A bright start to the week has subsided for UK stocks with the FTSE 100 falling to its lowest level since Friday this morning. The market has failed to gain traction above the 7300 level despite a couple of attempts to push higher and it now appears that the bears have the opportunity to probe lower with the index still susceptible to further downside. The pound is little changed on the day, making small gains against the Swissie and the Kiwi but declining versus the Aussie and the Yen.
Retailers succumb to rise-in e-commerce
News this morning that Toys R Us and Maplin have both gone into administration shouldn’t come as too much of a shock with both retailers struggling in recent years. The news comes as a particular blow to employees, with 3,200 and 2,500 jobs believed to be at risk for Toys R Us and Maplin respectively. Their demise is a timely reminder of the struggles faced by bricks and mortar retailers of late with the rise of e-commerce seeing many firms that were previously market leaders going out of business. A change in consumer spending preferences has seen a surge in online competition and caused a fundamental shift in the trading environment.
Unfortunately for Toys R Us and Maplin it appears they have gone the way of many former high street favourites such as Woolworths in failing to adapt to a change in the times and ultimately they have paid the price for failing to keep up with a seismic shift in the trading landscape.
Failures have been a long-time coming
For those that have followed these firms for several years today’s announcement shouldn’t come as a major surprise with Toys R Us making a loss in 7 of the past 8 years and is heavily in debt. The first UK store opened back in 1985 and whilst the 105 currently in operation will remain open until further notice as many as 26 are expected to close by this Spring. The brand was known for large warehouse-style stores for toy purchases in the early years, but the internet means that nowadays many consumers don’t need to drive to large out-of-town stores to service all their needs, and can access and even wider array of products online.
It is ironic in some ways that Toys R Us were themselves seen as a disruptive firm for traditional commerce in offering a one-stop-shop for consumers seeking toys that they have now usurped by online rivals who can operate at a fraction of the fixed costs.