ABS retail trade: Marginal growth in Jan may not be sustainable

by Marketing ON 5 March 2013

Retail sales grew by a marginal 1% month on month and 3% year on year in January, according to the latest ABS retail sales figures.

The seasonally adjusted rise of 0.9% on December’s results comes off a low base following drops in monthly trade figures in the two preceding months.

ARA executive director Russell Zimmerman says the rise is a good sign for the retail sector but only time will tell whether the rise can be sustained over the course of 2013.

“Delving into the figures across separate categories, of concern is department stores reporting the smallest sales increase; this category relies heavily on post-Christmas sales, and it shows consumers are focusing more on smaller purchases, such as food (4.4% rise year on year) rather than discretionary items,” Zimmerman says.

“Consumer reticence to spend across discretionary spending areas such as department stores and fashion is proof Australian households are under financial strain and need relief from interest rates, tax pressure and other increases in the cost of living and affording the basics such as utilities and fuel.”

The RBA met earlier today but left interest rates on hold at 3.0%, going against the urgings of the sector.

Household goods retailing performed the strongest (apart from miscellaneous retail categories) of the major categories month on month, up 1.3%, while department stores were the weakest, down 0.6%.

Across the states and territories, performance was stable with all coming in at around 1.0%, apart from Western Australia which dropped 0.4%. Year on year however, Western Australia was the strongest grower with a jump of 5.8%.

Cafes, restaurants & takeaways, up 3.6%, and food retailing, up 4.4%, were the strongest performing sectors year on year.

Data Crunch… Retail 2012: Bricks slumped, clicks boomed and caution prevailed

by Marketing ON 8 February 2013

In 2012, Australians spent $256.6 billion offline and $12.8 billion online, illustrating just how small the ecommerce slice of the pie remains (about 5%). But while the balance of spend still sits heavily in offline retail’s favour, it was a tough year for brick-and-mortar specialists, with Christmas spend faltering to end a year in which growth barely eclipsed the inflation rate.

At a number of points throughout the year, growth in online retail sales stood at around 10 times that of traditional retail, leaving the momentum firmly in ecommerce’s court.

Across both however, trend figures show growth stalled in December. Based on seasonally adjusted figures from the ABS, which remove the influence of events like Christmas and variations in each month’s length and composition of trading days, offline sales in December were 0.2% lower than November, and tracked a mere 2.3% higher than the same month in 2011 alongside an inflation rate of 2.2%. Raw ABS figures, however, show that spend in December was 34.7% up on November and 0.8% up on the same period the year prior.

For online retail, which still only accounts for 5.8% of total spend (excluding cafés, restaurants and takeaway food for a like-to-like comparison), the year ended with a return to high growth levels after a dip in the first half of the year, although December, at 23% year-on year-growth, fell below November’s peak. NAB’s Online Retail Sales Index suggests higher spend in November is seasonal in the lead up to Christmas as shoppers buy earlier to ensure parcels arrive in time for 25 December.

Year-on-year growth for traditional retail vs. online retail

Based on seasonally adjusted ABS ‘Retail Trade’ figures and NAB’s ‘Online Retail Sales Index’. The lines show the change compared to the same period in 2011.

The retail sector continues to pin fluctuations on month to month events, such as interest rate cuts, tax hikes, and other news of economic woes. Household budgets were stretched to the limit in the lead up to Christmas, says executive director of the Australian Retailer’s Assocation (ARA), Russell Zimmerman.

“Retailers were hoping the December interest rate cut might have saved the festive season, but the rate cut wasn’t passed on and other cost pressures had accumulated.”

However, how quickly and for how long these events impact on consumer confidence remains unclear. Consumer confidence surveys regularly fail to register upswings in sentiment following news of rate cuts and other alleviating factors, as seen in January’s Westpac-Melbourne Institute ‘Index of Consumer Sentiment’ which stagnated despite news of growth.

Amid the struggling brick-and-mortar landscape, there were winners and losers

Hardest hit throughout the year were household goods retailers and department stores, both of which experienced multiple periods of negative year-on-year growth throughout 2012.

