Online retail firms in trouble as punters turn back to the high street
E-commerce retailers which were bolstered by Brits stuck at home during the pandemic are now going bust, a new report shows, as the cost of living crisis continues to eat away at businesses.
The number of insolvencies of UK e-commerce businesses rose 71 per cent to 529 in the past year, up from 309 in the previous year, according to figures from Mazars, the international audit, tax and advisory firm.
As physical retail was forced to close during the pandemic shoppers turned online to get their fashion fix – driving up sales and interest in online brands such as Asos and Boohoo.
In the year of the first lockdown Boohoo saw a 41 per cent surge in revenues racking in a whopping £1.745m.
However two years on and the Manchester-based brand is struggling, haemorrhaging £90m in its latest financial results as the reopening of traditional stores and economic uncertainty hindered sales.
Its rival Missguided also forecasted to turnover £300m in 2020, however subsequently went bust in May last year after it was hit with surging supply costs and struggled to fight off fierce competition in the market.
The e-commerce retailer was later saved by Mike Ashely’s Fraser Group in a £20m rescue deal – with its clothes also now available to buy via Sports Direct.
Similarly, online furniture store Made.com was snapped up last November by Next for a mere £3.4m after it struggled post-pandemic – it was valued at £775m when it floated in the summer of 2021.
Rebecca Dacre, partner at Mazars, said that with the cost-of-living crisis limiting household spending, many of newer e-commerce providers are “struggling to survive” as they try to deal with rising costs, lower overall levels of consumer spending and a shift of consumer spending away from e-commerce and back to the high-street.
“In the past year, e-commerce businesses including furniture specialist Made.com, fashion retailer Missguided and online game seller Xbite became insolvent. All were hit by either slowing consumer spending, or supply chain problems partly due to the war in Ukraine,” she said.
Latest figures by the ONS also show that digital sales have fallen to their lowest levels since before the pandemic.
Dacre added: “The sharp jump in e-commerce businesses going bust is a clear sign that the pandemic ‘golden age’ of small online retail start-ups is now behind us.”
“Whilst the boom in online sales did create some long-term winners, many smaller players simply didn’t prove profitable enough to last.”