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Mattress company Koala cuts 30 Australian jobs over economic uncertainty

Mattress company Koala cuts 30 Australian jobs over economic uncertainty

Popular Aussie bedding and homewares company, Koala, has laid off 30 local staff due to unstable economic conditions.

The company shot up in popularity, particularly during the 2020 and 2021 lockdown periods, due to its competitive pricing, being all online and offering four hour delivery to metro areas.

However, just like many other companies, supply chain issues, inflation and surging interest rates have all taken their toll.

A Koala spokeswoman told The Sydney Morning Herald and The Age that uncertain economic conditions had resulted in 30 Australian staff members being made redundant last week.

Describing the former staff as “amazingly talented”, she said the company was supporting them with an outplacement service and professional connections.

According to the company’s website, Koala has “more than 200” employees.

The company also confirmed it had consolidated its offices in the inner-city Sydney suburb of Alexandria after previously also having employees located in the CBD.

News.com.au has contacted Koala for comment.

But it isn’t just the Australian staff that have been impacted, with 10 roles also being made redundant in South Korea following an expansion to the region last year.

The spokeswoman again told the publications “economic uncertainty” was behind the move, along with the need to “reduce our start-up cost in the market”.

“For the near term, our operations in Korea continue as we explore more efficient ways to serve the market,” she said.

The Sydney Morning Herald and The Age also cited claims from multiple industry sources that Koala had explored the possibility of listing on the Australian stockmarket, before abandoning the plan amid the recent the recent technology downturn.

The spokeswoman for the company strongly denied these claims.

“Like any private company with proven success as a market leader in our categories and markets, we are fortunate enough to receive countless inbound introductions from potential investors,” she said.

“They see the opportunity for Koala to continue to disrupt the global furniture market.”

She did not offer specific figures, but said Koala’s margins were double those of some of its competitors, adding that the decision to offer furniture and other homewares has led to “incredible growth” in non-mattress sales.

“We will continue to invest in our operations across Australia and Asia,” the spokeswoman said.

In October 2020, Koala copped significant backlash after announcing it would cease manufacturing its mattresses domestically and make them in China instead.

Staunch supporter of Australian-made products, Harvey Norman executive chairman Gerry Harvey, previously slammed Koala’s move, saying the name of the company implies the product is made domestically.

“Anyone selling imported mattresses are doing it because they can make more money,” Mr Harvey said.

“The marketing is dishonest… they are pretending they are Australian.”

The retail giant’s co-founder said overseas imports made it harder for local companies to compete in bedding and furniture.

Mr Harvey said his store predominantly sold made-in-Australia bedding, supporting local companies such as Sealy, SleepMaker and AH Beard.

When it was established in 2015, Koala marketed itself as a retailer of Australian-made furniture with a strong focus on sustainability.

However, most of its manufacturing has now moved to China and Europe, with the company deregistering itself in 2019 from using the Australian Made trademark.

“The decision to cease production of mattresses in Australia will provide significant innovation and quality improvements to help drive our continued growth across Asia-Pacific,” a company spokeswoman said at the time.

Koala said the move offshore would mean it would have greater influence in cultivating “sustainable behaviours” in its manufacturing and supply chain.

“We are always in search of the best manufacturers, suppliers, and makers around the world who meet or exceed our environmental and sustainability standards and conduct assessments to support this,” a spokeswoman said.

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Aussie company collapses up to 50 per cent since April, Creditorwatch finds

Aussie company collapses up to 50 per cent since April, Creditorwatch finds

It’s no secret there has been a “massive rise” in Australian companies collapsing but new findings show they have skyrocketed by a whopping 50 per cent since April.

The construction industry has faced a particular crisis with dozens of firms going under this year, but everything from billion dollar tech starts up to grocery delivery companies have become casualties of this “disturbing trend”.

Overall, companies going into external administration are up 46 per cent year-on-year, while court actions are up 54 per cent year-on-year, the latest data from credit reporting agency CreditorWatch found.

The huge jump has been blamed on interest rate rises causing “cheap money” to dry up, while spooked investors are pulling back on spending their cash on start-ups as valuations have taken a dramatic dive, with a slew of staff cuts battering the sector .

Meanwhile many businesses are already suffering depleted cash reserves as a result of the pandemic and the Australian Taxation Office (ATO) has ramped up its debt collection, according to the agency.