Clothing, footwear and personal accessory retailers also struggled throughout much of the year, apart from a relatively sustained period of strength around the middle of the year.

On the winner’s side sat food and liquor retailing and cafes, restaurants and takeaway food outlets. In December, they closed with year-on-year growth of 4.4% and 5.3% respectively.

Year-on-year growth for offline retail by sector

Note: Figures based year-on-year comparison of seasonally adjusted ABS Retail Trade figures. ‘Other retailing’ not shown on chart.

The spend data reinforces key points both old and new around how people spend.

Muted spend appears to be the new normal, particularly for consumer goods. The cautious mindset of the past few years continues to prevail against news that once would have spurred optimism. Not even the rate cut on December 4 and the stimulant of Christmas could spur the elevated levels of spend in December that retailers hoped for.

But that’s not to say people aren’t spending. Increased spend on restaurants and cafes supports the shift from consumables to experiences, a trend widely discussed over the past few years, as well as more recent reports that Australians are getting out and about again, reversing the long-standing trend towards eating and entertaining at home.

Upswing in retail spend predicted as purchase intent skyrockets: study

by Marketing ON 6 February 2013

Intent to make major purchases among Australians skyrocketed at the end of last year, according to Nielsen, leading the research agency to predict an imminent upswing in retail spend.

More than one in two (55%) believed the next 12 months will be a good time to buy things they want and need when asked in quarter four of 2012 – a jump of 13% on the previous quarter – a study fielded in November found.

This rise in retail optimism comes despite languishing consumer confidence, a measure built from a range of indicators in addition to purchase intent. Nielsen’s ‘Global Survey of Consumer Confidence and Spending Intentions’ study recorded a three point fall in Australian consumer confidence to 95 for quarter four of 2012, mirroring ‘disappointing’ results logged by Westpac-Melbourne Institute’s ‘Index of Consumer Sentiment’ in January.

Nielsen’s results point to renewed hopes for a positive retail environment in 2013, says managing director of Nielsen Pacific, Chris Percy. “Despite a slight drop in consumer confidence, the figures show a turning point in the financial stability of most Australians.

“The number of consumers signalling their intention to buy the things they want or need over the coming year indicates a shift to positive sentiment when it comes to consumer spending, helping retailers to breathe a sigh of relief.”

Nielsen analysis shows that saving intention dropped by 1% quarter on quarter, which the researchers labels another indication of an imminent spending upswing, even though it’s not a statistically significant change.

“Globally, we have seen a drop in savings by three percentage points, and Australia is following that trend,” Percy believes. “Locally, retailers can breathe a sigh of relief as consumers become more comfortable with their discretionary spending. When asked how they will use spare cash after covering essential living expenses, one in four said they would buy new clothes and one in three intends to put their spare cash towards holidaying.”

Australian consumers also continue to be confident in their job prospects, with close to half (44%) anticipating employment opportunities would be ‘good’ or ‘excellent’ in the coming year.

Overall, global consumer confidence saw a one-point quarter-on-quarter decline over the current period to 91 points, putting it two points higher than the same time in 2011.

Asia Pacific reported the highest levels of confidence overall, on 101, but still experienced quarter-on-quarter declines in eight of its 14 markets.

Europe continues to have the lowest consumer confidence levels, with a drop of three points to 71, while Latin America improved slightly to 96 and the United States fell one point to 89.

Of the 58 countries surveyed, North America posted the most significant decline in confidence over the past year, down 15 points to 71, while Greece continued to decline, reaching a lowly 35.

Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism.

Nielsen’s ‘Global Survey of Consumer Confidence and Spending Intentions’ quarter four 2012 was conducted between 10 – 27 November –27, 2012, among more than 29,000 online consumers in 58 countries throughout Asia-Pacific, Europe, Latin America, the Middle East, Africa, and North America. Sample was weighted to be representative of Internet consumers.

Infographic: The ups and downs of retail in 2012

by Marketing ON 20 December 2012

Earlier in the year, we tracked the ups and downs of online retail against ‘traditional’ retail in the infographic below.

