Cashflow dries up for UK online sellers

Proportion of web retailers facing squeeze is higher than physical shops

The proportion of UK online retailers facing “significant” financial problems is almost double that of all shopkeepers, according to the restructuring group Begbies Traynor, which monitors signs of distress in companies.

The total number of retailers with problems has risen 15 per cent to 15,792 over the past year. But there has been a sharper rise, of 28 per cent — from 1,421 to 1,816 - for webonly outlets.

More than 150 UK retailers face “critical” financial problems — up 8 per cent from the last quarter of 2012, the research shows. “A flush of online start- ups, which are typically at higher risk of failure in the early stage of their life- cycles, has driven a significant rise in financial problems in non- store retailers,” said Julie Palmer, a Begbies partner.

Larger online and multichannel competitors were able to offer lower prices and more convenient click- and- collect delivery, and to appear higher up search- engine rankings, she said.

The study adds to recent indications that retail businesses faced a tough Christmas, even though consumer spending has risen as the UK recovery gathers pace.

Among the more resilient businesses are furniture and furnishing stores, benefiting from the housing market’s revival, said Begbies.

Department stores that could offer “omni- channel” selling, allowing people to buy and collect goods either in stores or at home, were also in a stronger position.

John Lewis, which has beaten rivals over recent Christmases, said that it had experienced a last- minute surge in spending after a more subdued period, with weekly sales of £ 164.4 million — up almost 10 per cent from the previous week and 4.2 per cent from last year.

Creditors traditionally close in on vulnerable retail businesses early in the new year, when their cash balances are higher and it has become apparent whether or not their Christmas sales have been strong enough to repair their fortunes.

The signs of distress are most evident among secondhand shops and market stalls, which are struggling to compete with the main online marketplaces: Begbies said the number facing significant problems had risen 29 per cent since last year.

A 20 per cent rise in problems among food, drink and tobacco retailers reflected the pain inflicted on convenience stores by supermarkets’ expansion into smaller shop formats.

Not a rosy picture 28% Web- only outlets facing financial problems

4.2% Rise in sales at John Lewis in 2013 Christmas over 2012