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.

Retail trade figures saw drop in lead up to Christmas

by Marketing ON 14 January 2013

Peak retail industry body, the Australian Retailers Association (ARA) released disappointing November lead-in figures for Christmas  with the largest contributor to the fall being household goods retailing (-0.9%) followed by clothing, footwear and personal accessory retailing (-0.6%) and department stores (-0.4%).

As conveyed by the Australian Bureau of Statistics (ABS), the 0.1% month-on-month drop in November retail trade would be discouraging to retailers who were hoping for a slight boost heading into the 2012-13 festive season.

In consideration of the hit, ARA edxecutive director Russell Zimmerman says that reports in recent days of reduced lending costs of major banks need to be addressed. He admits that not only should the Reserve Bank lower interest rates, but the major banks should also pass on additional rate cuts to help ease the pain. “The figures indicate that there remains a lack of consumer confidence due to tax hikes, increases in utility bills and private health insurance,” says Zimmerman.

The lack of business certainty has again reared its ugly head, with Zimmerman looking to Canberra to step up in this election year and deliver reassurance. “In the build-up to this year’s federal election, what Australia needs is strong economic leadership in light of these figures,” he explains.

While the ARA executive director notes that a series of data showing a lack of confidence and positive economic data have been compounded across multiple areas of the economy, he informs that there is still some good news in one of the sectors.

“The increase in both month-on-month and year-on-year growth in the cafes, restaurants and takeaways category correlates with the beginning of the Christmas party season.”

Well, that’s something at least, added to the fact that food retailing (0.0%) was relatively unchanged, and remains the benchmark being the strongest performing industry (up 0.4% in trend terms).

On a holistic level, the trend estimate for Australian retail turnover was somewhat unaffected in November 2012 (0.0 %). This follows a rise of 0.1% in October 2012 and a rise of 0.1% in September 2012.

A breakdown of the figures:

Monthly retail growth (October 2012 – November 2012)

By category:
Other retailing (1%), food retailing (0%), cafes, restaurants and takeaway food services (0.3%), department stores (-0.4%), clothing, footwear and personal accessory retailing (-0.6%), household goods retailing (-0.9%). Total sales (-0.1%).

By state:
Australian Capital Territory (1%), Victoria (0.3%), Queensland (0%), Tasmania (0.1%), New South Wales (-0.2%), Western Australia (-0.3%), South Australia (-0.6%), Northern Territory (-0.9%).

Year-on-year retail growth (November 2011 – November 2012)

By category:
Cafes, restaurants and takeaways (5.3%), food retailing (4.5%), other retailing (3.6%), clothing, footwear and personal accessory retailing (2.1%), department stores (2.1%), and household goods retailing (-2.1%). Total sales (2.9%).

By state:
Western Australia (8.7%), Australian Capital Territory (6.1%), Queensland (4.7%), New South Wales (2.3%), Northern Territory (1.9%), Victoria (1.2%), South Australia (0.8%), Tasmania (-5%). Total sales (2.9%).

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.”

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.

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.”

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.

Offline retail slumps, online localisation hailed as its potential saviour

by Marketing ON 30 May 2012

The next wave of retailing is localisation and tighter tailoring of range to individual communities, according to CEO of digital agency Salmat, Grant Harrod.

Harrod’s comments come as figures for April’s retail trade emerge, showing a decline among traditional retailers of 0.2% month on month and a slowdown in the growth of online trade, albeit to a still considerable level of growth.

While the figures point to a continuing reticence to spend and the impact of the structural shift on offline retail, Harrod told members of the press at an event in Sydney that the ability of digital communication and ecommerce to provide localised offers could be the saviour of bricks-and-mortar operations.

“The next wave of retailing will be around this notion of localisation and re-establishment back with community that can be achieved using an omnichannel approach,” Harrod said.

Using digital methods to maintain a relationship with customers, target deals based on interests, buying behaviour and location, offer dynamic pricing to reward loyalty and select ranging to suit individual communities of shoppers could be a ‘fight back strategy’ for bricks-and-mortar, Harrod explained.

Women’s fitness and leisurewear brand Lorna Jane has embarked on the beginning of a localised strategy, by maintaining Facebook pages for each of its 131 retail stores. The intent is to build a community around each local store in order to offer customers as close to what they want as possible.

Sharing the brand’s experience with social media, its digital strategist Sam Zivot said online sales were now equivalent to the sales of 20 of its bricks-and-mortar stores, with 10% of conversions coming from Facebook. The brand has experienced a 300% increase in web traffic and 400% lift in online sales over the past 18 months, and intends to expand into the US with a localised website and distribution centre in the coming months.

While today’s ABS figures show a 0.2% decline on March, April’s spend represents a 2.4% year-on-year increase. However, this increase is being driven by food retailing, up 3.6% year on year, cafes, restaurants and takeaway, up 8% and other retailing, up 2.8%. Discretionary spend sectors of clothing and footwear, department stores and household goods dropped by 1.5%, 3.1% and 0.8% year on year respectively.

NAB’s Online Retail Sales Index shows that online sales grew by 16% year on year in April, compounding the pressure placed on traditional retailers not executing an omni-channel strategy.