Australia Riot Art & Craft shuts 56 stores, as pressure mounts on retailers

15:17  27 october  2020
15:17  27 october  2020 Source:   smartcompany.com.au

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Art supplies retailer Riot Art & Craft has closed its 56 stores, after being placed in liquidation last week.

a store filled with lots of counter space: Westfield © Provided by Smart Company Westfield

Employees were given little notice about the closures, receiving text messages last Monday informing them they were “not required” to attend work the following day, according to nine.com.au.

The majority of Riot Art & Craft stores were located in shopping centres in Australia’s east coast states, with a smaller number in Western Australia and South Australia.

“A massive thank you to everyone for all your years of service,” read the text message from Riot Art & Craft director Michael Kurc.

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“The liquidator will be in touch with you regarding your entitlements.”

Liquidator Nicholas Giasoumi of insolvency firm Dye & Co has been appointed as liquidator for SLKALT Pty Ltd, the company that operated the Riot Art & Craft business for more than 40 years.

Giasoumi confirmed to SmartCompany this morning the business has about 137 employees, both permanent and casual, who are collectively owed approximately $3.5 million in wages and entitlements.

Employees have been advised to make claims under the federal government’s Fair Entitlement Guarantee Act to recover these entitlements.

The business also owes about $8.5 million to 100 other unsecured creditors, the majority of which are landlords.

The Riot Art & Craft e-commerce store is continued to trade under new ownership, according to a message displayed on the website.

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Giasoumi confirmed the online assets of the business have been sold, but was unable to disclose the purchasing party.

He said he will now be going through the sale contract to ensure the assets were sold at market value, but the “primary concern” at this stage was to take care of employees and landlords affected by the liquidation.

It’s still “early days” in terms uncovering what caused the business to be placed in liquidation, said Giasoumi, although “clearly COVID-19 is not going to help, as a general rule”.

While Kurc says the matter is now in the hands of the liquidator, he told nine.com.au “after 46 years in business it’s been very traumatic closing doors”.

Warning signs

Riot Art & Craft stores had been looking increasingly bare in recent weeks, but staff said they were reassured more stock was on its way.

“They kept reassuring us, even the week before the director actually sent us an email, saying stock was on its way,” former employee Sophie Newcome told nine.com.au.

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“The thing that makes me most angry is that for the past few weeks we have been going in to work like normal, expecting to get paid, but we weren’t.

“That’s after the last fortnight of standing in what was almost an empty store telling customers that stock was coming in this week.”

Gary Mortimer, a retail expert from QUT Business School, says he’d seen commentary from customers on Twitter in recent weeks about Riot stores running out of stock.

Some stores were displaying signs that said more stock was on its way, says Mortimer, but it was clear there were serious supply issues.

“We can probably all recognise that something was going on, and the business was perhaps unable to pay suppliers,” he says.

“It’s often the beginning of the end, I suspect, when a retailer can’t access supply and inventory, it then becomes a downward spiral.”

With most Riot Art & Craft stores located in shopping centres, such as the Westfield in Warringah Mall in New South Wales or Fountain Gate in Victoria, Mortimer says the specialist retailer was competing directly with the large discount department stores, including Kmart and Big W.

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These bigger players have greater purchasing power, and can offer lower prices. But Mortimer says it’s important to recognise the potential market for arts and crafts supplies is likely to have shrunk too.

This is particularly the case for art supplies for children, who are now spending less time painting or creating models, and more time engaging with electronic toys and digital technologies.

“In many ways, they were facing many of the same challenges as Australian Geographic did when they collapsed,” Mortimer observes.

The closure of the Riot Art & Craft stores will add to a growing list of empty stores in Australian shopping centres, and Mortimer says mid-tier centres will be hardest hit.

“If you are a big shopping centre — a Westfield or Vicinity Group — you’re okay; there will always be other retailers keen to take over [leases],” he says.

But in smaller shopping centres that may have invested less in refurbishments or upgrades, “every lost retailer is another vacant tenacity that detracts from the shopping experience”.

This matters in an economic climate where consumers now have less to spend, as government support programs are scaled back, Mortimer says.

It’s now crunch time for retailers as the usually busy Christmas trading period gets underway, and Mortimer predicts we’ll see the outcome in the new year.

“February is really when we will start to see which retailers have survived,” he says, adding that the end of summer is usually known as “killing season” for this reason.

“If those Christmas sales don’t materialise, we will see more retailers going into voluntary administration,” he says.

The post Riot Art & Craft shuts 56 stores, as pressure mounts on retailers appeared first on SmartCompany.

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