Insolvencies down, but retail threatened

TREVOR CHAPPELL
January 13, 2017
Australian Associated Press

The number of businesses going bust in Australia continues to fall, but retailers could still find conditions tough in 2017, with giant online retailer Amazon set to arrive.

Global business advisory firm FTI Consulting has analysed insolvency statistics for November from the Australian Securities and Investments Commission, which showed the number of corporate insolvencies falling for the third consecutive month.

In November 2016, 636 companies went into administration, down from 677 in the prior month.

The number of insolvencies fell in all states except South Australia and Tasmania, and the ACT.

In the 11 months to the end of November 2016, 8,001 companies had entered administration – 1,536 fewer than the same period in 2015 and the lowest number for the period since 2007.

FTI Consulting senior managng director Tom Lemke says the downward trend is expected to continue in the December quarter and into 2017.

“However, following several high profile retailers encountering distress in 2016 including Laura Ashley, Dick Smith, and Masters, the retail sector may be once again at heightened risk in 2017,” Mr Lemke said on Friday.

Mr Lemke said Citi analysts had recently described sales during the 2016/17 holiday season as lukewarm, and a recent St George survey showed that 39 per cent of respondents planning to reduce discretionary spending in 2017.

Also, the expected entry of Amazon into Australia in 2017 would add to the challenges facing retailers.

Amazon accounts for 40 per cent of online sales in the US.

Mr Lemke said Amazon would challenge retailers of apparel, books, music, technology, toys, sporting goods and homewares.

Amazon’s strength was its ability to build a deep understanding of individual customers by using data and analytics to provide a personalised shopping experience. 

“Australian retailers generally have been slow to use their data to drive improved customer experience, and we believe this makes their businesses more vulnerable to well organised competitors,” Mr Lemke said.