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.

Confidence dives ahead of Christmas despite rate cut

by Marketing ON 14 December 2012

Consumer confidence has taken an unexpected dive ahead of Christmas, down by 4.1% to a neutral point of 100.0, according to the Westpac Melbourne Institute Index of Consumer Sentiment.

The measure, which is intended to indicate consumer’s propensity to spend, continues to be topsy turvy, with the drop following a similarly large increase of 5.2% in November.

Westpac’s chief economist, Bill Evans, says the drop, which came despite last week’s rate cut, is a very surprising result. “When we saw the 5.2% increase in the Index in November, which came despite the Reserve Bank surprising by holding rates steady, it appeared that sentiment was finally starting to respond to the accumulated series of rate cuts since November last year,” Evans says.

“With that in mind it was therefore reasonable to expect that the Index would respond quite positively to the rate cut the Reserve Bank delivered last week. Instead the Index fell back to near its October level and is now 3.2% below its November 2011 level.”

The rate cut did have an impact on mortgage holders whose confidence rose by 4.4%, but renters and outright owners of properties were very downbeat. Confidence of those who are renting fell 9.1% while for those who wholly own their property confidence was down 10.9%.

The survey also tracks major news events and their influence on confidence. It found the news items which had the largest impact were around economic conditions, with 60% of respondents recalling news items on the economy, while only 28.9% recalled the news of interest rate cuts, and 20% or less recalled stories around budget and taxation, international economic conditions, inflation or employment.

“Respondents continued to view news as quite negative around economic conditions,” Evans explains. “Apparently the fall in headline unemployment from 5.4% to 5.2% which was announced during the survey week had limited impact on respondents.”

December’s rate cut did boost the perception that now is a good time to purchase a house, with the index tracking sentiment on this measure improving to its highest level since September 2009, a year in which Australian house prices increased 14%.

Respondents to the survey, conducted between 3 and 9 December, were more confident around the outlook for their finances – the only sub-index the register an increase – while perceptions of finances compared to a year ago, economic conditions over the next twelve months and next five years, and whether now is a good time to purchase a major household item all fell.

Evans predicts another rate cut when the Reserve Bank Board next meets on February 5. “Evidence to date is that low rates are not generating much traction with households. Hence there is likely to be a decision to further ease rates in February or March”, he says.

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.”

Steady growth for retail despite “struggle to remain competitive”

by Marketing ON 5 November 2012

Retail sales in September grew by 0.5% month on month and 3.6% year on year, signalling steady growth for the industry, according to the ABS.

However, executive director of the Australian Retailers Association (ARA), Russell Zimmerman, says the result is similar to that of a year ago, indicating retailers are still struggling to remain competitive.

A level playing field is vital in order for the retail industry to return to strong growth, Zimmerman says, again citing the Low Value Imports Threshold (LVIT) on GST and penalty rates as a continuing impediments for traditional retailers.

“Retailers are also struggling to remain competitive and respond to consumer demand for around-the-clock trading because penalty rates associated with employing staff on Sundays, weekends and public holidays exceed the benefits of remaining open,” Zimmerman says.

Department stores and the clothing, footwear and personal accessories category were the poorest performing for the month, registering 0.5% and 0.6% month-on-month declines respectively. In contrast, household goods retailing (+1.2%), food retailing (+0.6%) and cafes, restaurants and takeaway food services (+0.5%) all recorded improved fortunes.

Western Australia continued to be the stand-out state, clocking a 1.2% month-on-month increase and 10.5% year-on-year jump. Victoria and New South Wales continued to feel the pinch, up by between 0.2% and 0.5% month on month and between 1.5% and 2.9% year on year. Queensland fared only slightly better with 0.5% month-on-month and 4.5% year-on-year gains.

The ARA is calling on government to reduce penalty rates to levels which “promote a win-win balance between industry growth and the availability of flexible work hours”. Zimmerman says retailers will be unable to take advantage of potentially beneficial changes, such as the introduction of 24-hour shopping in Sydney, due to the anti-competitive regulatory environment and wage pressures.

Consumers stuck in a rut as bad as during the GFC

by Marketing ON 12 September 2012

Consumers are well and truly stuck in a rut, according to the latest consumer confidence figures, which show September’s confidence levels to be as bad if not worse than during the height of the global financial crisis.

Westpac-Melbourne Institute (WMI) said consumers are in an “extended cautiously pessimistic phase” with September the seventh consecutive month that the Index has been below 100, a stretch only surpassed in 2008/09 and the early 1990s.

Roy Morgan Research reports that September’s consumer confidence reading is one of the lowest since the GFC. However, it remains a much higher reading at 112.0 points compared to WMI’s at 98.2.

Both confidence indices are calculated from a neutral point of 100 plus or minus the average number of favourable or unfavourable answers to five key questions. A score above 100 indicates that the number of optimists outweigh the number of pessimists and vice-versa for a number below 100. Fieldwork for Roy Morgan’s study was conducted on the weekend of September 8/9 while WMI’s took place between 3 and 8 September.

Chief economist at Westpac, Bill Evans says the results does not bode well for consumer spending and is consistent with the slowdown in consumer spending indicated by the June quarter national accounts. “With a sharp fall in July retail sales confirming this boost is now reversing, underlying momentum appears to be soft, in line with the consistently downbeat signal from the consumer sentiment index.”

