The collapse of Mosaic Brands into voluntary administration this week has been driven by several factors all linked to the company’s inability to keep up with shifting forces and consumer ideals in the market.
This is according to RMIT fashion industries expert Dr Carol Tan, who noted that the top key catalyst was the surge in online retailing and the growing intrusion of fast fashion businesses in the Australian market.
Mosaic manages several Australian retail brands including Rivers, Katies, Noni B, and Millers with over 700 stores nationally.
“Changing consumer preferences have transformed the retail landscape, making it difficult for Mosaic Brands to adapt quickly,” Dr Tan said. “At one point, Mosaic also expanded too rapidly, which may have stretched its resources.”
Last year, former CEO Scott Evans confirmed the opening of 40 Rivers megastores in regional locations.
“They have also been challenged legally, with the Australian Competition and Consumer Commission (ACCC) taking Mosaic Brands to court for failing to meet advertised delivery timeframes,” Dr Tan added.
"More generally, many legacy brands have rigid structures that hinder their ability to pivot in response to market trends or consumer preferences. Their heavy reliance on traditional retail models, focused primarily on brick-and-mortar stores, has limited their ability to succeed in an e-commerce-dominated environment.”
Earlier this year, it was also reported that the group was negatively impacted during the second half of FY24 by disruptions as it migrated to a fully integrated logistical supply chain and distribution system with a newly appointed global partner.
All this led to a trading and statutory loss for FY24. Preliminary results from Mosaic indicated that the group was expecting a $5 million to $10 million loss in operating earnings before interest, tax, depreciation and amortisation (EBITDA) and an operating profit loss (EBIT) in the range of $15 million to $20 million.
From there, the business’ challenges snowballed, including missing an ASX reporting deadline and the announcement that Mosaic will wind down five of its brands - Rockmans, Autograph, Crossroads, W.Lane and BeMe brands, including all stores and websites.
The business was then placed into voluntary administration on October 28, with four FTI Consulting experts appointed as voluntary administrators, while four others from KPMG were appointed as receivers and managers.
KPMG Australia’s turnaround and restructuring partner David Hardy said the team will be seeking to stabilise the operations of Mosaic "to preserve the underlying value of the business while endeavouring to serve its customers, with support from its employees and suppliers to minimise business interruption.”
The receivers will be overseeing the trading operations of the group, whilst the administrators will be seeking offers to recapitalise or acquire the Mosaic Brands business.
In a statement to the market, Mosaic Brands noted that the executive team progressed plans to restructure, realign and simplify the group’s operations over the past few weeks.
“These initiatives have included rationalising the group’s brand and store portfolio and focusing on key growth brands, reducing costs and improving Mosaic’s working capital position.
“This process has involved discussions with a wide range of stakeholders, both locally and internationally, including Mosaic’s senior secured lender, suppliers, service providers, landlords and the ACCC.”
The Mosaic board then thanked the majority of long-standing partners who supported its effort to negotiate an informal restructure of the group.
“With the group continuing to trade, management intends to progress its brand rationalisation and wider restructuring plan and to focus on the key Christmas and holiday trading period.
“The board wishes to reiterate its belief to those who supported the restructure, to Mosaic’s customers and, most importantly, to Mosaic’s dedicated team across Australia, that the business has a long-term future.”
How to be successful fashion brand in 2024 and beyond
Fashion brands that are successful in today’s competitive market are “cultivating strong communities around their products”, according to Dr Tan.
“These brands maintain closer communication with customers, both in-store and online, allowing staff to gather valuable feedback and understand what resonates with their audience,” she said.
"Building an authentic brand that aligns with customer values is also essential. Consumers are more likely to connect with brands that reflect their beliefs and lifestyles.”
As an example, Dr Tan highlighted local shoe brand Radical Yes, which operates on four core values: creativity, communication, consideration and community.
"These values are fundamental to driving the company’s direction and decisions, ensuring that every aspect of their business aligns with their mission,” the RMIT lecturer said. “This values-led approach not only differentiates their brand in the market but also cultivates a loyal customer base that resonates with their vision.
“Fashion brands must also consider their social and environmental impact. Producing in smaller quantities is not only more sustainable but also avoids the pitfalls of overproduction and excessive discounting, which helps maintain brand integrity and prevents cheapening the brand image.
“Ultimately, successful fashion brands are agile, community-focused, and responsive to their customers' needs, prioritising authenticity and responsible practices in a rapidly evolving market. Many legacy brands are not meeting this brief."
Dr. Carol Tan is a senior lecturer and program manager of the Masters of Fashion (Entrepreneurship) at the School of Fashion and Textiles, RMIT University.
Since 2003, she has been actively researching the key success factors for small-to-medium enterprises (SMEs) in Australia, focusing on businesses experiencing significant growth.