Earlier this year, Australian designer Dion Lee was making waves in the fashion world after his corset top was debuted by the most famous woman in the world.

When pop superstar Taylor Swift arrived at the biggest sporting event on the planet, attention was already heightened due to her whirlwind romance with football player Travis Kelce and a swirl of conspiracy theories about the singer's possible endorsement of Joe Biden.

It was the perfect stage for a fashion brand to unveil its wares, second only to an extravaganza like the Met Gala in terms of the publicity it could generate.

Within hours of the singer's appearance, global news outlets were running headlines about the singer's outfit and her label of choice: Australian designer Dion Lee.

Elle magazine declared that Taylor Swift Is Wearing An Australian Designer To The Super Bowl, while Billboard ran a news story on Taylor Swift's Super Bowl 2024 Outfit Included a Chic Corset Top: Shop the Look Here.

But Dion Lee's time in the spotlight was short-lived.

Three months after Swift's debut of its corset top, the Australian-turned-New York brand collapsed into voluntary administration, with millions in debts.

As administrators swooped in, there had been hope the fashion brand's Australian arm would find a buyer.

But the second creditors meeting on August 29 heard that while there had been interest from potential investors of the brand, "no acceptable offer was as yet forthcoming".

Last week, it was confirmed Dion Lee would wind up and enter liquidation with $35 million in debt.

It came fresh on the heels of news that local fashion label Sass and Bide would close all but four of its stores across Australia next month.

The premium fashion brand, which is majority-owned by department store Myer, made the pivot to a mostly online business following weaker sales in its bricks-and-mortar stores.

So what is it about Australia's retail market that has sent brands packing and is the cost-of-living crisis playing a role?

A local brand makes a global splash

Dion Lee was established in Sydney in 2009, a year after its founder graduated from the TAFE NSW Fashion Design Studio.

Lee, who was an unknown, untested designer at the time, made his debut at Australian fashion week to huge fanfare.

His "technical but sensual" aesthetic was difficult to put into words but earned him the title the "boy wonder of Australian fashion".

By the time 2013 rolled around, the fledgling brand was on the rise but in need of financial backing.

That investment came from Cue Clothing, an established store that had been in the Australian retail space since 1968.

It was a match made in retail heaven, with the brand reportedly investing somewhere between $20 million and $50 million into the young designer's expansion goals during their 11-year entanglement.

With a major player behind him, Mr Lee expanded beyond the narrow limits of Australia's retail sector to the United States, his biggest market.

Dion Lee is now based in New York, opening his first international store in Miami last year, after telling Vogue he saw the potential "to translate the type of customer we've built in Australia" in the American city.

But just as his global ambitions were realised, there was trouble at home.

After more than a decade of investment, Cue founder and chairman Rod Levis parted ways with Dion Lee.

In an interview with the Australian Financial Review in May, Mr Levis said he had come to the decision after concluding Mr Lee needed "a lot more finance" to realise his goals.

The Cue boss noted Dion Lee's sales had grown "strongly over the past five years" and they were "stable" at $32 million in the past financial year, but added: "It is not profitable this year."

While the company's slowing sales and expansion plans appeared to have been the source of the split, Mr Levis insisted the two men were on the best of terms.

Without Cue's continued backing, it appeared Dion Lee's Australian franchise was left on rocky footing.

That same month, the brand announced it had fallen into voluntary administration.

Cue was contacted for comment.

Antony Resnick and Henry Kwok of dVT Group were appointed as administrators as the company attempted to resolve its financial woes and find a buyer.

But on August 29, the creditors announced they would be winding up the company and pushing forward with a liquidation.

The brand's retail stores in Australia are expected to close in late September or early October, while its online site will continue to trade through to early November.

Australian's fashion casualties

Mr Lee's entry onto the Australian fashion scene coincided with a significant development in the industry.

In the early 2010s, global fast fashion retailers Zara and H&M moved into the Australian market, investing in bricks-and-mortar retail. Upscale brands Burberry, Louis Vuitton and Prada quickly followed suit.

For years, the only way Australians could visit these brands was by going overseas and when the stores finally arrived on our shores, interest was high.

Around the same time, e-commerce retailer the Iconic launched and ASOS created a standalone website in Australia, making it even easier for consumers to buy clothes from the comfort of their living room.

These companies were joined by Shein and Temu more than a decade later.

In the span of 10 years, Australian retail underwent a dramatic transformation, from limited global brands to a highly concentrated industry with major players.

"In the middle, you've got a mix of brands all competing for essentially the same market," said retail and consumer behaviour expert Professor Gary Mortimer from QUT's business school.

When it comes to higher-end brands, the market is even smaller and is still crowded by other labels, he explained.

