placed into administration in order to exit certain retail leases, which no longer make sense. We spoke to Richard Facioni, founder of private equity firm ACTA Capital, which co-manages Ginger & Smart through Alquemie Group alongside Alceon, about the recent decision to go into administration, and what’s next for the brand.  Inside Retail: What were your main reasons for going into administration?  Richard Facioni: The primary reason was to allow us to get out of some retail leases that simply weren’t working for us, and also to sort out Covid rent relief, because some of our landlords were playing a bit of hardball in terms of what they believed was appropriate rent relief for the most recent lockdown period from July through October last year. What this process allows you to do is to exit leases, or to say, ‘This is what we’re going to pay you.’ It basically short-circuits what can be a protracted negotiation, and it’s really as simple as that.  When we come out of administration – I think the second creditor’s meeting is scheduled for next week – we’ll still have a very good online business, we’ll have our David Jones concessions, we’ll have our wholesale business both domestically and internationally, and we’ll have a couple of stores, and that’s it. We’ll shrink the store portfolio and focus on those other channels, and we’ll have a more profitable business as a result. The stores we’re getting out of just weren’t contributing. One of them was in The Strand Arcade, which is a very difficult centre, and the other was in [Westfield] Bondi Junction, where David Jones just moved us to a better concession location, and with that, we didn’t need both. It’s strategic in the sense that it was all premeditated. IR: Is the business profitable?  RF: Yeah. IR: In terms of those stores not performing, is that due to Covid, or do you think that the store network was bigger than it needed to be prior to Covid? RF: Covid certainly exacerbated things. If you look at The Strand Arcade, it was already a difficult centre, and then, the retail shopper in the CBD hasn’t come back to where they were pre-Covid. It’s a very quiet centre, particularly the level that we’re on. Bondi Junction is less Covid related. Foot traffic still isn’t back to where it needs to be, but the repositioned concession in David Jones is actually performing quite well, and we just didn’t need both. They were just going to cannibalise each other.  IR: It sounds like you will still have some standalone stores. How many, and what role do you see them playing in the broader mix of sales channels going forward?  RF: We will have a couple of stores. We’ll have our outlet store at Birkenhead Point, and we’ll have our flagship store in Paddington. But as a brand, we need to determine what a store looks like in this new environment and where they need to be. The market has changed, particularly for a brand like Ginger & Smart, so we need to rethink whether we get back into retail seriously, or if we’re happy having David Jones concessions as our footprint.  They tend to perform quite well for us. We also have a pretty strong online business, and wholesale does quite well. We’ve started selling internationally as well. So it becomes a case of do we get back into retail, and if so, what does that actually look like? We’re not going to rush back into it. IR: When you say consumer behaviour has changed, do you mean people are shopping online versus offline, or that they’re not working full-time in an office anymore. I know Ginger & Smart caters to the type of customer who is wearing designer clothes to work. Is that also part of the equation? RF: It’s part of it. As you say, their customers are women who are wearing designer clothes to work, functions and events. All those things are going to come back in time. There’s definitely been a shift to online, and the CBDs are still very quiet, so having stores in the CBD is risky. Previously, we thought about having a boutique in Mosman, having one in the Melbourne CBD, and at the moment, I’m saying, ‘We probably don’t need those boutiques’ – provided we’ve got sufficient coverage through our David Jones concessions and our online offering, because we’ve got a very loyal customer base. As the market normalises and stabilises, we’ll start to think about rebuilding a portfolio of boutiques and what they look like.  The other thing is, unlike Scanlan Theodore and Zimmermann, which have quite extensive ranges, we’ve got quite a small range. It’s more about regular introduction of new product, but quite a tight range, so we don’t need big format boutiques. But the problem with having smaller boutiques is it’s harder to make them profitable, so we need to think about how we make that work. It’s not as straightforward as opening another store. That’s why the concession model works so well for us, because it’s a defined pad, it’s on a percentage turnover rent, and we can make that quite profitable. For us to open a boutique, [we can’t do that] unless we start to extend the range, and if we start to extend the range, we start to dilute our brand DNA.  IR: How would you say the business fared over the last two years during Covid, and what are your plans now as things start to open back up? RF: There were definitely some tough times, particularly when we had no weddings, no racing carnivals, no Christmas parties, and people were all working from home. They are all the end uses of our product, so there were periods when there was very little need for customers to buy our product. We wound back our intake of new product as a result, but we’re coming through that now.  On the flip side, we were able to introduce the brand to Saks in the US. We’ve taken three orders with Saks, and we’ve had advanced conversations with Nordstrom, so we were able to explore other avenues, and online, as I mentioned, has done very well. But no question, it’s been a tough time because we don’t do activewear, we don’t do leisure wear, we’re more events, we’re more desk-to-dinner, so we were particularly impacted by all the lockdowns and restrictions that happened.  Barring any future restrictions, the future of this business looks quite bright because it is quite a unique brand, it has a signature aesthetic. We’re still very bullish on the brand.   IR: How big a part of the business do you see international being in the future?  RF: I think it’s going to become an increasingly significant part of our business. There’s strong demand in the US for Australian brands, we’ve seen that historically. The feedback from Saks was that there was nothing else in their range that spoke to their customer in the way that Ginger & Smart does. The sustainability, the ethical sourcing, which is part of our brand ethos, they like that as well.  I think continued wholesale partnerships and online growth into the US and European markets will be an increasingly important part of our business. I don’t see us opening boutiques overseas, I don’t think we need to do that, but I certainly see international becoming an increasingly significant part of our business, and one that we’re going to continue growing, for sure.