‘Ramping up legal action’

CreditorWatch has issued a chilling warning that the rise in business insolvencies will continue this year as multiple impacts batter the economy including ongoing supply chain issues, declining consumer confidence, rising interest rates, inflation and labor shortages.

CreditorWatch chief executive Patrick Coghlan said the hands-off approach to debt collection adopted by the ATO and many lenders during the pandemic is clearly over.

“The massive rise in external administrations is certainly a disturbing trend – now up 50 per cent since April. Our data shows that court actions are back to pre-Covid levels and the ATO has also stated that it is ramping up legal action for outstanding debts,” he said.

“With business and consumer confidence declining and inflation and interest rates on the rise, this doesn’t bode well for businesses, particularly small and medium enterprises whose cash reserves were depleted during the pandemic and are now operating on much tighter margins.”

No longer ‘awash with cash’

Aussie start-ups have been particularly hard hit, with the casualties piling up in the tech sector.

The latest was an Australian tech company called Metigy, which left staff “shell-shocked” by its sudden collapse last week, after it planned to raise money with a valuation of $1 billion.

Businesses that are trying to raise money for growth are particularly at risk in the current environment, added CreditorWatch chief economist Anneke Thompson.

“When interest rates were low and the world was awash with cash, investors were hungry for investment opportunities, and willing to move up the risk curve to find good returns,” she said.

“Now that cash is being consumed by ever-increasing prices and debt costs a lot more, the appetite for risk is dropping.

“Start-up businesses or those in the growth phase are always considered riskier. We have already seen this phenomenon hit the tech sector, and many well-known companies are being repriced to reflect this.”

Other recently failed Australian start-ups include grocery delivery service Send, which went into liquidation at the end of May, after the company spent $11 million in eight months to stay afloat.

There was also a Victorian food delivery company that styled itself as a rival to UberEats and Deliveroo that collapsed in July as it became unprofitable, despite making more than $6 million worth of deliveries since it launched in 2017 and had 18,000 customers.

Meanwhile Australia’s first ever neobank founded in 2017, Volt Bank, went under last month with 140 staff losing their jobs, while 6000 customers were told to urgently withdraw their funds.

A venture capital firm issued a sobering message about the state of Australia’s start-up industry, warning that more new companies would go bust and pulling back on funding as a result.

CreditorWatch also identified five regions where businesses are most at risk of going under with the suburbs of Merrylands, Canterbury and Auburn in NSW on the list, alongside Surfers Paradise and Ormeau in Queensland.

Construction collapses to continue

After four consecutive months of increases to interest rates and inflation continuing to rise, it is now clear that a slowdown in demand in many industries is inevitable, added Ms Thompson.

She said construction companies will continue to be impacted by late payments and reduced demand, particularly smaller operators.

The most recent company impacted was Melbourne-based Blint Builder which collapsed this week with approximately $1 million in outstanding debt owed to 50 creditors, according to the liquidators.

It joined smaller operators like Hotondo Homes Horsham, which was based in Victoria and a franchisee of a national construction firm – which collapsed in July affecting 11 homeowners with $1.2 million in outstanding debt.

It was the second Hotondo Homes franchisee to go under this year, with its Hobart branch collapsing in January owing $1.3 million to creditors, according to a report from liquidator Revive Financial.

Others include two major Australian construction companies, Gold Coast-based Condev and industry giant Probuild, which went into liquidation earlier this year.

There was also Norris Construction Group, which was in Geelong, collapsed in March with $27 million in debt. It owes $3.2 million to around 140 staff that it is unlikely to be able to repay, according to the liquidator’s report.

Meanwhile, Snowdon Developments was ordered into liquidation by the Supreme Court with 52 staff members, 550 homes and more than 250 creditors owed just under $18 million, although it was partially bought out less than 24 hours after going bust.

Other casualties this year include Inside Out Construction, Solido Builders, Waterford Homes, Affordable Modular Homes and Statement Builders.

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Fears Melbourne building company Blint is on the brink of collapse

Fears Melbourne building company Blint is on the brink of collapse

A Melbourne builder has “disappeared” placing homeowners under a “horrendous” amount of stress as they are left with half finished homes they have poured hundreds of thousands into that they may struggle to complete.

One family impacted are Dean and Nolle Fuller, who have five children between them, and have already shelled out $480,000 to the builder called Blint, since signing on in January.

The couple had demolished their existing home last November and had engaged Blint Builders to build two townhouses for $1.5 million, due to be delivered early next year.

