Australia’s retail sector entered 2026 under sustained financial pressure. Although online sales continued to grow, higher operating costs, weak discretionary spending, accumulated tax debt and intense competition pushed a growing number of retailers into insolvency.

Key figures

• A record 14,722 Australian companies entered external administration in FY2024–25, up 33.2% from 11,053 in the previous year.
• During the first eight months of FY2025–26, 9,307 companies entered external administration. This was 1.3% lower than the corresponding period, suggesting overall insolvencies had stabilised - but at historically elevated levels.
• Retail accounted for approximately 7% of appointments during those eight months, equivalent to roughly 650 companies based on ASIC’s rounded industry share.
• More specifically, reports indicate 548 retail insolvencies occurred during the first half of FY2025–26, representing a 34% year-on-year increase.

A growing online market- but not necessarily a profitable one

E-commerce demand remained comparatively strong. Australian online retail sales reached $4.70 billion in June 2025, up 13% year-on-year.

However, sales growth did not automatically translate into stronger profitability. Many online and omnichannel retailers continued to face:

• rising freight, warehousing and fulfilment costs;
• expensive digital advertising and customer acquisition;
• heavy discounting and promotional dependence;
• high product-return rates, particularly in fashion;
• competition from global marketplaces and low-cost offshore platforms;
• excess or poorly managed inventory;
• limited access to working capital; and
• outstanding ATO and supplier debt.

ASIC generally records e-commerce businesses within their underlying retail category, rather than publishing a standalone “e-commerce insolvency” total. Therefore, online retailer failures are largely included within the broader retail figures.

What changed in 2025?

The record insolvency level reflected both current trading conditions and the removal of pandemic-era support. The RBA found that tax payment concessions allowed some struggling businesses to accumulate larger debts. Since 2022, the proportion of insolvent companies owing more than $250,000 in tax increased materially as the ATO resumed stronger recovery activity.

Retailers were particularly exposed because household spending remained cautious while wages, rent, energy, insurance, freight and inventory costs continued to rise. Fashion, homewares, furniture and other discretionary categories were among the most vulnerable.

The liquidation of Mosaic Brands, which operated Rivers, Katies, Millers and Noni B - illustrated these pressures. At its peak, the group operated around 1,400 stores. Its collapse ultimately resulted in more than 700 store closures and almost 3,000 job losses, including 136 Rivers stores and approximately 650 employees in early 2025.

Outlook for 2026

The 2026 outlook is best described as stabilisation at a high level, with retail risk still increasing.

Retailers are being squeezed between subdued consumer demand and elevated input costs. Retail turnover growth has reportedly been forecast to slow from approximately 2.3% in 2025 to 1.8% in 2026, while discretionary spending growth is expected to weaken more sharply.

The businesses most exposed are likely to be those with:

• thin margins and high fixed costs;
• weak cash-flow forecasting;
• significant tax or supplier arrears;
• excessive inventory and slow moving
• dependence on repeated discount campaigns;
• costly physical store networks; or
• growing online revenue without sustainable unit economics.

Conclusion

Australia’s retail insolvency problem is no longer simply a post-pandemic correction. The sector is undergoing a structural reset. E-commerce continues to expand, but growth alone is not protecting retailers from failure. In 2026, survival will increasingly depend on cash-flow discipline, profitable customer acquisition, inventory control and early restructuring - not simply higher sales.