SYDNEY: Trade creditors have reacted angrily to reports designers at Rosemount Australian Fashion Week (RAFW) lavished upwards of $60,000 on catwalk shows.
Industry suppliers claimed several high-profile brands on the schedule still owed tens of thousands of dollars in overdue debt. While designers at the spring/summer 2009/10 showcase invested up to $15,000 for an independent parade this month, some spent over triple that amount on extra production features.
This came a week after administrators for collapsed fabric business Smouha revealed it was owed more than $4 million by fashion companies, including RAFW regulars Sass & Bide ($500,000), Lisa Ho ($200,000) and Wayne Cooper. Sydney-headquartered consultancy firm TCF Services confirmed it was among trade suppliers sidelined in favour of a glitzy runway spend. The company, which specialised in the delivery of federal government grants for fashion businesses, had chased debts with several RAFW designers valued at between $5000 and $20,000.
Managing director Gerry Frittmann said while it was no secret designer brands survived on credit, the financial crisis had worsened debt levels as exports to Europe and the US essentially "died". He said the number of designers owing funds to trade suppliers was now "worse than ever", with investment in showcases such as RAFW driving them deeper into the red.
"It's a catch 22 - the smaller, emerging brands showing at RAFW sit at the higher end of the market and need to increase their local and international profiles to drive demand and increase sales."
"They need to do this to the point of becoming a sustainable business operation turning over between $2 to $3 million within the first two to four years of existence or they don't survive."
He said collapsed fashion label Mad Cortes was a prime example of a company which failed because of low turnover during its first four to five years in business. Frittmann said in order to fund growth many designers had made payment arrangements with suppliers, including paying outstanding bills within 120 - 180 days as opposed to the standard 30-day period.
He believed most unpaid bills among emerging designers were valued lower than $20,000 but were being "compounded" by the financial crisis.
"There are many fashion designers who have become local celebrities through shows like RAFW but this hides the fact their businesses are in fact very small, underfunded and in many cases trading insolvently. But as they are so small, they fly under the radar in terms of corporation law action if they go into administration or trade like this."
Frittmann said aside from "two or three" designers on the RAFW runway schedule, which this year included 45 shows compared with 60 last year, most were essentially emerging labels.
Rival consultancy group Australian Fashion Partners (AFP) also confirmed it had seen a spike in outstanding debts from young labels this year. Managing director Dominic Beirne said the company had already been forced to initiate legal proceedings against one designer on the RAFW schedule. AFP had assisted the brand in developing a successful submission for government funding, along with providing mentoring and strategic planning services.
"The amount owed I won't disclose and the processes I shouldn't go into because we are in the middle of actions to recover the funds," he said. "This designer is increasing their debt burden [by taking part in RAFW] for no definitive increase in sales. It is however, the only show in town so it's difficult to see how they can get the international exposure without it."
He said it was difficult to estimate the average designer spend at RAFW but said it could cripple smaller players in the current climate.
"The debt position is probably more pronounced among start-ups than established businesses as it most likely a higher percentage of their turnover."
Business information service IBISWorld predicted Australian clothing exports to fall 2.4 per cent to $322.5 million over the current financial year, as high-end demand fell off from the United States, Europe and Asia.