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Consumer Services

Australia’s relative smaller population means the retail market is dominated by a number of large players. This has also resulted in a lack of diversity of brands products and services.

1 in 45 Aussie consumer services go insolvent. Consumer services insolvency rate up 0.5%. Smaller services face higher insolvency risks.

To achieve the necessary growth the economies of scale for most retailers is more than 36 stores to provide the benefits of centralised head office and buying while maintaining store profitability.

Covid has changed the way consumers buy goods and services, ecommerce is now a distinct part of our retail environment, while the move to greater workplace flexibility will change retail in our cities.

Key Challenges

All retailers have suffered the impact of price increases and uncertainty of supply created by the increased costs of shipping and availability of containers.
Digital marketing through Instagram and TikTok has allowed designers and product creators to communicate directly to consumers by passing bricks and motor retailers allowing them to trial new products without committing to large orders.
The difficulty facing traditional retail networks is how to deal with the residual lease deferments held on their balance sheet, while continuing to right-size their networks both in terms of number of stores and location, to cater to the reduction in foot traffic in the major cities.

Our Experience

While we have seen a return to brick-and-mortar retailing over 2022 it has not returned to the same level, with e-commerce operators retaining some but not al of the gains they made over the pandemic.

We are however entering an uncertain economic with rising interest rates and falling consumer confidence. It isn’t clear that the increase in consumer spending over Black, Cyber and Xmas 2022 period was the result on increased consumer confidence or the increase in prices through inflation.

What is clear is that spending patterns have altered, e-commerce has a stronger position and the store network footprints that existed pre-covid focussing on City centres has moved suburban meaning that retailers need to re-think their store networks and address the accrued covid lease liabilities.

Olvera is the financial training partner for the Australian Fashion Council designing and running the training courses for young designers.

Olvera is one of Australia’s leading advisors to the retail industry for structured voluntary administrations to reduce corporate overheads and store foot networks to sustainable levels.

Issues impacting businesses in Energy & Resources

To achieve the necessary growth the economies of scale for most retailers is more than 36 stores to provide the benefits of centralised head office and buying while maintaining store profitability. Covid has changed the way consumers buy goods and services, ecommerce is now a distinct part of our retail environment, while the move to greater workplace flexibility will change retail in our cities.

To achieve the necessary growth the economies of scale for most retailers is more than 36 stores to provide the benefits of centralised head office and buying while maintaining store profitability.

Covid has changed the way consumers buy goods and services, ecommerce is now a distinct part of our retail environment, while the move to greater workplace flexibility will change retail in our cities.

Key Insight

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November 1, 2023

Insolvency & Restructuring in the Consumer Services Industry in 2024

IntroductionThe consumer services industry is a quintessential pillar of the Australian economy, embodying a vast swath of sectors from retail and hospitality to tourism, collectively contributing over 20% to the nation's GDP and providing livelihoods...

Case Studies

Howard’s Home Storage is one of the leading specialist retailers in home and office storage systems with a network of 58 owned and franchised stores.

As part of a proposed sale of the business the company had entered into agreements to acquire the franchise stores that it did not own, the sale did not proceed and as a result, the franchise network began to underperform, and unable to reach an agreement with its banks appointed an administrator to the Group.

We worked with the Group’s founders on a Deed of Company Arrangement.

Retail Adventures was a retail chain of 1,000 discount variety stores across Australia operating from three national distribution centres.

The company was operating under three state brands the most recognisable was the small retail brand of “Crazy Clarks” and the big box format “ Sam’s Warehouse”. Over 15% of the portfolio was loss-making a the commencement of the programme.

Over 6 months we consolidated operations in tow distribution centres in Brisbane and Melbourne, consolidated into 2 national brands, closed 150 stores and renegotiated the leases on a further 500 stores. The restructured group was sold back to its main shareholder for less than the value of its secured debt with networking capital funding through an inventory of $22m.

Ellery is a luxury Australian fashion brand with design offices in Paris and Milan and production facilities in Sydney.

Less than 5% of global sales were generated in Australia through a local shopfront and wholesale clients.

An assessment of the business and costs of manufacturing identified a failure in the budgeting process of production. We identified that 15% of the costs of production was double handling of products and sample in transhipment. A further 12% of goods were damaged as a result of poor quality control and manufacturing in the Australian supply chain.
Our solution was radical, we closed all Australian operation and negotiated a license agreement with an Italian agency to relocate manufacturing to Italy.

The changes provided working capital for the on-going business, settled the secured debt and provided for an orderly sell-down of inventory over 12 months. Overall production costs were reduced by 20% and the founder Kym Ellery was able to focus on design and marketing as a licensed brand.

Kate Barnet

PRINCIPAL

Kate develops strategic solutions for groups dealing in crisis management and/or distress investment. She has over 30 years of experience working with distressed companies in the financial assessment, recoverability, and sustainability of risk assets.

MEET OUR TEAM

Olvera Advisors

Kate Barnet

PRINCIPAL

Kate Barnet is a recognised leader in the insolvency and reconstruction industry.

Damien Hodgkinson

PRINCIPAL

Damien develops strategic solutions for groups dealing in crisis management and/or distress investment.

Mirzan Mansoor

PRINCIPAL

Mirzan has in excess of 13 years of experience across restructuring and turnaround, corporate finance, mergers and acquisitions and corporate banking in Australia and in Singapore

Michael Billingsley

PRINCIPAL

Michael offers Olvera Advisors over two decades of international restructuring expertise, adept at innovatively supporting diverse businesses, from small firms to listed companies.

Tony Wright

PRINCIPAL

Tony contributes 15 years of insolvency experience to Olvera Advisors, with diverse industry expertise and a unique background in ASIC’s Enforcement Division.

Neil Cussen

PRINCIPAL

Neil Cussen, a leading authority in insolvency and reconstruction, offers 35 years of experience, excelling in asset tracing, business recovery, and cross-border insolvencies.

Robyn Karam

PRINCIPAL

Robyn’s inclusion in the Olvera team brings an added 15 years of expertise in corporate reconstruction, insolvency, and forensics.

Diana Talevski

DIRECTOR

Diana Talevski is a dedicated and experienced Registered Trustee in Bankruptcy, specialising in the dynamic field of restructuring.

Our Services

Restructuring & Turnaround

Our Experience