The collapse of BHS and its impact on small businesses

On June 2nd it was announced that retail giant British Home Stores (BHS) would be wound down following the company’s entrance into administration six weeks earlier.

The exact fate of the business won’t be known until after June 23rd, when creditors will vote on the liquidation process, but even if some portion of BHS is saved, it is estimated that many of its 164 stores will be closed.

Suppliers could be left struggling

For many of BHS’s suppliers, the news of the company’s collapse spells disaster. Last month it emerged that the chain bore liabilities of £1.3 billion spread across more than 1,200, which means hundreds of small businesses will be left out of pocket.

While some may be able to recover from the loss, the precedent isn’t good. Icetech, a Scottish freezer manufacturer that supplied Comet, went into administration earlier this year. Comet collapsed in 2012, owing small businesses £0.9 million, and forcing Icetech to cut half of its employees, something from which it was unable to recover.

Taxpayers may have to help foot the bill

But what about businesses that aren’t directly associated with BHS? Well there could still be economic issues to face. The Pensions Protection Fund, something which all businesses, as well as tax payers, contribute to via an annual levy, will now be short. Though the British Chambers of Commerce has argued that small businesses should not pick up the tab for corporate failure, it’s possible some of the costs will have to be covered through tax.

High streets in trouble?

And then there’s the matter of footfall. Other large businesses are likely to feel the aftershocks from the potential disappearance of one of the biggest high street names since Woolworths folded in 2008. According to analysis by the Financial Times, the company most under threat is lingerie chain Ann Summers, with over half of their stores within 200m of a BHS, followed closely by Eurochange and HMV, as well as Virgin Media and The Perfume Shop.

However, small retail enterprises may feel the effects of lowered footfall even more. Having fewer physical premises limits footfall as it is, and any small stores close to a BHS my find far fewer potential customers entering their shops than before.

Lessons learnt - what can SMEs take away from BHS’s demise?

Fortunately, it’s not all doom and gloom. There are a couple of things that small businesses can learn from BHS’s collapse that should help futureproof their companies and save them from a similar fate.

  • BHS was accused of being tired and out of touch, but for large, lumbering companies it’s difficult to keep up with new trends. Small businesses are more agile, better able to react to customer needs and changes in the market, and that’s what gives them their power. With billions of retail profit coming from online sales, let BHS be a cautionary tale for those who do not yet have a handle on their online presence.

  • For many small businesses these days, having a physical store isn’t a necessity, but for those who do need one, it’s can be better not to commit to cumbersome, long-term leases. Remember that disrupters such as Uber and Airbnb manage to generate millions without owning any taxis or properties respectively. In this fast-paced world, successful companies need to evaluate their products and services constantly to avoid being left behind.

Will BHS’s collapse have an impact on your business, and is this another sign that the British high street is in terminal decline? Tell us what you think in the comments.

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