2012 was a year of fluctuations for online retail, with growth peaking near 30% in February then dropping to below 20% in April, before recovering to 25% in July. The last recorded data from NAB’s Online Retail Sales Index, collected in October (after this graphic was published), growth was steady at 26%.

In contrast offline retail sales growth languished at sub-5% levels all year, with some months recording decreases. In November, the more recent run of ABS retail trade figures, there was no change in sales month on month.

While much has been made of the threat online retail, in particular overseas operators, poses to traditional retailers, the vast majority of sales (94.7% in July) still goes through brick-and-mortar outlets. And international retailers only claimed 28% of online sales, as local online players dominate the space. After a spurt in mid 2011, growth for international retailers dropped below that of local operators, where it remained for much of 2012.

Online shoppers spent the lion’s share of their outlay on auction sites, department stores and fashion retailers throughout the year. In July, toys and media retailers were the second largest segment of the online markets, while household goods and electronics was the third largest.

Tellingly, as of earlier in the year, if the top 15 online retailers in Australia were a single entity, they’d be bigger than Myer and David Jones and almost on par with department store market leader Big W, according to analysis from data analytics firm Quantium.

Click image to embiggen.

Retail growth comes to grinding halt amid rate cut uncertainty

by Marketing ON 4 December 2012

Retail growth came to a grinding halt in October with sales coming in at exactly the same level as in September.

In the lead up to Christmas, the 0.0% month-on-month result points to a climate where consumer spending is still supressed by a range of pressures. Compared to last year, October showed marginal growth of 3.1% — small comfort for retailers, according to executive director of the Australian Retail Association (ARA), Russell Zimmerman.

“It’s clear from the figures that there needs to be an interest rate cut today in order to stimulate consumers and ensure any available cash is put into their pockets in the lead up to Christmas,” Zimmerman says.

Month on month, most retail sectors remained flat during the period, apart from food retailing which grew 0.9% and household good retailing which dropped by 1.6%.

Year on year, the month of October performed slightly better than last year, with cafes, restaurants and takeaways up 5.4%, food retailing up 5.0%, clothing, footwear and personal accessory retailing up 3.2%, department stores up 2.8% and other retailing up 1.5%, while household goods was the only sector to decline, down 1.5%.

Zimmerman believes October’s rates cut wasn’t passed on swiftly enough by the banks the rate hold in November combined to make spending unsustainable for consumers.

“Two weeks ago, the ARA estimated shoppers would bag $41.2 billion in Christmas presents before Christmas Day, which is a 3.9% rise on last year’s spend in the same period,” he adds.

“Consumer confidence is somewhat shaken at the moment, with bills rushing in as a result of costs associated with utilities, the carbon tax and other pressures on household budgets.

“Many retailers have started Christmas trading feeling positive about what they can bring to their customers and having invested in offering the best possible shopping experience — the investment is a leap of faith as they wait with bated breath for key regulatory changes and sensible decisions regarding monetary policy.”

Department store spending plummets 10% as retail fizzles

by Marketing ON 4 September 2012

Department store sales plummeted by 10% in July, which after two months of stabilisation, saw consumer spend fizzle as the effects of stimulus payments wore off.

The Australian Bureau of Statistics’ (ABS) retail trade figures show that while there was year-on-year growth of 3.5%, overall sales declined by 0.8% on June.

Executive director at the Australian Retailers Assocation (ARA), Russell Zimmerman, says the decline shows consumers are feeling the effects of new stresses on household finances in the absence of June’s stimulus payments.

“July retail trade figures suggest the boost retailers enjoyed in the two previous months, especially in discretionary spend areas, was always going to be short-lived.

“Retailers saw consumer spending fizzle out in July as households began to grapple with the effects of the carbon tax, changes in health fund rules and health insurance rebates.

“Department stores have fared worst out of all categories with a 10% decline compared to June and a drop off of 5.4% compared to July last year, which is not surprising given discretionary spending is the first sacrifice consumers make when budgets are tightened.”

