Several more retail businesses have hit the headlines after falling into administration in recent weeks. As this list continues to grow, it’s interesting to note the very different reasons why retailers end up in this situation.

Several more retail businesses have hit the headlines after falling into administration in recent weeks. As this list continues to grow, it’s interesting to note the very different reasons why retailers end up in this situation.

In some cases, it is the retailer’s business model itself that is at the root of a problem.

For example, it may no longer be relevant to the current market – either in terms of its product ranges and/or its distribution strategies. Or, it may have failed to get the balance right between online and real world sales. Alternatively, it may have failed to connect with its customer base effectively in order to keep them engaged. 

These are all easy traps to fall into, but each has been made far more damaging when combined with the ‘perfect storm’ of high commodity prices, soaring rents and sky-high business rates. For businesses that have no real place or reason to exist in the current market, these challenges are likely to be a bridge too far.

But then there is a second group of companies facing administration. These retailers are often struggling as a result of their parent company not performing very well or because they have the wrong finance structure in place. As a result, their debt burden often catches up with them, leaving them with very little room to manoeuvre.

For these companies, getting their business back on track can feel like trying to turn an oil tanker – but that doesn’t mean it’s impossible. Look at Bonmarché, for example. The UK’s largest womenswear value retailer catering for women over 50, revealed pre-tax profit of £10.5 million a year after it was acquired by Sun European Partners through the clever use of a pre-pack administration deal.

Bonmarché had previously been part of the Peacocks Group, which collapsed into administration at the start of 2012. After being purchased by Sun, however, Bonmarche has gone on to generate turnover of £170.3 million in the year to March 31, and has also announced plans to open several new stores.  The business also repaid £9.5 million of loans during this same period and revealed that it was in a strong cash position, with no loss-making stores in its portfolio at the year-end.

Figures like these suggest that Peacocks’ balance sheet, rather than Bonmarché, was the real culprit behind the retailer’s earlier misfortunes. After being acquired by Sun, Bonmarché was able to turn the tide simply by focussing on doing what it does best: providing value womenswear for over-50 shoppers in convenient locations and with attractive price points.

And perhaps that is the real secret to Bonmarché’s success:  value fashion has become an extremely challenging market in recent years, but Bonmarché has a relevant product offering and knows how to meet the specific needs of its unique customer base. Having cast aside the shackles of Peacock’s debts, Bonmarche is now well placed to thrive in this market.

This case highlights that while some retailers have the power to avoid an administration, those under parent groups don’t necessarily have full control of their destiny.

While Bonmarché underperformed under Peacock’s reign, it has been able to succeed on its own. This demonstrates the complicated nature of retail administrations and shows that in tough times, all stakeholders in the business need to ensure they are doing everything in their power to keep the company financially stable, operationally smooth and relevant to consumers.