Melbourne retailer Design A Space will close its stores next month, calling time on a retail model which allowed rural and regional small businesses the chance to stock their products in the city centre.

Founded by husband and wife team Chris and Bec Lutz in 2006, Design A Space rents physical floor space to independent brands hoping to showcase their goods to a metropolitan customer base.

The venture grew to three locations across the Melbourne CBD, Fitzroy, and Windsor, and has stocked goods from more than 170 small businesses.

Design A Space bills its offering as unique among retailers, given the ever-changing range of homemade jewellery, fashion, artwork, and homewares stocked by partner businesses.

But the same economic challenges which are hammering traditional stores forced Design A Space to shut its long-running Windsor location in April.

Now, its Melbourne CBD and Fitzroy locations will cease trading on July 15.

“We have fought hard to keep the stores alive,” the business announced Saturday.

“However, with the rise of costs in every aspect of our business it is no longer profitable to remain open.

“The last three years have been extremely challenging for us as well as our incredible designers and with the current financial climate, it is proving very difficult.

“We know so many of you have put your support behind Design A Space and for this, we are very grateful.”

Co-founder Chris Lutz said the business successfully battled through Covid-19 restrictions, but successive interest rate hikes by the Reserve Bank of Australia, designed to curb discretionary purchases, have now hampered consumer spending.

Elevating the costs faced by partner brands did not make sense so long as underlying consumer spending remains low, he added.

Calling time on the enterprise now allows Design A Space to “end the way we want to end”, he said, allowing it to pay out suppliers and honour remaining staff entitlements.

The business is able to “hold its head high and sort of say, ‘Look, we’ve tried our best, we’ve had a great 17 years, but the climate is just extremely tough,” Lutz said.

Designers mourn the loss of long-running stockist

Small businesses which have worked with Design A Space are mourning the loss of what they see as instrumental to reaching new, curious, and highly engaged customers.

Tracy Keating, founder of Leaf Candle Co, told SmartCompany that the two years of stocking her products with Design A Space proved “instrumental in establishing our brand and exposing us to a large audience of both retail and wholesale customers”.

As the cost of doing business continues to rise, Keating said it was important for consumers to continue supporting small and independent traders.

“I’ve seen far too many far too many ‘closing down’ posts on Instagram over the past month or so and it breaks my heart a little bit every time I see another small business have to close,” she said.

Other small businesses to have stocked their products at Design A Space have shared words of support online.

Elsewhere Co., a brand specialising in recycled leather handbags, chains, and charms, said the business “Lover being part of the amazing Design A Space community”.

“Congratulations on an incredible 17 years of supporting independent designers and best wishes for what comes next,” the business wrote on Instagram.

“We’re very thankful for the support that we’ve had over the years,” Lutz said of the response to Design A Space’s imminent closure. “It’s incredible, absolutely incredible to see all those comments, to be honest.”

Economic squeeze comes for small retailers

The closure of Design A Space’s remaining stores coincides with pronounced financial hardship across the retail sector.

Successive interest rate hikes designed to curb inflation are flowing through to shoppers, who are still reporting major pessimism about the economic landscape.

Anneke Thompson, chief economist for CreditorWatch, this month said recent consumer confidence data from Westpac and NAB points to further pain for retailers.

“Consumer sentiment has never been this low for this long, which points to difficult times ahead for the retail sector in Australia,” she said.

Australian Chamber of Commerce and Industry and Westpac’s quarterly business sentiment data, released Tuesday, only serves to compound those struggles.

“The general business mood plummeted from an already pessimistic level, with a net 32% of respondents now expecting the general business situation to worsen over the next six months, a result that eclipses the lows seen in the midst of the pandemic and is the weakest reading since the GFC,” the report said.

Further interest rate hikes are a live possibility, with the full impact of previous raises yet to flow into the broader economy.

At the same time, the inflation rate remains stubbornly persistent, keeping the cost of energy, shipping, and other key business expenses higher than historic averages.

• This story originally appeared on SmartCompany.