The slab for the two homes was laid and the first floor framing has been done on both but then work started to slow down in the middle of this year, according to Mr Fuller.

But the 54-year-old said alarm bells really started to sound when his wife drove past the site in the first week of June and discovered that the portaloo had been taken away and a tradition was on site collecting his materials.

She then went straight to the builder’s office only to discover it locked up, while her calls went unanswered.

Two days later on June 9, the owner of Blint told the Fullers he was going into voluntary administration but since then they have heard “nothing”, with emails and phone calls left unanswered and the office empty.

Building site targeted

Their building site has been broken into leaving it a “mess”, Mr Fuller said.

“In that time, we have had two lots of vandalizing and trespassing and damage caused to our property, which has been lodged with police,” Mr Fuller told news.com.au.

“We have had a truck back up and dump three to four square meters of rubble and waste material on the property and the truck also smashed the gates down.

“Recently someone turned up and stole the electrical meter box within the property.”

The project manager said the experience had caused an “unbelievable amount of stress and anxiety”.

“We have half a million dollars outlaid on something that is sitting still and… sitting on a block that is wasting away and not covered by insurance potentially,” he said.

“We are in a situation that we may be forced to compromise significantly on what was our dream home to build.

“We are financially impacted and may have sell off things to complete the build as there have been cost increases and delays. The property we have might have to be stripped right back to be rebuilt, notwithstanding that we have got to pay rent and that we have to be out of this rental by Christmas.”

left in limbo

Mr Fuller said his family would have to negotiate to stay in the rental meaning his, including three of their children, would be forced to be crammed into the small property for another 10 to 12 months.

I have added it’s been almost impossible to find out information when “all we want to do is build a house” and instead they are left in “limbo”.

“It takes a lot of time and hours with pursuing legal options and between the Housing Industry Association and banks and insurance companies it’s relentless,” I explained.

“We are all sitting on insurance policies but because the trigger is Blint going into voluntary administration, none of us can trigger the insurance policies. So we are sitting on property we can’t do anything with as we can’t engage new builders.”

Mr Fuller said it’s a “frustrating” experience and just wants answers from the builder.

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Offices seized

Blint Builder’s office in the Melbourne suburb of Highett has also been seized by the landlord.

Legal documents posted on the front door show the landlord has executed their right to re-entry, terminating the lease and demanding all property be removed and the keys be returned.

The legal notice also revealed that Blint Builders owe the landlord close to $14,000 in unpaid rent and rates.

Emails to Blint are undeliverable, while news.com.au has called, left voicemails and sent text messages to the builder but has not heard back.

‘Horrifying strain’

Another family who are under “horrendous strain” are Tony and Jo Firman and their two children, who are building a home specially designed for her disability.

Mrs Firman has multiple sclerosis and the couple were building a home to meet her needs in the Melbourne suburb of Mordialloc, which included a swimming pool.

They had demolished the original home and signed up to build their $1.2 million house with Blint, which was scheduled to be finished in mid February.

The couple said they have paid $1.14 million so far to the builder and the house is at lock up stage but no work has happened since early June, according to Mr Firman.

“There is no carpet, it hasn’t been painted and there are serious defects that need to be rectified, so there’s still quite a bit of work,” he claimed.

The 54-year-old said he even went to Blint’s office twice in June to find out about the progress of the home.

But since then the builder has “disappeared off the face of the Earth” with Mr Firman’s calls and emails going unanswered, he claimed

“It went from talking to him every day to him never ringing me back and never hearing from him,” he said.

Being left in limbo has taken a toll on him with the online retailer saying he has “never felt more depressed in my life”.

“It’s a massive strain on us as a family, both financially as we are paying rent as well as paying off part of the house that we can’t even live in it as we have no occupancy certificate,” he added.

‘Sending us broke’

Mr Firman said they can’t get a payout from the insurance company until Blint goes into liquidation and it could “cost a lot of money to force that to happen” through the courts.

“Even with the full insurance payout it might not be enough money. We skimped and saved and borrowed quite a substantial amount of money. We are worried we won’t make enough money to repay the loan and be able to live,” he said.

“I fear that this will send us broke.

“It’s very touch and go for us at the moment … My daughter turns 21 next month and her only wish was to have the party at the new house and that won’t happen.”

‘Derelict sites’

Dad-of-three Jamie* had also signed up with Blint in March 2021 to renovate and extend their two bedroom house in the Melbourne suburb of Murrumbeena for $730,000.

