Modern Retail

Retail finance: Why it’s crucial for high-street brands

It might surprise you to learn that some of the biggest high-street brands have financed areas of their business through business loans.

Whether it is to fund product development or pay off a tax bill, retail finance has helped a wide range of well-known brands keep going.

Funding online

One of the areas retail businesses have benefited from finance the most is online, which is where high-street brands are finding more and more of their customers shopping.

The most difficult aspect of transitioning over to online from brick and mortar is finding the skills to get the job done right. The second most difficult aspect of that transition is paying for everything to happen.

When you look at the success of the likes of John Lewis and eBay and the catastrophic decline of Mothercare and Toys R Us, it is easy to see how online might literally determine the success of retailers in the future.

Want some hard facts? The ONS (Office of National Statistics) revealed that high-street sales collapsed in their biggest fall in four and a half years in 2017. Clothing stores are the next victims to suffer, according to one analyst. Which sales channel mopped up the high-street’s blood? Online. Everybody is now shopping there.

Enter retail finance

Enter retail finance. It has helped hundreds of local and national high-street brands enter the online world and thrive on it. As we previously mentioned, the second most challenging aspect of transitioning to online from brick and mortar is paying for everything.

A custom e-commerce website with a large catalogue and high traffic? That’ll be £10k to £20k minimum. Extra coding time? Add another £5k to it. Now you have a website, you’ll need to market it. You’ll want to budget circa £15k a year for SEO (organic search) and circa £10k for PPC (paid search). See how the costs are spiralling?

To give you an idea of how much it can cost, John Lewis spent £30m (yes, million) to launch their first website way back in 2001. It isn’t a recent example, so here’s another – Amazon spends well over £500k a year just to maintain their website.

Faced with these costs, it is not economical for even a successful national retailer to go in hard on online retail. And for smaller retailers, competing with the established big boys isn’t viable. Unless finance is sought to fund a structured transition.

Financing the online transition

The high-street is dying. Online is thriving. The case for retailers to get themselves online is established. What next?

Find a lender who specialises in funding improvement projects (that’s what this is – if you aren’t improving your business model, then what are you doing?). This will give you a much better chance of approval. High-street banks are traditionally a no-no for retail finance because they don’t see any guarantee that going online will work out. Specialist lenders like ourselves are savvier in their application criteria.

Contributor: Nationwide Corporate Finance

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