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Bankruptcy of Danish toy store chain reflects pressure on retail sector

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Bankruptcy of Danish toy store chain reflects pressure on retail sector
Photo: Mads Claus Rasmussen/Ritzau Scanpix
11:39 CET+01:00
Danish toy store Fætter BR decided to pull the plug in December 2018, after a long period of poor sales typical of the increasing difficulty experienced by the retail sector.

Increasing competition from online retail and changing consumer habits are putting pressure on sales figures and creating gaps in sectors of the retail industry, according to analysis conducted by Danske Bank, which took in 300 retail companies in Scandinavia.

The analysis is based on comparisons of results in 2013 with 2017, and found that clothing, shoes, sports, leisure and electronics stores were those experiencing the greatest difficulty.

“This is an industry under pressure in present years. Turnover is not growing as much as before, and profit margins are under pressure at the same time,” Danske Bank economist Louise Aggerstrøm said.

“That is first and foremost due to the tough competition. That comes from online retail and the competition between large companies. It makes it difficult to earn money,” Aggerstrøm added.

An additional factor is a change in the way consumers choose to spend their money, the analyst said.

“People are spending more money on eating out or travelling compared to buying a new refrigerator, a sofa or clothes,” she said.

Companies unable to arrest the slide face the same fate as Fætter BR, she continued.

“This is something that has happened very quickly in recent years. We have just seen a large, prestigious company like Fætter BR go bankrupt, and in 2016 [electronics outlet] Fona went the same way,” the economist said.

“That illustrates the fact that these companies need to be innovative. They have to think about how they can earn money in other places — perhaps by using online sales more than they do today,” Aggerstrøm said.

The picture for the retail sector in Denmark is not entirely bleak, with other areas showing good performance.

Pharmacies, furniture suppliers, personal care, and building and DIY are amongst those to have seen improved sales.

Optometrists have seen a fall in profit margins — but the optical sector remains best at maximising profit from sales, according to the analysis.

READ ALSO: Amazon subsidiary to open office in Denmark

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