ChannelLife Australia - Australian retailers set to face a tough market in 2018

Retaielrs.JPG

Australian retailers set to face a tough market in 2018

Retailers and franchises continue to face tough market conditions due to ongoing mortgage stress and the knock-on effects of reduced consumer spending. 

Organisations in these industries should take steps to protect themselves from non-payment and keep cash flowing, or risk contributing to the high number of insolvencies traditionally seen in the first quarter of the year, according to Atradius.

The early part of the year is traditionally slower for retailers as Australians come down off the retail high of the Christmas period. 

The post-Christmas period sees a spike in insolvencies and retailers need to have an outstanding seasonal sales period to avoid financial difficulty during the loss-making first quarter of the year. 

With mortgage stress contributing to even less spending, retailers need to plan ahead to avoid being overwhelmed by debt. 

Atradius ANZ MD Mark Hoppe says, “Mortgage stress is causing Australian consumers to spend less money on retail items like clothes and furniture. 

“Australia’s private debt is amongst the highest in the world and, as banks keep issuing more and higher mortgages, the impact on the retail market will be felt even more keenly.”

“The Australian retail market has already seen a number of high-profile insolvencies from Dick Smith to Laura Ashley, David Lawrence, and Marcs, it’s crucial for retailers and franchises to protect themselves.” 

As retailers struggle, so too do their suppliers. 

Selling to retailers on credit terms means suppliers risk not being paid for their goods in a timely fashion or, sometimes, not being paid at all. 

Alternatively, retailers may review their approach to inventory and decide to stock fewer products, which can also leave suppliers out of pocket as previously-reliable orders dwindle.

Hoppe continues, “Securing cash flow with a strategy like credit insurance means retailers can innovate to stay ahead of the competition and remain viable even as the market tightens.

“Retail suppliers should also consider trade credit insurance to protect them from following their retail customers out of business.”

“An insurance policy lets businesses trade with confidence because it reduces risk and can significantly decrease uncollectible account expenses.”

Trade credit insurance covers losses that aren’t the customer’s fault but still result in non-payment. 

By making up the shortfall, it lets businesses continue to service their own debts. 

It can also lower the cost of borrowing, which can keep cash flowing. 

The due diligence done by trade credit insurers can help businesses avoid being stung by customers that have a history of non-payment. 

When businesses can identify at-risk buyers, they can focus their energies on more valuable customers. 

They can trade more safely through better information and strategic planning.

Interested in this topic?
We can put you in touch with an expert.

Follow Us

Featured

next-story-thumb Scroll down to read: