Retail administrations: Who's next?

We're only in January but 2013 is already shaping up to be a busy year for administrators in the retail sector in particular. HMV, Jessops and Blockbusters have all hit the wall this month, following hot on the heels of Stead & Simpson and Comet, which collapsed towards the end of 2012.

Hundreds of stores are set to close as these retail businesses enter administration, leaving the retail vacancy rate at a record high of 16.5 per cent. This alone will leave the high street with a very different atmosphere, but it seems likely that more trouble is just over the horizon. So which retail outlets might be at risk of administration in the rest of 2013?

Obviously it isn't possible to predict exactly who will enter administration, but we're getting a good idea of where things are heading by watching the financial figures and monitoring broader trends within the industry.

One thing that has cropped up again and again over the past couple of months is the threat posed by online competitors. There are two main aspects to this: Firstly, chains like HMV and Blockbusters have been seriously affected by online services such as Amazon, Netflix and LoveFilm. Put simply, people can get hold of entertainment products cheaper and more conveniently online than on the high street. This is forcing high street retailers to innovate, but in the case of companies like HMV, this innovation was too little too late.

This situation was even worse for Blockbuster as its business plan essentially became obsolete in the face of cheaper DVDs and downloading services – both legal and illegal.

Online businesses have also been exerting a subtler drain on high street retailers for some time now under the name of product research. Comet, which entered administration in December of last year, was one of the hardest hit by this as savvy consumers started using its stores to research their purchases by talking to staff and viewing the physical object themselves before heading online to make their purchase elsewhere through an online business that could offer cheaper prices by avoiding the expense of shop floor space.

This trend is only likely to increase as more and more businesses take advantage of the growing number of web-savvy businesses. Companies like Curry's and certain department stores could be the next victims of a trend like this is problems continue.

Ultimately, high street businesses need to find a way to add value to their consumers' shopping experiences and offer them something that they can't find online. Businesses that don't manage to look ahead and work hard to provide an innovative service are unlikely to survive in an economic climate where every penny counts and the tendency to spend on a whim has almost died out.

We can't predict exactly who will enter administration next, but we know that there are a huge number of entrepreneurs and business buyers waiting in the wings for their chance to leave their mark on the retail sector.

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