Retail insolvencies have risen by 19.65 per cent in the nine months to March 31 this year compared to the same period in FY24, new data from the Australian Securities and Investments Commission (ASIC) revealed.
Collapses in retail are now at 804 all up in FY25 so far – across first, subsequent and transitional appointments – with the going trajectory indicating that insolvencies will surpass FY24’s full-year retail collapses of 963.
The surge in retail insolvencies add to an overall record surge in business collapses across all industries. ASIC data shows there was a 36.2 per cent increase in companies entering external administration in FY25 financial year-to March 31.
Accounting firm BDO claims these numbers indicate that Australia’s small business sector is facing unprecedented challenges.
Administrators at BDO Australia were court-appointed to oversee the collapse of Ally Fashion.
The newly released insolvencies data from ASIC includes the recent collapses of Ally Fashion, as well as Jeanswest, Designerex and Tuchuzy, and other major collapses such as Mosaic Brands, with Katies, Rivers, Noni B and Millers entering liquidation.
BDO business services partner Dr Mark Pizzacalla said 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.
“Some established retailers are referring to the current economic environment facing them as a “silent depression’,” Dr Pizzacalla 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.”
In addition to these challenges, recent industrial relations reforms are having an impact on small retailers.
“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,” Dr Pizzacalla continued.
“These reforms are putting additional pressure on small businesses, making it harder to align resources with growth and market changes.”
Alongside this, monthly business turnover in retail slipped into the red in February this year, new data from the Australian Bureau of Statistics (ABS) revealed.
In the same month, fashion sales plateaued year-on-year, other ABS data shows, lifting by just $12 million to $3.09 billion in February 2025 compared to the same month in 2024.
BDO Australia national retail leader Salim Biskri said managing cash flow has become one of the greatest challenges for small retailers.
“For many small businesses, cash flow management is the most stressful issue they face,” Biskri said. “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.”
Salim also highlighted the troubling rise in insolvencies within the sector.
“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 Jeanswest and Ally Fashion, which recently shut down numerous stores, demonstrate just how severe the situation has become.”
To alleviate these stresses, Biskri said several measures can be implemented. This includes embracing digital transformation, which he said is crucial.
“Small businesses should develop robust online platforms to compete with larger retailers,” he said.
“Secondly, advocating for policy reforms, such as tax relief and reduced compliance burdens, can provide immediate financial respite.”
He also recommended 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.”