Clothes retailer Ted Baker has entered administration following leadership failures and bookkeeping problems, with experts warning there is no room for outmoded business models in the modern retail sector. More major names are likely to go under given the perfect storm of economic headwinds in the coming months.

Fashion victim

Ted Baker got itself into a difficult position not knowing what it stood for having grown during the 1990s to become a market-leading premium brand with a reputation for quality. Latterly it has drifted into a mid-market space where margins are tighter and brand loyalty declines.

More recently online competition, labour costs and high interest rates have irrevocably harmed many retail businesses’ balance sheets, with Ted Baker being a prime example.

Not an isolated case

This situation is representative of the broader challenges felt by high-street businesses, particularly in the retail sector. Customers are watching their spending more with the cost-of-living crisis, and the entire retail sector is struggling with both the challenges of operating high-street retail stores coupled with customers buying less high-end luxury retail goods.

Ted Baker’s story is a cautionary one that all retailers would be wise to heed, as reinventing traditional models grows ever more urgent if more names aren’t to suffer the same fate. Ted Baker is unfortunately not an isolated case, but instead representative of turmoil right across the retail sector as business models are upended.

Despite the growth of online sales as a proportion of total turnover, the overall decline of consumer spend, along with the increased costs of rent, energy, wages and transport, means that retail businesses are facing a perfect storm.

Only time will tell how many more may follow Ted Baker; there are lessons for retailers and finance directors, concerning both customer-facing and back-office operations.

Retail is evolving rapidly

As retail evolves rapidly, pleasing customers as their tendencies change has become essential for staying relevant. People now expect more than just shopping – they want experiences. Smart retailers investigate how to deliver that through innovative stores that entertain and serve people uniquely.

Those able to adapt quickest will find the most ongoing success.

For smaller businesses, having a tight handle on costs, adapting to changing consumer demands, and having efficient working capital, from both internal cashflows and external borrowings, will be key to survival over the coming years.

This will require having up-to-date and accurate data on a weekly and monthly basis to react quickly to changes in consumer trends.

Although inflation appears to be on the decline, the time lag for smaller businesses means that they should still be on high alert and have a good knowledge of their latest trading results and cashflow for many months to come.

And for those that haven’t already adopted online and e-commerce as part of their expanding business model it is time to do so, as more and more customers choose this method of buying over the high street. Even if a retailer does have a physical store, consumers are increasingly checking stock availability online and ordering via click and collect. Very soon not have an online presence will be a severe competitive disadvantage.

If you are just starting out online and would like a copy of my recent e-book ‘Clicks to Customers – a  guide for small business owners to building a thriving e-commerce business’ you can purchase a  copy by clicking here

Noel Guilford