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East coast clients in the food and retail sectors have been experiencing a tighter than expected year. We speak to Kevin San & Associates director, Kevin San on some of the trends he’s seeing in the market today.
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How can you help your food and hospitality business clients?
24 October 2018
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9 minute read
Q: What trends are you seeing in your work with clients this year?
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Kevin San (KS): There's considerably more competition so clients who have bricks and mortar cafes are finding that they've lost a share of their turnover to other cafes who are opening nearby.
There are some clients where they've seen three or four cafes opening within the same suburb in the past 12 months and everybody loses in that situation.
I've also got clients who focus on catering for events and a lot of those seem to be less favourable than they used to be. For example the Smooth FM festival of chocolate at Homebush- Last year it was a tremendous success for every food vendor that went but this year they moved it to Homebush and it was a disaster- everybody took in 10 to 15 per cent of what they took in last year which is a huge drop. Things were so bad that Smooth FM walked back on the 20 per cent and they were not charging everybody the commission.
That's a case study for quite a lot of food-based events this year- a lot of them seem to have run aground or are failing. The organisers are trying to grow them bigger and in increasing the number of vendors, they've reduced the share for everybody.
I have clients complaining that Vivid was a real struggle for them simply because there were so many food vendors that were set up for the Vivid festival that in the end, it was almost not worth going.
Q: What can accountants do to help their clients navigate changing conditions?
KS: It's about working with your clients to keep on top of the changing business environment.
Clients which are heavily based in events and catering, they may have to transition to more casual staff than full-time staff because they can't really bank on the income being good anymore
At the same time, bricks and mortar cafes might have to consider something different. We have situations where the business owner has to increase their involvement in the day to day running of the business so all these things have to be done to help clients manage their cash flow a little bit better which is now a lot harder to come by.
Q: Should clients rethink their business plans?
KS: Bricks and mortar including retail is becoming a gigantic risk, it's becoming so hit and miss that I'm starting to recommend to clients that instead of opening a store in the mall, they pursue a pop up store instead because we have situations where malls can suddenly decrease in popularity because a new mall opens up in the suburb next door and all of the sudden no one goes anymore
I see that in Campbelltown where Macarthur square is suddenly a bit of a ghost town because Narellan mall opened up and it's much nicer and newer. If you have spent a lot of money on fit out and initial investment in opening up in a mall then that is something very hard to back out of.
I'm seeing that across the various areas around Sydney including the northern beaches. I’ve had clients reporting that things seem to be declining even though the local mall has been upgraded, and I suspect now that because the mall is now so big, that the traffic passing their store is now less.
Retailers are also really suffering.
All of my clients in retail are suddenly saying this year is a disaster. I'm meeting new clients where I look at their revenue, it shows a sharp dip when another restaurant opens up in the next suburb and it can be extremely dramatic like a 30 to 40 per cent drop.
We're getting to a point where Sydney is definitely overly saturated for food.
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