When a retailer's business hits the rocks, everyone and his dog has an opinion. It's a rare industry whose dirty laundry is so publicly aired as that of high street retail. The announcement earlier this month that Ethel Austin was to go into administration, with the attendant loss of 181 head office jobs and 33 store closures, provoked a fair bit of 'of course, I saw that coming', and it's fair to say that, for anyone who's ever been close to this sort of thing, the story's all too familiar.
So yes, you see a sorry-looking store on the high street (or in Ethel Austin's case, the street next to the High Street), and the writing would appear to be on the wall. But what you're seeing is a symptom, not a cause, so what's the disease? Retail Week journo Amy Shields gives an excellent overview of Ethel Austin's history in this article, which is well worth a read: a concise analysis of the events leading up to the collapse of a national retailer.
Now, I'm not going to expand on this much more, but what I will say is to point out one key element of the article, which reports that in 2002, the firm's new owners 'did not change the formula, but took out costs and pumped up the profits', which is a very strange oxymoron indeed. This sort of short-term strategy will bring a business to its knees, whipping away much-needed development funding and (crucially) morale like a rug from under its feet.
Recklessly applied cost-cutting, whilst promising a result of sorts in the coming quarter, is ultimately not only unsustainable, it injects rot deep into the business. Staff morale hits zero at head office, and this soon filters out into stores. As both the fabric of the estate and the attitude of store staff slip into disrepair, customers quickly find newer, shinier, more helpful stores to shop in.
And there's the root of the problem. Retail at this scale (300 stores) is a model which is both extremely delicate and highly change-resistant. A long-term view must be sought, and far-reaching strategies implemented and bravely adhered to. Debt, however, does not work like this, and in the end was more of a factor in Ethel's decline than anything else. The moment this business started to falter was the same moment the focus on the balance sheet moved from annual to quarterly returns. In other words, once the purpose of the business, its reason for existing, was to rapidly return on an investment rather than to ensure its continued existence long into the future.
So what's the future for Ethel? Well, the position it's in now is a tricky one to say the least. The estate is... challenged, the margins are terrifying and the overall proposition was leapfrogged by Primark, Peacocks et al some years ago, so I won't be holding my breath. Still, where there's a will there's a way... isn't there?
EDIT: The story develops - Elaine McPherson (of MKOne fame) has bought Ethel Austin from administrators MCR for a rumoured £10m. Whilst the closures and layoffs performed by MCR will remain in effect, McPherson has pledged to return the business to its former glory. Arguably, at such a (relatively) low price, one is able to embark on such a mission; would be great to see it make a comeback, but if not, the assets remaining within the business should return on that investment if cleverly stripped. Not that this author is suggesting for a minute that that could possibly be on the cards.
What could play a key part in making that mission a successful one would be a top-notch, cutting edge multi-channel retail strategy. Elaine, we're only a phone call away...