Executive Chairman of Roy Morgan Research, Gary Morgan, pointed to a weakening in the mining sector for these latest consumer confidence figures. “The weakness in iron ore prices and another key commodity – coal – suggest Australia’s mining boom may be coming to an end, threatening the Gillard Government’s promised surplus.

“Notably, iron ore miner Fortescue last week responded to the falling iron ore price by cancelling a planned expansion in WA’s Pilbara, sacking 1,000 employees and contractors. Extensive publicity has also surrounded BHP Billiton’s cancellation of a proposed $30 billion expansion of its Olympic Dam copper and uranium mine in South Australia and the shelving of plans to expand its port facilities in Port Hedland – further clear indications of the weakness of commodity prices.”

WMI’s index rose slightly over the past month, up 1.6 points to 98.2, while Roy Morgan’s dropped by 3.4 points to 112.0. Both are reading at or below the levels of September last year.

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.”

Aussies go thread bare to save amid fears of double dip recession

by Marketing ON 18 July 2012

Spending less on new clothes is one of the top three strategies Australians have adopted to save money, according to a study by Nielsen, which adds to the story of consumers changing their spending habits as overseas fears of a GFC aftershock are reflected locally.

The other most common strategy adopted to cut back was a reduction in takeaway meals, closely followed by measures to save on gas and electricity. Conducted globally among 28,000 consumers, the study isolates rising utility costs, job security and the economy as the key drivers of lower spend.

Managing director of Nielsen Pacific, Chris Percy says consumers are preoccupied with factors such as deteriorating economic conditions overseas, the increasing cost of living and banks not passing on interest rate cuts.

“Australians are being hit hard by the increasing cost of living, and a lack of confidence in the marketplace will only serve to further impact discretionary spending as people opt to keep their wallets firmly in their pockets,” added Percy.

Sentiment in Australia appears to echo the fears of a double dip recession overseas, with almost two-thirds believing now was a ‘bad’ or ‘not so good’ time to buy discretionary items. This is in direct contrast from figures from two years ago, when 60% said now was a ‘good time’ to buy things.

Nielsen also found that 47% of Australians are putting a portion of their spare cash into savings and 30% allocate surplus funds to pay off debts including credit cards. However, nearly one in five claim to have no spare cash after living expenses are paid.

Compared with other countries around the world, Australia ranked 25 out of the 56 nations surveyed in terms of consumer confidence – just behind New Zealand, Israel and Pakistan.

“Poignantly, this is the first time Australia has dropped below New Zealand in terms of consumer confidence in the past year,” Percy adds. “While New Zealand consumer sentiment has remained relatively stagnant in recent times, Australia has experienced a number of fluctuations including a significant drop in confidence in 2012.”

Asia-Pacific nations come out on top overall making up seven of the 10 most optimistic countries. Indonesia, India and the Philippines recorded the highest levels of consumer confidence globally.

The European nations of Hungary, Portugal, Italy and Greece took out the bottom four spots.

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.

Retail sees modest sales rise, but clothing and department stores struggle

by Marketing ON 8 May 2012

Retailers notched a modest boost in sales during March with a 0.9% month-on-month and 3.7 percent year-on-year increase, according to ABS retail trade figures released yesterday.

Following a month-on-month rise of 0.3% in February, sales have buoyed slightly but clothing retailers and department stores continued to struggle with soft sales keeping the overall sector down.

Executive director of the Australian Retailers Association, Russell Zimmerman says the weak growth in key discretionary categories shows relief for both business and consumers is still needed.

“Despite some welcome news of an increase in consumer spend, the category breakdown shows confidence hasn’t extended to discretionary spend, with year on year growth across the clothing and footwear as well as department store categories still weak and below the rate of inflation,” Zimmerman says.

“Retailers will be looking for further interest rate cuts over the coming months with even more taxes and charges expected to hit both retail and consumer confidence,” according to Zimmerman, who also calls for the Federal Government to exercise restraint with today’s budget to allow the Reserve Bank room to move.

Food continues to buoy up the sector, with growth in food retailing, and cafes, restaurants and takeaway food coming again this month. The former posted a 0.9% increase month on month and 4.1% increase year on year, and the latter recorded jumps of 2.0% month on month and 7.6% year on year.

Clothing, footwear and personal accessory retailing was up 1.6% on February and 0.4% on March last year, while departments stores increased a modest 0.7% month on month and 1.4% year on year.

Other retailing, which includes miscellaneous retailers and online players, was sluggish month on month, up by only 0.5% but recorded strong year-on-year growth of 6%.

The state which was the largest contributor to the rise month on month was New South Wales (1.2%), followed by Victoria (1.3%), Western Australia (1.2%), South Australia (0.6%) and Queensland (0.2%).

Zimmerman adds that retailers wait with baited breath for today’s budget announcement. “The hope is the 2012-13 budget to be announced [8 May] will boost retailers through tax and red tape changes for both consumers and business which will cause further retail sales growth,” he says.

“Retailers will be hoping any attempts to reach budget surplus won’t be achieved through extra taxes or charges on consumers at a time when spend needs to be stimulated not stifled.”