Insolvency specialist warns franchisees

2018 is going to be a ‘bumpy ride’.

National insolvency specialist, Jirsch Sutherland predicts that 2018 will be a tough year for many Australian retailers, and the franchise sector, in particular, is one to keep an eye on.

Jirsch Sutherland partner, Andrew Spring said, “We are hearing from accountants and business advisors that the retail sector is really struggling. Many of those who are not selling consumables are having a particularly tough time. We saw a number of high profile retail brands collapse in 2017. We predict that we haven’t seen the worst of it, and that the New Year will see many more homegrown brands go into insolvency.”

“Two of the greatest factors for retailers are high leasing and staff costs. For many retailers that become insolvent, the reasons are similar – other key reasons include stock costs, obsolete stock issues, poor accounting or record-keeping practices, no-interest competitors and low margins – we see this time and time again,” he said.

The impact of e-commerce is having a major effect on the retail sector. “E-commerce is a necessity now, not a point of difference – especially with savvy competitors entering the market. However, unfortunately some retailers are being left behind or have not sufficiently invested in their e-commerce platforms; they’re finding that the fixed costs of having a bricks-and-mortar presence alone are too high,”

“Retailers need to understand that the increased prevalence of online shopping has expanded their competitor base. Geographical barriers to entry are being eroded and if retailers are unable to find ways to explore new markets for their products, then they are likely to see their sales base continue to decline as their competitor’s pitch to their historical customers,” he added.

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