The family had planned a double storey addition out the back with a new kitchen, living area and kids’ bedrooms and are currently living in a rental.

Jamie said the work was “slow going” and the family had forked out $600,000 so far.

Now they’ve been left with a half built home, even though it was due to be complete in April, and he describes the site as “quite derelict”.

Jamie confronted the builder at his home in June and was told Rodger Reidy had been appointed to handle the voluntary administrators.

But when he contacted the insolvency specialist firm he was told that it was not the case and Rodger Reidy also confirmed with news.com.au they had not been appointed.

Now, he can’t get in touch with Blint with the phone turned off and emails unanswered.

The 43-year-old said he just wants to be able to finish the home, even if it costs the family an extra $50,000, but he has been left in limbo, adding he is “exhausted and frustrated”.

News.com.au understands a number of suppliers are also owed money from Blint.

*Name changed for privacy reasons

Read related topics:melbourne

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Westpac, CBA and NAB banks close 37 branches, 182 jobs lost

Westpac, CBA and NAB banks close 37 branches, 182 jobs lost

Dozens of major bank branches are set to be closed over the next few months which will see 182 Australians lose their jobs, according to the Finance Sector Union.

In total, 37 branches will be shuttered across the nation, with the union describing the closures as reaching “crisis point”.

Westpac Group is making the most dramatic cuts with 24 branches being shut down across the country.

In NSW, Westpac branches in the suburbs of Lakemba, Engadine, Corrimal and Kingscliff will be shuttered in coming months, while Queensland’s branches in Ashmore, Nerang and Rockhampton will also be shut.

The closures will also hit Westpac’s Western Australian branches based on Mandurah and South Perthwhile the berrimah branch in the Northern Territory has also been cut.

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The Finance Sector Union said it had campaigned against branch closures for many years but is now seeking government intervention to protect local economies and save what’s left of Australia’s bank branch network.

“This latest list of closures means the big four have closed more than 550 bank branches across Australia since January 2020,” said Finance Sector Union (FSU) national secretary Julia Angrisano.

“We must act to stop the banks walking away from communities in our suburbs and towns. It’s time to examine the impact of these closures which have hit hundreds of communities across the country.”

Others set to close down as part of the Westpac Group include St George’s NSW branch in Five Dockthe Bank SA’s branches in Munno Parra and St Peterswhile the Bank of Melbourne will also lose seven branches.

The Bank of Melbourne branches include Croydon, Coburg, Fitzroy, Sunbury, Footscray, 114 William St Melb and Mornington.

Meanwhile, the NAB is closing nine branches across three states, including sites located in Lavington, Narrandera, Corrimal, Figtree, Cronulla and Maroubra in NSW, Wynnum in QLD and North Melbourne in Victoria.

Two states will be impacted by branch closures by the CBA, including the NSW suburbs of Annandale, Toongabbie and Lindfieldas well as Drysdale and Woodend in Victoria.

Ms Angrisano said communities depend on the banks to deliver financial services and feared the current trend would mean no branches in the future.

“The banks notify the FSU about upcoming closures. In this case, two banking brands are being withdrawn from the same location in Corrimal, NSW. Imagine the impact of losing two more banks in the same suburb?,” she said.

She said the banks had failed to support local communities and cost savings from branch closures were designed to increase the banks’ already huge profits.

“We need an inquiry into bank branch closures to assess the impact on local communities when the banks pull out of suburbs and towns,” she said.

“The UK has a formal ‘community impact assessment test’ and we need a similar test to ring-fence our branches and make sure banking services the public which they derive their profits from.”

A Westpac Group spokesperson said with more than five million digitally active customers, it was investing in services to complement how our customers choose to bank.

“Declining customer use of branches means that in some instances, we may take a difficult decision to leave a branch location. In these instances, we continue to support our customers with access to banking services via Bank@Post, telephone, mobile and virtual banking,” they said.

“We take steps to ensure customers are notified in advance about the changes and are directly connected with the services they need to continue to do their banking. For those who are new to digital banking, or may require more assistance with the changes, we provide dedicated support and education to make the transition easier.

They added that the “majority” of affected employees would secure a new role within the group.

Krissie Jones, from NAB executive retail, said as more and more customers are choosing to bank online, we’ve made the difficult decision to close some branches that receive less customer visits.

“Increasingly Australians are banking digitally, with more than 94 per cent of customer interactions now taking place over the phone, by video or online,” she said.

