Insurance crunch
Electrical retailer Empire Direct went into administration on Monday, with its website now containing only a short statement from administrators KPMG.
The reason for the failure given in the statement is: "The business is unable to trade in administration due to low stock levels and operating losses and accordingly the stores have been closed."
However, the FT reported yesterday that KPMG has revealed that: "business really suffered when credit insurers withdrew cover in October."
Credit insurers such as Euler Hermes have joined the rest of the financial sector in retreating rapidly from risk since the start of Bankageddon. This is a worrying trend for the channel as credit is vital for retailers and resellers to be able to maintain the levels of stock needed to make a profit. The concern is that the absence of credit insurance will prevent this.
Additionally non-food retail was the poorest performing UK retail sector in the last quarter. So companies like Empire Direct - which already faced stiff competition from the likes of DSGi, which owns PC World and Currys, and KESA, which owns Comet - were bound to struggle regardless.
