Retravision woes continue retail consolidation

Retravision woes continue retail consolidation

The retail consolidation trend gathered pace last week with Retravision (NSW) placed into voluntary administration. Operating as the buying group for 120 independently owned stores, it has debts of about $50 million.

Deloitte has been appointed as receivers in an attempt to recover some of the $17 million owed to secured creditor, Westpac.

Retravision (NSW) has more than 30 suppliers of product. The retail outlets offer a wide range of consumer electronic goods including flat-screen TVs, set-top boxes, digital cameras and MP3 players from Panasonic, Samsung and Sony. They also carry two desktop and four notebook SKUs courtesy of Acer.

Ingram Micro managing director, Guy Freeland, said the distributor was one of the Retravision creditors. He estimated the debt could be higher than $1 million but said Ingram was not exposed because it was insured.

"The cause of these things is never simple but clearly there's increased competition in the store-based space with The Good Guys, JB Hi-Fi and Leading Edge all fighting for the IT dollar," he said. "In regional areas we think the drought is also having an impact on spending.

The core of the Retravision (NSW) business is still strong, according to Deloitte, which has blamed the group's problems on significant debts owed by two of the retail stores. The receivers are currently considering options including a restructure of the business that would enable it to continue trading or facilitate a sale.

The Retravision news comes just weeks after another electrical retail group, Betta Stores Limited (BSL), was put up for sale due to financial difficulties. It serves as a buying group for Betta Electrical, Chandlers and Truscotts retail outlets.

As previously reported in ARN, the Commonwealth Bank appointed PricewaterhouseCoopers as receivers in October with a view to recouping some of the $16 million it is owed. Problems at BSL stemmed from the development of flagship superstores designed to help it compete with bigger rivals.

The collapse of two significant retail buying groups plays into the hands of market giants like Harvey Norman and Dick Smith Electronics. But given that these companies often have direct relationships with vendors, what will the consolidation trend mean for retail distribution?

Cellnet managing director, Adam Davenport, said vendors with broad product ranges would continue to find the most cost-effective route to market through distribution.

"As an observer it seems conditions are difficult [for mass market retailers] and scale is important," he said. "The large mass merchants have direct relationships with many of the manufacturers and consolidation does concentrate power among a smaller group.

"But I still think there's a place for distribution because it can get very difficult for retailers to manage a large number of vendor relationships. Sometimes it is appealing for them to consolidate purchases through a distributor."

This view was echoed by Ingram's Freeland. "There is a lot of cost and effort associated with getting smaller drops of gear to sites spread across the country," he said.

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