“While these branches will no longer be there, we will still be there for our customers – just in different ways,” she said. “Over the past few years, fewer customers are coming into branches to do their banking and foot traffic has lessened, which has been accelerated by Covid.”

She added there will be no job losses at NAB and the branch team will also be working with customers over the coming weeks to talk with them about the various banking alternatives available.

CBA did not respond to news.com.au’s request for comment before publication.

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Online brokerage company Robinhood lays off almost a quarter of its staff

Online brokerage company Robinhood lays off almost a quarter of its staff

A US online trading platform, which experienced a boom in customers during the pandemic, has slashed its staff by 23 per cent after being hit by the cryptocurrency market crash and record inflation.

It’s the second round of staff sackings for the company called Robinhood, which laid off 9 per cent of its 3,900 employees in April.

Yesterday’s announcement saw the company shed 23 per cent of remaining positions — about 815 jobs — meaning the company will have sacked more than 1000 employees in a matter of months between the two rounds of redundancies. Roles in operations, marketing and program management the most impacted by yesterday’s decision.

Robinhood was embroiled in the Gamestop controversy early last year when Reddit renegades and amateur investors blew up the share price of the brick-and-mortar video game retailers, but this momentum has failed to continue.

Robinhood’s chief executive Vlad Tenev said that letting go of 9 per cent the workforce in April to focus on “greater cost discipline” for the organization “did not go far enough” in a blog post on the company’s website.

“Since that time, we have seen additional deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash. This has further reduced customer trading activity and assets under custody,” Mr Tenev said.

“Last year, we staffed many of our operations functions under the assumption that the heightened retail engagement we had been seeing with the stock and crypto markets in the Covid era would persist into 2022.

“In this new environment, we are operating with more staffing than appropriate. As CEO, I approved and took responsibility for our ambitious staffing trajectory – this is on me.”

Last year, Robinhood grew from 700 roles at the end of 2019 to nearly 3,900 by the first half of 2021, but its 2,022 cuts take its total workforce down to 2,600.

Mr Tenev said staff would receive an email and Slack message with their employment status after the company wide meeting announced the redundancies on Tuesday.

He added the cuts were a “painful decision” and meant the company would be “parting ways with many incredibly talented people”, although staff would be given the opportunity to remain with the company until October 1.

Robinhood also revealed its second quarter results which showed its monthly active years plunged to 14 million down by 34 per cent from a year earlier.

Revenue also plummeted by a whopping 44 per cent to $US318 million ($A461 million).

Robinhood became a trading phenomenon during the pandemic as it offered an easy to use, mobile first platform and in the second quarter of last year it boasted more than 21 million active users who were keen to trade crypto and meme stocks.

But with lockdowns in the past, revenue tied to customer’s trading dropped 55 per cent in the latest quarter to $US202 million ($A292 million).

The company has also been slugged with a $US30 million ($A43 million) fine from the New York State Department of Financial Service for alleged violations of anti-money laundering and cybersecurity regulation in its cryptocurrency trading unit.

A global tech bloodbath has seen a spate of companies laying off staff.

In Australia a crypto company called Immutable, which valued at $3.5 billion, is facing a fierce backlash after sacking 17 per cent of its staff from its gaming division, while continuing to “hire aggressively” after raising $280 million in funding in March.

Meanwhile, Australia healthcare start-up Eucalyptus, which provides treatments for obesity, acne and erectile dysfunction fired up to 20 per cent of staff after an investment firm pulled its funding at the last minute.

Debt collection start-up Indebted sacked 40 of its employees just before the end of the financial year, despite its valuation soaring to more than $200 million, with most of the redundancies made across sales and marketing.

Then there was Australian buy now, pay later provider Brighte, that offers money for home improvements and solar power, which let go of 15 per cent of its staff in June, with roles primarily based on corporate and new product development.

Another buy now, pay later provider with offices in Sydney called BizPay made 30 per cent of its redundant workforce blaming market conditions for the huge cut to staffing in May.

Earlier this year, a start-up focused on the solar sector called 5B Solar, which boasts backing from former prime minister Malcolm Turnbull, also sacked 25 per cent of its staff after completing a capital raise that would inject $30 million into the business

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Australian crypto platform Immutable sacks 17% of staff despite plans to ‘hire aggressively’

Australian crypto platform Immutable sacks 17% of staff despite plans to 'hire aggressively'

An Australian crypto company valued at $3.5 billion is facing a fierce backlash after sacking 17 per cent of its staff from its gaming division, while continuing to “hire aggressively” after raising $280 million in funding in March.

