Login
iscover
Small Australian businesses in the retail sector are under significant strain as they face continuous, unprecedented challenges, BDO Australia has revealed.
Retail businesses face ‘silent depression’ as insolvencies surge
11 April 2025
•
8 minute read
An analysis of ASIC insolvency data by BDO Australia has revealed a struggling SME retail sector, with recent data finding the highest annual number of business insolvencies on record.
You’re out of free articles for this month
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
According to the firm’s research, ASIC reported that in the first half of the 2024–2025 financial year, there were 7,483 insolvency appointments., a 47.1 per cent increase compared to the same period in the previous year.
Mark Pizzacalla, BDO business services partner, said the retail industry was tackling significant challenges.
“There are several factors contributing to this, including the dominance of online shopping, escalating rental expenses, and a shift in consumer preference towards shopping complexes over traditional strip shopping areas,” he said.
“The convergence of online retail growth, soaring rental costs and changing consumer behaviours has created a perfect storm for small businesses. This has left businesses under immense pressure, and without timely intervention, we risk losing a vital component of our economy.”
Pizzacalla noted that some established retailers had begun referring to the current economic environment as a “silent depression”.
It was also noted that recent industrial relations reforms were having an impact on small retailers, among other challenges.
Multiple reforms were putting additional pressure on small businesses, making it harder to align resources with growth and market changes.
“The increase in the national minimum wage, multi-employer bargaining, and new rules allowing ‘employee-like’ contractors to seek intervention from the Fair Work Commission for unfair contract terms are all factors affecting small retailers,” Pizzacalla said.
Across the increased number of insolvencies in the retail sector, managing cash flow had become one of the greatest challenges for small retailers as it was a stressful task that had become increasingly harder to improve.
BDO national retail leader Salim Biskri said it was evident that cash flow had become a prevalent issue for SMEs based on the troubling insolvencies within the sector.
“With lean working capital and the rise in late payments from customers, many retailers are struggling to stay afloat. The current economic climate, driven by the cost-of-living crisis and inflation, is only exacerbating these issues,” Biskri said.
“We’re seeing an alarming increase in retail insolvencies, with ASIC data showing a 28 per cent rise in insolvency rates up to September 2024. The closures of well-known brands like Jeans West and Ally Fashion, which recently shut down numerous stores, demonstrate just how severe the situation has become.”
In a move to help these businesses alleviate the pressure, BDO recommended the implementation of several measures such as embracing digital transformation and developing robust online platforms to compete with larger retailers.
Pizzacalla added that advocating for policy reforms, such as tax relief and reduced compliance burdens could provide immediate financial respite, as well as fostering collaboration among small businesses to pool resources and collectively negotiate better rental and supply terms.
“Investing in staff training and staying informed about industry trends can also make small businesses more competitive, helping them meet evolving market demands.”
“Addressing the challenges faced by small businesses requires a multifaceted approach, combining technological adaptation, policy advocacy, strategic collaboration, and continuous learning.
You need to be a member to post comments. Become a member for free today!