While the result for department stores was dire, the other main category of discretionary spend – clothing, footwear and personal accessories – dropped only marginally, losing 0.9% on June.

Household goods was the only category to clock notable month-on-month gains in July, with a 2.4% increase. The strong performer of the year – cafes, restaurants and takeaway food services – held steady at 0.3% month on month, but continued to power ahead on last year’s results, up by 9.3%.

“Looking ahead to August and September figures, the ARA is expecting retail trade figures to drop further from their artificially higher mid-year levels as utility bills roll in and are impacted for the first time by increased levies and taxes,” Zimmerman forewarns.

“Retailers also need assistance in the areas directly affecting them in order to innovate and respond to consumer demand rather than leaving shop fronts empty – some of these areas include employment relations, tenancy, training and lifting of planning and zoning restrictions.”

Father’s Day forgotten as clamp down extends to special occasions

by Marketing ON 28 August 2012

The clamp down on discretionary spend looks set to extend to special occasions, with IBISWorld expecting consumers to reign in their spending on Father’s Day this year.

The analyst group forecasts growth on Father’s Day spending to remain static at around $28 per family, less than half of what was spent on Mother’s Day earlier in the year.

Despite positive employment news, wages growth and rising disposable incomes, consumers continue to keep a tight reign on their purse strings having changed their attitudes towards consumption in response to tight times over the past five years. The news that frugal behaviour may spread to special occasions is another blow to the struggling retail sector markets, which markets heavily around special events.

General manager of IBISWorld in Australia, Karen Dobie, says the focus for gifts will be on low key gifts, such as dining out, picnics, a good book or gift vouchers. “While every Dad is hoping for a new gadget or tool to play with, value-conscious families will continue to chase bargains this Father’s Day and detract from the popularity of these purchases”, Dobie says.

Gift vouchers, books and CDs are categories expected to be favourites this year, with spend on these items forecast to increase by 7.6% and 7.1% respectively. Spend on eating out, a perennial favourite on both Mother’s and Father’s Day, is expected to top the overall spending in dollar terms, with a 5.1% increase on last year.

Sporting goods and clothing have fallen out of favour since last year (decreasing by 3.3% and 2.1% respectively), while spending on hardware, personal care items and electronics will remain relatively flat.

$659.9 million is predicted to be spent on Father’s Day in 2012, a mere 1.9% increase on last year.

Zero retail growth forecast for rest of year, despite May rise

by Marketing ON 4 July 2012

Retail sales rose 0.5% month on month and 3.5% year on year in May, a modest increase which could be due to the cold snap southern states experienced during the month.

But the upward trend will be short lived as increased pressure on household budgets catches up with consumers, according to executive director of the Australian Retailer’s Association (ARA), Russell Zimmerman, who predicts zero trade growth for the rest of the year.

Whether perceived or real, the impact of the carbon tax is expected to impact on shopper behaviour. “Families have recently been hit hard with more financial pressure as a result of the carbon tax, which the ARA does not believe has been adequately compensated for,” Zimmerman says.

Discretionary spend categories of household goods retailing, up 0.8% month on month and 0.4% year on year, department stores, up 1% month on month and 0.9% year on year, and clothing, footwear and personal accessories, up 0.5% month on month and 1.7% year on year, experienced sales increases across the board – a rare occurrence for 2012.

“Cool May weather in the southern states is a reason for the spike in trade figures we have seen,” Zimmerman explains. “Categories which rely on consumer discretionary spend such as department stores, clothing and footwear and household goods have enjoyed a modest boost for the first time in quite a few months – both month on month and year on year.”

Food retailing which had been performing strongly stalled, with a 0.1% month on month decrease, but is still up 3.7% year on year. Cafes, restaurants and takeaway food services continued to perform well with a 1.4% month on month increase and 8.2% year on year gain.

New South Wales, Victoria and Queensland all clocked month and month and year on year growth for May, while Western Australia performed the strongest up 1.1% and 10%. South Australia, Tasmania and the ACT recorded mixed results.