The crypto platform, which is an Australian unicorn called Immutable, could be hit with legal action as the union questioned the validity of the redundancies.

The union called Games Workers Australia has disputed the number of staff members that were fired claiming it was at least 30 roles, while Immutable has insisted just 18 workers were let go.

The staff came from the company’s flagship video game Gods Unchained and were advised of the redundancies 24 to 48 hours before being told to leave.

Staff were fired from roles including video effects artists, senior engineers and a marketing director and the process involved a 30-minute company wide meeting last Monday.

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‘devastating news’

Game Workers Australia, a branch of Professionals Australia, said it is supporting staff from Immutable Games Studio who received the “devastating” news that they would be made redundant.

“Based on information we have received, Game Workers Australia believes there are at least 30, but potentially more, job losses at Immutable,” said Professionals Australia CEO Jill McCabe.

“Immutable has provided varying reasons to their employees as to why the redundancies were necessary.

“While some employees were advised that the reason for their redundancy was due to individual performance metrics, others were advised the cause was due to an organizational restructuring or the non-alignment of their role to business goals.

“While staff were advised that they were able to request information about other roles in the company, their were given the impression that they would not be suitable for these roles.”

However, an Immutable spokesperson said the restructure was a “difficult choice” and was performed to meet business goals, while individual performance was not a reason for any redundancies.

They added individual staff were given the opportunity to respond to the redundancies and most were found unsuitable for redeployment to vacant roles.

Hiring 80 more roles

Concerns have been aired that Immutable is still hiring for similar roles that were made redundant such as product managers and engineers.

An Immutable spokesperson said the restructure impacted 6 per cent of the total number of employees at the company and it continued to “hire aggressively”.

“As we grow, the nature of the expertise the company needs is changing. We needed fewer artists, unity engineers and card designers and are hiring more tokenomics experts, blockchain engineers and crypto product managers,” they said.

“We have established new roles for Gods Unchained which we will be hiring for over the next six months; in total we will be hiring more new roles into Gods Unchained than were made redundant.

“Immutable is growing from 280 employees today to over 360 by the end of the year.”

The company started the year with just 120 employees and has already more than doubled, they added.

Game Workers Australia also claimed that Immutable provided no opportunity for employees to respond to the company’s intention to make them redundant and most of the redundancies were advised and executed within 24 to 48 hours.

“Sadly, the experience of game workers at Immutable is emblematic of the broader problems across Australia’s growing $3 billion games sector,” Ms McCabe said.

“While game workers are highly qualified and skilled, wages are unsustainably low, the hours are long, and unpaid overtime is common.

“Many people burn out of our industry and leave before even making it to five years.”

But the Immutable spokesperson defended its process and said the company “followed a fair and consistent process in relation to the restructure that is in line with legal obligations”.

Earlier this year, Immutable’s founders James, 30, and Robbie Ferguson, 25 were one of 13 new entrants that placed on the Australian Financial Review rich list with an estimated combined wealth of $1.01 billion.

Tech sector bloodbath

Immutable’s staff are the latest casualties in the tech sector, which has seen a spate of companies firing staff as conditions get tougher.

Australian healthcare start-up Eucalptys that provides treatments for obesity, acne and erectile dysfunction fired up to 20 per cent of staff after an investment firm pulled its funding at the last minute.

Debt collection start-up Indebted sacked 40 of its employees just before the end of the financial year, despite its valuation soaring to more than $200 million, with most of the redundancies made across sales and marketing.

Then there was Australian buy now, pay later provider Brighte, that offers money for home improvements and solar power, which let go of 15 per cent of its staff in June, with roles primarily based on corporate and new product development.

Another buy now, pay later provider with offices in Sydney called BizPay made 30 per cent of its redundant workforce blaming market conditions for the huge cut to staffing in May.

Earlier this year, a start-up focused on the solar sector called 5B Solar, which boasts backing from former prime minister Malcolm Turnbull, also sacked 25 per cent of its staff after completing a capital raise that would inject $30 million into the business

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Sneakerboy collapse: Company owes $17.2 million to creditors, customers

Sneakerboy collapse: Company owes $17.2 million to creditors, customers

Several employees of a collapsed footwear company suspected the retailer was on its last legs for some time as they were accosted by angry creditors and customers on a daily basis, endured pay runs that were weeks late and never received their final entitlements.

