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What causes retail businesses to go bankrupt?

The retail industry is a mixed bag, with some going into volunteer administration and some thriving. What do you think are the common mistakes failed Australian retailers made that brought their downfall? If you're a retailer, are you facing the same issues and what can be done to resolve it?

Top voted answer
Aishah Mustapha

Aishah Mustapha, Content Marketer at

Top 10% Graphic Design


I think it comes down to two things:
1.       No point of difference or unique selling proposition (USP)
2.       High overhead costs either from rapid expansion or poor financial planning
 
This applies to a lot of bankrupt retailers, regardless of what they sell.
Masters expanded too rapidly and couldn’t differentiate itself from the incumbent Bunnings, whether from price, customer experience or product line. Dick Smith had a lot of obsolete or unsold stock when they folded, which signals that they failed to keep up with consumer demand changes. If you asked consumers to describe Dick Smith in fewer than 10 words, many would struggle simply because Dick Smith had no USP.
 
It’s an important lesson to think about when you are starting a retail business nowadays, in this highly competitive environment – what is your USP?
 

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