Black Friday has permanently altered seasonal patterns whilst consumers pivot to services spending, creating a fundamental shift in Australian retail, reveals CreditorWatch’s latest Retail Reshuffle report.
What’s happening: CreditorWatch data shows insolvencies are now running 50% above pre-COVID levels, with early warning indicators pointing to further stress across several retail sub-sectors through 2026.
Why this matters: The changes represent a fundamental shift rather than a cyclical downturn. Consumer behaviour has fundamentally shifted, seasonal patterns have been rewritten, and the gap between large and small retailers is widening.
Australia’s retail sector is undergoing a profound realignment as shifting consumer behaviour, persistent cost pressures and structural change drive insolvencies higher and redraw the competitive landscape, according to Retail Reshuffle, the latest CreditorWatch report examining the retail industry.
After a temporary reprieve during the pandemic support period, retail insolvencies have risen steadily as inflation, higher interest rates and cost of living pressures have constrained household spending. CreditorWatch data shows insolvencies are now running well above pre-COVID levels, around 50% higher. Early warning indicators point to further stress across several retail sub-sectors through 2026.
Consumers are rebalancing spending away from goods and toward services, whilst discount led sales events such as Black Friday have permanently altered seasonal patterns. At the same time, scale advantages are allowing larger retailers to consolidate market share at the expense of smaller operators.
Insolvencies climb steadily
Patrick Coghlan, CEO of CreditorWatch, says the changes now underway represent a fundamental shift rather than a cyclical downturn.
“What we’re seeing in retail is not a temporary cycle, it’s a structural reset,” Coghlan explains. “Consumer behaviour has fundamentally shifted, seasonal patterns have been rewritten, and the gap between large and small retailers is widening. For many smaller operators, the operating environment has become far less forgiving.”
ASIC data shows retail insolvencies have climbed steadily from pandemic lows and remain materially higher than historical norms. CreditorWatch’s own indicators suggest this trend is far from over, with invoice payment defaults and ATO tax defaults reaching elevated levels, both reliable lead indicators of future insolvency risk.
The report dissects the eight sub-sectors of the retail industry, surmising that discretionary heavy segments are showing the greatest strain, particularly clothing, footwear and department stores, where weak discretionary demand and heavy promotional activity are compressing margins.
Furniture, homewares and recreational goods are unwinding pandemic era demand spikes amid subdued housing activity and higher financing costs. Smaller independent retailers lack the balance sheet strength, supplier leverage and logistics scale of larger chains.
Black Friday reshapes calendar
The report identifies five enduring shifts that are redefining the sector as a whole: Black Friday dominance, pulling sales forward and eroding traditional December peaks, permanent ecommerce maturity favouring large, well capitalised retailers, a post-COVID pivot back to services spending reducing demand for discretionary goods, rising demand for technology based recreation and electronic products, and ongoing market share reallocation.
By contrast, food retailing and pharmaceutical retail remain comparatively defensive, though even these segments are seeing margin pressure among smaller operators as cost inflation and competitive pricing intensify.
Scale advantages consolidate
Smaller retailers are losing ground to large chains with superior logistics and pricing power. The gap between large and small retailers continues to widen as scale advantages become more pronounced in the current operating environment.
Businesses exposed to the retail sector should take a more active approach to credit risk. Closely monitoring credit ratings, invoice payment behaviour and ATO tax defaults across retail trading partners is essential in this environment, according to CreditorWatch.
Services spending pivots
Ivan Colhoun, chief economist at CreditorWatch, says higher interest rates are compounding the structural changes already being felt across retail.
“With the post-holiday period often a time of weaker spending, and cost pressures still elevated, retail insolvencies are likely to remain at or above recent levels in coming months,” Colhoun explains.
The shift in consumer spending patterns from goods to services represents a fundamental change in how Australians allocate their household budgets. This pivot has been accelerated by the pandemic but shows no signs of reversing, creating ongoing challenges for traditional retail operators focused on physical goods.
CreditorWatch provides Australian businesses of all sizes with innovative credit management solutions and unique, AI powered data insights to help them reduce their risk exposure, get paid faster and trade more confidently. As Australia’s only dedicated B2B credit reporting agency, CreditorWatch offers a complete suite of credit reporting products covering the entire customer lifecycle.
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