by Adam Raciti

Throughout 2018, we have seen a number of corporate collapses, most notably in the retail industry with well-known brands such as the Sussan Group, Roger David, Toys ‘R’ Us, TopShop, and Allphones all succumbing to the financial pressures that come with the industry. No doubt, others in the retail industry must be questioning whether they are next and how to prevent the same occurring.

The good retail operator stays ahead of other operators in terms of customer engagement with the use of social media, drive and connectivity to ensure their product is imbedded in the minds of potential customers. However, what is equally important is servicing their existing customer base. As the old saying goes, “regulars are the bloodline of any business”.

The bad retailer is often described as lazy and expects the work to be done for them, which is often found in the franchise space where retail operators rely heavily on the franchisor to provide the customer based rather than actively seeking for themselves. It is often that the bad operators are quick to blame high costs of rent (albeit sometimes true) instead of negotiating new terms with the landlords and demonstrating that the business is suffering. However, this is usually discussed when it is too little too late!

No doubt the ugly cases include those retail operators who are enticed and dazzled by the flashing lights of the big retail outlets including ‘Westfield’ and ‘DFO’, where ‘foot traffic’ numbers are exaggerated, onerous lease terms are demanded or worse, the leases are negotiated by the franchisor without input from the incoming franchisee.

The landscape of retail has changed and will continue to do so. Therefore, care has to be taken to prevent becoming another statistic of retail collapse. The rise of online shopping has only contributed to the difficulties faced by the physical retailer. It is suggested that clothing retailers charge a fee for the use of fitting rooms, which could potentially contribute towards an eventual purchase or have a rack of ‘standard sized clothes’ for customers to try instead of using saleable goods. This is one example of many and the idea is understanding the market in which you operate as a retailer to determine what suits you best.

Our involvement in numerous retail matters has identified that the retail industry is sustaining marginal growth, which is supported by data released by the Australian Bureau of Statistics which indicates a monthly turnover of 3.4% from August 2017 to August 2018, however, this is a slightly lower rate of growth compared to previous years. Whilst this is positive, the growth is unable to compete with the increasing costs of rental, goods and logistical imports.

Let’s hope the Christmas trade will not only provide breathing space but a platform to survive beyond the boxing day sales. Although, it is predicted that condition could worsen further over the coming six months as a falling housing market and a weaker economy are affecting discretionary spending.

Using other people’s real-life experiences in order to prevent a repeat experience is often the best preventative cure.

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