Pumpkin Patch begins fire sale as Aussies’ Christmas spending looks set to drop

Collapsed childrenswear retailer Pumpkin Patch has begun slashing prices across all its stores as part of a three-month long fire sale, as its receivers set about closing down the business.

Pumpkin Patch receivers KordaMentha said this week that the chain will be gradually closed as the receivers have been unable to find a buyer, despite some interest in the business’ intellectual property being desired. The chain went into receivership last month after it was revealed the company could find “no solution” to its multimillion-dollar debts.

“Our focus since Pumpkin Patch entered receivership in October was to sell the business as a going concern. Unfortunately, while the brand is attractive, the business itself ultimately drew no interest at the conclusion of the sale process,” receiver from KordaMentha Brendon Gibson said in a statement.

“We now move to the next phase of receivership which is to sell off all stock and begin to wind down the business.”

Read more: Is Kmart to blame for Pumpkin Patch’s downfall?

Noting the decision was a “blow to staff”, the troubled retailer’s receivers confirmed 63 jobs will be immediately lost due to the closure of the business’ head office.

A total of 1600 jobs will be cut across the Australian and New Zealand stores, reports Fairfax, but the timing of the store closures is still uncertain.

“It is too early to say when individual stores will close. Our current intention is for all stores to remain trading until the end of the year with some continuing on into January as stock diminishes,” Gibson said.

The liquidation process will likely last until February, and customers’ gift cards will be honoured while stock remains, on a dollar-for-dollar-basis.

Gary Mortimer, retail expert at Queensland University of Technology Business School, told SmartCompany he believes Pumpkin Patch’s downfall can be attributed to a lack of differentiation.

“Pumpkin Patch has always been regarded as great for fashionable childrenswear, but over the years it began to see the impact of retailers like Kmart and Zara Kids,” Mortimer says.

“These places began doing fashionable childrenswear at much lower prices, and once a retailer becomes the same as all the others, all shoppers look at is price and it loses its point of differentiation.”

Mortimer believes beginning to slash prices this side of Christmas is a good move, saying it will likely lead to the receivers recouping more value from the stock than they would have otherwise.

“With the big Christmas rush coming, this is a perfect time to cut the prices and clear out the inventory,” Mortimer says.

“If they began the sale after Christmas they’d be competing with thousands of other retailers on Boxing Day sales, so this way they can clean out as much inventory as possible.”

Consumer sentiment falters

Despite the lure of several high-profile fire sales, a Westpac consumer sentiment survey released yesterday revealed 2016 would be a “so-so” year for consumer spending, reports the ABC.

Total retail sales for the Christmas period are forecast to be up between 3 and 3.5%, which is down from the large 5% gain seen in 2015. Only 14% of consumers surveyed declared they would spend more this Christmas, with 52% saying they would spend the same, and 34% saying they would spend less this year.

Westpac said the results were “middle of the pack” when looking at the 42-year history of the survey. Those who were likely to spend less were reportedly 18-34 year olds, those on lower incomes, and females.

Mortimer believes shoppers are being a “little more conservative” in spending, and attributes a decline in retail spending to the rise of experience focused purchasing.

“Shoppers are looking for an experience rather than something physical. Things like concert tickets, flights, or vouchers,” he says.

“People will still buy products and wrap up presents though. The ritual of Christmas remains.”

Retail analyst at Retail Oasis Pippa Kulmar believes that lower level of purchasing this Christmas is due to the “disaster year” that was 2016.

“A lot of consumer sentiment is fuelled by uncertainty about the future. I’ve seen a lot of people lamenting online about how 2016 has been a disaster and it’s created uncertainty in the market,” Kulmar told SmartCompany.

“It’s not just in Australia, as with globalisation what happens in other countries affects us too.”

Kulmar notes that lack of confidence is occurring on both sides, with many retailers holding sales now to boost Christmas profits.

“With [political events] like [the election of Donald] Trump and Brexit, people have changed how they’re approaching spending this Christmas, as they’re not sure what next year will bring,” she says.

“People are holding their breath.”