Colorado collapse prompts warning about niche markets

A retail expert says the collapse of Colorado presents an opportunity for independent retailers to pick up additional customers but also sends a strong message about operating within a niche.

Retail giant Colorado, which owns iconic Australian brands Jag, Mathers, Diana Ferrari and Williams the Shoeman, has been placed in the hands of administrators after struggling to get out of debt of more than $400 million.

This is likely to trigger the appointment of receivers – most likely from high-profile insolvency firm Ferrier Hodgson – by the syndicate of lenders.

The Colorado Group was purchased by Affinity Leave Partners in 2006 for $430 million when the retail market was particularly buoyant.

But according to a recent report by Inside Retailing Online, the group has been struggling to cope with the fragile retail environment for the last two years, posting a $62.7 million loss last financial year.

The company’s collapse threatens the jobs of about 3,800 employees who work in 434 shops across Australia and New Zealand.

Industry experts expect some of Colorado’s stores to be closed, and it is likely its brands may be sold off separately to realise value for lenders, with retail heavyweight Solomon Lew among the group of potential buyers.

The collapse comes within a day of discount perfume chain Perfume Empire being placed in the hands of receivers.

National Retailers Association spokesman Michael Lonie says while there may be an opportunity for smaller retailers to pick up Colorado customers, it is a “fairly long bow” to draw.

Rather, Lonie says Colorado’s collapse sends a strong message to independents that operating within a niche means your offering must be clearly defined and you must have an edge over your competitors.

In any niche, Lonie says high prices must be justified with a very specific stock range, arguing Colorado isn’t specialised enough for the prices it charges.

Lonie says Colorado is up against stiff competition from rival Kathmandu, which offers specialised hiking gear and is going from “strength to strength” after years of struggle.

According to Lonie, Kathmandu has managed to come back from the brink by honing its offering and getting rid of non-core stock.

At the other end of the market, Lonie says clothing and footwear retailer Rivers poses a threat to Colorado, particularly as it is renowned for its heavy discounting, which resonates with cautious consumers.

“Colorado is a little bit of this and a little bit of that. If you’re going to operate within a niche like camping and hiking, you need to have a clearly defined category of goods,” he says.

Lonie says the rise of one-stop-shops for outdoor leisure, such as Anaconda, haven’t helped smaller retailers as consumers tend to purchase everything they need from the one store.

But Russell Zimmerman, executive director of the Australian Retailers Association, says small retailers have an opportunity to combat this by offering a highly tailored service.