On the same day that Dwell has been formally placed into administration, fashion retailer Internaçionale and specialist retailer ModelZone are both on the brink of collapse. Retail Week looks at the contributing factors.
Why are we talking about it now?
It’s a black day for the high street as news that Dwell has officially collapsed into administration coincides with fashion retailer Internacionale filing an intention to point administrators and specialist retailer ModelZone preparing to do the same.
Why has it happened today?
“The quarter rent day is the catalyst or tipping point for retail administrations and the period when retailers need cash to pay,” says Neil Saunders, managing director at Conlumino. According to Saunders, this week’s quarter rent day was the breaking point for all three retailers, but separate factors also came into play.
“Internaçionale was a very weak brand in a very competitive market,” Saunders says. “The stores weren’t in the best locations.”
Dwell has also been criticised for not differentiating itself in a competitive market place. “A lot of the competition, such as John Lewis, are doing really well and expanding. Dwell was one of the players that didn’t really stand out,” says Saunders, who said the retailer also favoured expensive store locations.
Sources believe ModelZone has over expanded in too short a time span. At the time of its buyout in 2009, the retailer had 25 shops, which has since grown to 50. Saunders maintains that ModelZone’s store estate size is a contributing factor to its collapse, along with its niche offering. “It’s a very specific and fairly niche market – it’s not a mass market proposition, and so it doesn’t need that many stores,” he says.
What does the news tell us about the retail market in the UK?
The tough economic environment is taking its toll on weaker players in the industry. Sources question what Internaçionale’s USP is compared to stronger fashion rivals such as Primark, while Dwell has failed to compete with leading players including John Lewis and Next. Similarly, ModelZone has struggled to contend with specialist model retailers online.
Are there likely to be more retailers collapsing into administration in the near future?
Despite early signs of approaching economic stability, consumers are still being cautious and the high street is struggling as a result. Saunders says: “Whilst demand is starting to come back and it has stabilised, there’s still over supply across retail as a whole, with too many shops and players and therefore the weak players have systematically been picked off.” Therefore, retailers who fail to differentiate themselves from the competition could be the next victims.