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Bleak warning for retailers: Adapt or die

Adam Zuchetti
Adam Zuchetti
16 January 2020 2 minute readShare

As news emerged that Jeanswest has fallen into administration, an insolvency firm has warned that more retail collapses will happen unless the industry embraces significant change.

On Wednesday (15 January), it was revealed that Jeanswest and its associated entities had appointed KPMG as administrators of the chain, which has almost 150 stores nationwide, with locations in every state and territory.

A first meeting of creditors is due to be held in Collins Square in Melbourne on 28 January.

It has been a troublesome start to 2020, with news that Curious Planet would see all of its stores closed in the coming weeks and winemaker McWilliams Wines also calling in administrators.

Andrew Spring, a partner at insolvency firm Jirsch Sutherland, said that retail failures “aren’t new”, but that the situation is likely to persist without significant reform of how retailers manage their businesses.

“Retail is a tough environment to be successful in over the long term,” Mr Spring said.

“You only have to look at well-known examples of companies like Encyclopedia Britannica, Blockbuster and Kodak, whose products became redundant because the companies didn’t keep on top of changing trends.

“A more recent example is the Australian textbook retailer, the Co-op Bookshop, which for decades used to be the place to buy your university textbooks but sadly went into administration after, among other reasons, over-the-counter textbook sales plummeted.”

However, Mr Spring said that collapses aren’t guaranteed, stating “there are things that retailers — large and small — can do to set themselves up for success rather than failure”.

According to Mr Spring, retailers of all size should be seriously examining their awareness of the following points:

  1. Understanding what’s happening in the market, such as changing product demand
  2. Understanding the barriers to entry
  3. Knowing your target audience
  4. Developing a strategy for going to market and attracting customers
  5. Having a customer retention strategy
  6. Establishing what you want to be known for, and knowing how to “tell the world”
  7. Knowing how to create brand loyalty
  8. Knowing how to use data gathered, such as through loyalty programs
  9. Having strong back-office management
  10. Always taking time to know your numbers and accrued liabilities (such as taxes)

Mr Spring singled out the last point as being of key importance.

“Not knowing your accrued liabilities can be a sleeping bear that could one day wake up and bite you,” he said.

“Ignorance is not a defence. Business owners have statutory requirements, and if they don’t have the money to pay off their debts or meet statutory obligations, that can have a major impact on a business. It’s vital to be conscious of a positive cash-flow cycle, as it can be hard to manage.”

Mr Spring’s comments come just weeks after the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) released an interim report into its Insolvency Practices Inquiry, which criticised administrators and insolvency practitioners for their fees and perceived lack of transparency, stating that “the current system appears self-defeating, as the costs of a voluntary administration often consume or exceed the assets of the company”.

The insolvency industry, however, has pushed back against such criticism, and attributed low rates of successful restructuring to businesses seeking help too late for it to be salvaged.

Bleak warning for retailers: Adapt or die
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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