Controversial luxury shoe retailer Sneakerboy went into voluntary administration in early July but two former staff members told news.com.au this was not surprising.

Five companies were included in the administration notice, Sneakerboy Pty Ltd and two related companies under the Sneakerboy name, and Luxury Retail Treasury Pty Ltd and Luxury Retail Group Pty Ltd (Sneakerboy’s parent company).

ASIC documents seen by news.com.au show the embattled company and its related companies owe $17.2 million to more than 100 creditors, including $200,000 to Nike.

A whopping $500,000 is also owed to 120 past and current staff members through unpaid wages and entitlements.

Elliot* worked for Sneakerboy since 2017 and is owed $15,000 from 220 hours of annual leave and roughly 12 months of superannuation that he never received after quitting in January this year.

“Since 2018 there were a few warning signs (at Sneakerboy), pay was occasionally a tiny bit late, like a day late,” he recalled to news.com.au.

“Then over the years it started to get out of control, in the last year it would be one to two weeks late. It was insane.”

The Melbourne worker, 34, was struggling to pay rent and groceries from the late payments and now works elsewhere, adding: “You get paid on time (at this new place), it’s crazy, it feels like such a treat.”

Elliot said from the beginning of his stint at the company he had doubts about the way Sneakerboy made money

“I felt like it wasn’t a sustainable business model, it was predicated on taking money from customers and using that as a loan to buy the shoes which is insane,” he said.

Customers would fork out cash for a pair of shoes, which was usually thousands of dollars as Sneakerboy sells sneakers by brands like Balenciaga and Canada Goose for well north of $1000. This money would then be used to actually buy the shoes — but the products would usually arrive weeks or months later as it was a pre-purchase order.

Wait times for sneakers usually blew out to weeks or months, causing angry customers to ring stores multiple times a day requesting for refunds.

Elliot said his store got “a lot of refund calls.”

“You would try to delay it as long as possible,” he added.

Things reached a head when one customer spent between $40,000 to $50,000 on sneakers — with plans to sell it on at a higher price at her home country of China. However, the shoes didn’t arrive for months.

“She put her own lock in front of the store, she put a bike lock on the front door,” Elliot said with a laugh.

“They had to get a locksmith. Some people were mad about it, but she spent tens of thousands of dollars and had n’t received her product from her so it was fair enough”.

It’s understood from creditors there are in excess of 1000 customers who prepaid for products which may now never arrive.

News.com.au has contacted Sneakerboy and its two co-owners for comment.

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Struggling to pay rent

There were times when Elliot couldn’t afford rent because his pay arrived so late and he had to sell some of his own stuff.

“You’d have weeks where it’s like ‘cool, gotta sell a bunch of my own sneakers to pay rent’, it’s pretty cooked,” he said.

Although it looked like superannuation was being deposited into his account according to his pay slip, he knew this wasn’t the case.

“We’d all known for a couple of years our super wasn’t being paid properly, when you got the pay slips it said you were getting super but obviously they weren’t,” he added.

The Fair Work Ombudsman confirmed to news.com.au that it was investigating Sneakerboy over concerns from workers regarding their wages and entitlements.

A spokesperson told news.com.au the government department “has ongoing investigations in relation to Sneakerboy”.

“As these matters are ongoing, it is not appropriate for us to comment further at this time.”

Elliot said he could “tell Sneakerboy was going badly” because it was doing 40 per cent off sales even when they didn’t have stock available.

“It was fully desperate,” he said. “They were struggling for cash flow all the time.”

‘Blocked the exit’

Adam* worked at Sneakerboy’s Sydney store for four years and he claims the run-ins with angry customers and creditors made him develop depression.

“The constant pressure from management to keep selling on my day off and angry creditors have affected me mentally,” he told news.com.au.

“I had to visit a psychologist and psychiatrist to combat my depression.”

The 26-year-old resigned three months before Sneakerboy collapsed and said his mental health has improved since then as he has “moved on to better things”.

He alleges one of the worst interactions he had was with the landlord of his store who had not been paid rent for months.

“They were shouting at me and acting aggressively,” he said. “They blocked the exits, spoke very rudely and kicked me and other staff members out of the shop.”

He also said they got angry calls from contractors, including third party cleaning companies and delivery partners over unpaid bills.

“Customers were the most frequent and the worst,” Adam continued.

“They would abuse the staff members by shouting, swearing, acting aggressively, throwing fits, and threatening the staff member.