"You can get the global brands so it's hard for a domestic, top-tier brand to compete in a small market that's also very crowded with global offers, and not being able to sort of ramp up production to meet demand quickly enough," Professor Mortimer said.

Australians now buy more clothes per person than any other country, according to Australia Institute research.

But for every success story in the industry, there are dozens of others that have gone under.

In the last five years, a series of high-profile labels collapsed, including Ellery, Alice McCall and Arnsdorf.

Recently Sass and Bide, which was launched in 1999, announced it would be closing 10 standalone stores in an effort to remain "sustainable into the future".

Data from ASIC shows 768 retail businesses entered administration in the 2023-2024 financial year, compared to 540 businesses during the same period in 2022-2023.

It's hardly surprising given many Australians are tightening their belts amid the cost of living crisis, according to Professor Mortimer.

"Consumers today are more concerned about paying their bills, paying down their mortgage, putting fuel in their car and putting food on the table, not necessarily buying a new outfit for spring," he said.

"So those discretionary categories do tend to suffer greatly."

Even high-end fashion retailers like Dion Lee are not immune to the spending cutback.

"If you're out there buying an $8,000 handbag, you're probably not too worried about putting $2.20 litre into your car. But I guess it's still relatively a small market if you're [largely] domestically based," he said.

He explained that being a smaller brand competing with established international labels could be a constraint.

"So we think about Louis Vuitton or Burberry or Chanel as global, high-end retailers, and they don't just work in fashion. They also have a range of cosmetics and other categories and other brands like L'Oreal," he said.

"A lot of the big brands we see also have these spin-off brands, which means if Australian shoppers are spending less on high fashion and premium goods, they're able to diversify that decline in spending, maybe in North America or Europe."

Professor Jana Bowden, a marketing expert from Macquarie Business School, believes part of the problem facing Australian retailers is a result of our obsession with fast fashion.

"Recent data shows that Australians have become the biggest consumers of fashion globally, but that we are spending $13 on average per apparel item," she said.

"We have an addiction to fast fashion and to deep discounts and none of this bodes well for higher-end brands trying to extract a premium from consumers' wallets — consumer price sensitivity is at a maximum right now."

It's not just luxury retailers feeling the pinch, but brands that appeal to budget-savvy consumers too.

Low-cost jewellery and accessories chain Colette was among the list of retail casualties earlier this year.

"It's a telling story for the fashion industry. When we look at the ABS seasonally adjusted month-on-month spending, household spending is down, discretionary spending is down, apparel spending is down," Professor Bowden said.

"Consumers are pulling back. They're saving their pennies and if they are shopping for fashion, then they're discount devouring."

As inflation and higher interest rates weigh on households, forcing consumers to cut back, brands hope to counteract this by attracting customers through promotions and heavy discounts.

"Everyone is offering 20, 30, 40 per cent off [recommended retail price]. Stock is sitting in warehouses and even deep discounting of up to 70 per cent isn't clearing the bulk of stock," Professor Bowden said.

"Dion Lee, as the latest victim of fashion's reckoning, can't even shift its product at a discount of 90 per cent off and there's still another 15,000 items stockpiled in its warehouse.

"The crunch that Australian fashion is facing is catastrophic."

What does the future hold for Australian fashion?

Last month, Deloitte Access Economics' Retail Forecasts showed that Australia's retail sector has effectively been in recession for the last 18 months.

Deloitte partner and principal report author David Rumbens observed it wasn't a surprise given that in six of the last seven quarters, "real retail spending has declined".

"And the numbers only look worse on a per capita basis," he said.

But it's not all bad news. There are also bright spots in Australian fashion, especially for brands that have made a name for themselves overseas.

Last year, Zimmermann became Australia's first billion-dollar fashion label after a majority acquisition by private equity firm Advent International.

Ranjan Sen, managing partner at Advent International, said the firm saw the brand's "significant potential for further expansion".

The clothing label was founded in Sydney in 1991 by sisters Nicky and Simone Zimmermann, but has since gained international recognition, running a network of stores in Australia, the United States, the UK, Europe and China.

Opening up to overseas markets has been a boon for the business. While Australia still makes up about 25 per cent of sales, the company's overseas markets are even more lucrative, with the United States driving 35 per cent.

After last year's headline-making deal with Advent, Zimmerman is focused on expanding even further, including in Asia and the Middle East.

One of the brand's founders told Vogue they were confident Zimmerman could continue to expand while avoiding over-saturation.

As for the future of the local fashion industry, a broader bounce back in discretionary spending will likely depend on the Reserve Bank, according to Professor Mortimer.

"If we started to see three or four consecutive interest rate reductions, that would certainly create a more optimistic market," he said.