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 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.”

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.