“Imagine you are getting this at least seven to nine times a day through phone calls or coming to the store.”

He added: “From my observation, every time Sneakerboy desperately needed money, they always start massive sales by offering high discounts for branded products.

“If you recall, last year, they did four or five massive warehouse sales, which is unusual for a business.”

Stephen Dixon from insolvency firm Hamilton Murphy Advisory was appointed as administrator at the beginning of July.

There are 36 potential buyers circling to try to acquire Sneakerboy, according to Mr Dixon.

“This interest has come from a range of international and Australian parties across a broad industry spectrum,” a statement from the company read.

“We appreciate and understand the concerns that all stakeholders to the Sneakerboy Group have, especially employees and customers,” Mr Dixon said.

“We continue to urgently work towards a sale of the business, as we believe that this will be the best outcome for creditors. Employee obligations are a critical part of the negotiations we are having with potential buyers.”

*Names withheld over privacy concerns

[email protected]

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Business

Australian tech company Metigy collapses impacting 75 staff

Australian tech company Metigy collapses impacting 75 staff

Staff who worked for an Australian tech company have been left “shell-shocked” by its sudden collapse after it planned to raise money with a valuation of $1 billion.

The company called Metigy was founded in 2015 and offered an artificial intelligence platform that provided insights into customers for small business marketing.

But its demise has impacted around 75 staff, who appeared to have been blindsided when informed on Monday that the company had gone into administration.

Some staff members had joined the company, which was founded by David Fairfull and Johnson Lin, just a few months ago.

One employee, who had been with Metigy for almost 18 months, said two weeks ago she “never thought” that the company would have gone under.

“All of us employees were informed today and we are shell-shocked to say the least,” she wrote on LinkedIn.

“It’s heartbreaking to have our journey cut short so early, when I could see that we were turning a corner with the product in the last few months and what was coming up in the next few months.”

Another staff member revealed plans they were making “for all the great work we could do with a new brand and communications function at Metigy” that she hoped to lead, but instead found herself suddenly unemployed.

“We’re pretty shell-shocked. It’s not because we didn’t care enough or because we did a bad job or the market conditions weren’t in our favor – and that will always be the toughest thing to deal with when you work as hard as we did,” she wrote .

“I am beyond grateful to have met this group of people who I now call friends and I’m so sad that we don’t get to continue on this rollercoaster together.

“My heart is always in start-up land regardless of how hard it gets. It’s an experience that teaches us so much about ourselves and I will always choose it.”

The company’s collapse is a particular shock as it planned to raise money just two months ago.

A recent presentation from a Metigy investor showed the company’s revenue had grown more than 300 per cent in both the 2020 and 2021 financial years, and had more than 25,000 clients across 92 countries, the Australian Financial Review reported.

Meanwhile, Australian private equity firm Five V Capital had recently presented Metigy as a case study showing it was valued at $105 million in October 2020 when it invested and its last evaluation sat at $1 billion in April this year.

Metigy’s collapse came as a “big shock” and had caused “a great deal of sadness”, one employee added on LinkedIn.

He said that the “growth team never failed to deliver” with a list of achievements in their short time, including acquiring roughly 38,000 users from a base of just a few thousand, rebuilding the website leading to significant improvements in conversion rates and a full rebrand .

Simon Cathro and Andrew Blundell of Sydney-based firm Cathro Partners were appointed as administrators on Friday night.

The duo said they are working with investigators and creditors to assess the business commercials and explore the possibility of its sale.

“We are exploring the urgent sale of Metigy’s assets and intellectual property as part of the voluntary administration process and consider a sale could be an outcome in this process,” they said.

Metigy has more than 30 shareholders, according to documents lodged with the Australian Securities and Investments Commission.

Tech companies are struggling in Australia after a share market bloodbath, which has left investors spooked and made funding harder to find.

Other failed businesses include grocery delivery service Send, which went into liquidation at the end of May, after the company spent $11 million in eight months to stay afloat.

Last month, Australia’s first ever neobank founded in 2017, Volt Bank, went under with 140 staff losing their jobs, while 6,000 customers were told to urgently withdraw their funds.

A Victorian food delivery company that styled itself as a rival to UberEats and Deliveroo also collapsed in July as it became unprofitable, despite making more than $6 million worth of deliveries since it launched in 2017 and had 18,000 customers.

A venture capital firm issued a sobering message about the state of Australia’s start-up industry, warning that more new companies would go bust and pulling back on funding as a result.

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