The Centre of Retail Research predicted that as many as 17,000 shops could close throughout 2025, and October is set to add to this figure with numerous closures for the likes of Poundland, Halifax, and New Look. Factors such as increasing business costs, shifts in shopping habits to online, increased competition, and higher taxes are all combining to create one of the toughest retail climates we have seen.
As many businesses shut stores and battle the current economic elements, the Amazon accountants Archimedia Accounts have provided insight into the impact of store closures on businesses financially, exploring the positives and negatives of these shutdowns. They have also offered advice on how retail businesses can stay afloat in the current climate.
Positives of Retail Store Closures:
- Reduction of expenses and losses
Closing physical stores often results in reduced rent, maintenance and utilities costs. By reducing these costs, businesses have more financial power to put into other areas of the company, whilst potentially reducing any potential loss margins. Reducing expenses is key at a time where one of the main reasons retailers are struggling is the increased business costs across the country.
- Opportunities to reinvest in online platforms and e-commerce
With reduced business expenses on physical stores, more capital can become available to invest in online platforms and e-commerce. Statistics show that the e-commerce penetration rate on the British isles is nearing the 85 percent mark in 2025, making it the most developed e-commerce market in Europe. It is therefore more important now than ever, that businesses invest financially in their online presence, in order to attract customers and compete within the saturated online retail market.
- Expansion and re-distribution
The closing of stores means business expenses can be re-allocated and capital can be invested into more profitable strategies that can help breathe new life into a business. This may not only be in the form of investing into the ever-growing e-commerce market, but also investing in portfolio and strategy optimisation by focusing efforts on high performing locations.
Negatives of Retail Store Closures:
- Loss of local presence and consumer trust
Closing down stores is never a decision taken lightly. This is because of negative side effects such as losing local presence. The loss of the physical presence of the brand in an area could result in decreased brand awareness in the region and ultimately less revenue as a result. Additionally, when consumers see physical stores closing down, they naturally begin to lose trust in the company and thereby may opt for alternative brands, which can serve as a hit to the business, and a profit booster to its competitors.
- Costs of the closure
Businesses have numerous costs to consider before closing down physical stores. For instance, employees must be paid off by the company should the store closure result in them being made redundant. In relation to the property itself, excess costs can be incurred if the lease is broken early, resulting in costly termination fees. Until the lease ends or until the property is sold to another party, the business may be responsible for paying maintenance or utilities.
- Lower credit rating
A lack of awareness around credit scores for businesses is one key factor holding small and medium sized enterprises back. Research shows that a huge 87% of businesses have only partial or no understanding of the factors that influence their company’s score.
Businesses who make the decision to close down stores also risk reducing their credit rating, which impacts their favourability to lenders, and their ability to successfully apply for loans. Closing physical stores may be viewed as a signal of poor financial performance, which indicates that the business is having difficulty generating adequate revenue, thereby reducing lender’s confidence in the company.
A company with many physical stores can sometimes indicate a business’s scale. Closing stores down can reduce the perceived stability and magnitude of the business, potentially leading to a lower credit limit or less advantageous terms from lenders. If reducing the number of physical stores coincides with financial instability within the company, this signals a great risk for lenders.
Key advice for retailers:
Use forecasting tools to plan operations sustainably: Demand forecasts can be vital for optimising the inventory of stock. Using advanced technologies such as AI and machine learning to analyse complex data enables businesses to become more proactive in their strategic approaches. This can prevent excess stock, reduce storage costs, and help ensure the company is running more efficiently and cost effectively.
Effective cash flow management and financial advice: Retailers should be generating accurate cash flow forecasts by analysing historical data and current market trends to predict future needs and make informed decisions. Companies should ensure they have consistent, real-time insights on their financial position.
Retail businesses should always ensure they have dedicated financial advisors, bookkeepers or accountants, and utilise financial softwares. These can help the business to stay up to date with accurate financial data, and with detailed financial forecasts, companies can prepare and plan for any potential losses or stagnant periods. Recent reports state that there is a limited influx of financial advisors. This has created a shortage which is generating concerns about a growing “advice gap” – where the demand for financial guidance exceeds the availability of qualified professionals.
Cost-benefit analysis for stores: When making the decision to open or close a physical store, retailers must identify all tangible and intangible costs such as rent, labour, and current and predicted sales figures. Crucially, the retailer also needs to ensure this is part of a wider and solid business plan and that the forecasted opening or closure of a store aligns with the company plans and requirements. Without a solid plan and cost-benefit analysis in place, a business could be stepping into a potentially unprofitable investment or a move that may not be in the company’s best interest.
Experts at Amazon accountants Archimedia Accounts provide advice on how retail businesses can stay afloat in the current climate:
“It is important to recognise that despite the many store closures in recent times, retail is not dying, but evolving. Therefore, it is essential that businesses constantly adapt and react to the market. Store closures themselves don’t always need to signal a ‘downfall’ or an ‘end’, sometimes they can signify a key step toward financial recovery and a shift in focus on areas such as e-commerce.”
“I would strongly advise retailers to focus on vigorous and consistent financial management. This is the foundation for long-term survival and growth, with financial planning and forecasting playing a critical role in risk assessment and overall strategic management. If a company lacks clear visibility on finances, informed decisions cannot be effectively made. Profit margins and outgoings should be consistently analysed, especially in the current climate of unpredictable inflation and consumer demand. In a competitive sector such as retail, staying ahead of the curve is vital.”
“Retailers need to ensure they have financial advice in place as early as possible, and not simply when things may take a downturn or when issues arise. A financial advisor or accountant can help businesses identify risks and create an action plan to achieve growth. Digital tools are non-negotiable in 2025, providing retailers with a competitive edge through accurate real-time insights. With precise forecasting, retailers can stay one step ahead, and prepare for any potential hiccups or financial downturns, giving them a crucial advantage. Retail businesses that stay financially knowledgeable, conscientious, and nimble, will give themselves an increased chance of success and growth.”
