ording to a joint study by the Australian Retailers Association and American Express, 32 per cent of small and medium businesses with a turnover of less than $50 million are feeling uncertain about the year ahead. Over 90 per cent have seen business costs increase in the past 12 months, while about half of small business owners surveyed said they frequently use personal funds to cover rising business expenses. Double whammy Tracey Bailey, founder and CEO of Biome – a retail business focused on everyday eco-friendly items – recently announced that the brand was subleasing its location in Brisbane’s inner city – and looking to downsize. She told Inside Retail that declining sales were not sufficiently covering the high cost of operating the CBD location. For Biome, Bailey said the ratio of rent to turnover should typically be about 10 per cent. However, its rent had climbed to 25 per cent of sales, which is unsustainable. Meanwhile, passing trade has fallen by about 50 per cent compared to pre-Covid-19, according to the sophisticated traffic monitoring devices that Biome uses. “A lot of retailers are in leases that they signed up for prior to Covid-19, with many being over three- to five-year periods. A lot of these leases are coming up for renewal, which will provide a wake-up call to landlords that their property isn’t worth what it used to be,” Bailey said. “The value they are selling is effectively the number of people walking past their store and Brisbane’s inner city no longer has the same level of passing trade.” Very few shops left According to Bailey, the current economic downturn – in conjunction with the reduced number of people working in CBD offices – have acted as a “double-whammy” for the business. She said that if only one of these phenomena was occurring, Biome’s situation would likely be more manageable. “Until interest rate rises started kicking in, we were surviving. But, at the same time, we heard that Telstra used to occupy 12 floors of the building across from us. Now, they’re only occupying two floors. That’s hundreds of people that aren’t filing out every day to buy lunch and pick up a gift.” Increases in annual rent, wages and other expenses – as well as the rising cost of goods – have placed additional pressure on the brand, forcing Biome to raise prices for certain goods. “What’s particularly difficult for the smaller retailers is that we don’t have a lot of financial resilience. The bigger retailers might have more access to capital and investment to help them see through this time. We don’t have as much of that freedom.” Bailey added that a rapid shift to hybrid working conditions has left small retailers in the CBD feeling caught out, with limited government or financial support available. “A lot of customers are coming into our store, shaking their heads and asking where they’ll find these things in the city now. There’s very few small shops left, and Myer has just closed down in Brisbane’s CBD.” Demand for sustainability Bailey wanted to dispel the myth that, when times are tough, consumers are more inclined to cut back on sustainable and eco-friendly goods. She stressed that this was not a factor for Biome. Rather, many customers are still purchasing in-store, but aren’t able to spend as much as they previously could. “If anything, we help customers live a more budget-conscious life by minimising waste. For example, Biome’s naked ingredient bar allows people to make their own skincare and cleaning products,” she said. “You can make the things you need for a few dollars, rather than buying packaged and synthetic products in a supermarket.”