Consumers are spending… just not in your stores… and won't be in the
future
After what concluded as the worst year in a decade for 2010…a strong start
to 2011 saw what we hoped would be the upturn in the retail cycle. However,
after December 2011 results were released last week it is clear….the retail
cycle is DEAD!
2011 saw seasonally adjusted growth at 2.44%. That is less than CPI (approx.
3.1%) and the lowest for 20years. So if Australians are earning more than ever,
where is all that money going?
What is surviving is experience categories which are still in growth, as well as
the bellwether of retail grocery which is naturally protected by it’s nature
from offshore and is seeing more involvement since the Masterchef effect began.
In summary for 2011…
Whats in growth…
- Supermarket and grocery grew 3.84% YOY with specialised food just ahead at 5.32%
- Liquor retailing saw the second highest growth at 7.10%
- Pharmacy and cosmetics kept strong at 6.29%
- Hardware and garden (5.48%) and furniture, floor and homeware (5.02%) saw good growth
throughout the year and finished up well
- Despite a refocus on DIY food, cafes, restaurants and catering grew at 3.12%
- And, other retailing…remains the biggest growing category at 11.64%
But…the casualties
- Takeaway food has experienced a level of rejection as experience becomes more important
at -1.09%
- Newspaper and books continue to shift online -1.36%
- Other recreational goods suffered at -1.67%
- While fashion was hit hard with clothing (-1.92%), department stores (-2.35%) and
footwear (-4.62%) saw the worst consumer spending rejections and over eroded margins
- But the wooden spoon for 2011 goes to electronic goods at -4.84%, where its time
to reconsider your channel strategy as it costs more to sell it than profit
But consumers have more money than ever…..where is it going? Thanks to a
report late last year from The Commonwealth bank (Comsec Equities Sep 11), on on/off
shore e-commerce spending, it’s those categories worst hit in traditional
retail that are thriving offshore!
Department stores, entertainment and clothing have been worst hit by offshore e-commerce
growth. In fact if you added last years department store sales lost offshore,
the picture shifts from -2.4% to +6%...
The truth is, Australian retailers can only blame themselves. When faced with
the battle of the GFC, higher Australian dollar, more considered consumer spending
and the digital revolution…the weapon of choice was 50% markdowns…further
eroding revenues and permanently changing the consumer mindset.
In stark contrast, we saw… and continue to see…digital and in-store
innovation to excite, a renewed focus on product offer and a multi-channel restructure
to make it easy for the consumer to shop. Problem is, this is… all
happening offshore and a laggard, copy cat approach is no longer sufficient for
Australian retailers in a global economy.
But the good news is, consumers are still buying and there is a lot of room for
growth, its just not all in one channel. We just have to look to the ASOS,
Amazon, Apple, eBAy or John Lewis of the worlds if ever in doubt.
The way forward for Australian retail is therefore to not rely on tactical promotions,
catalogue drop offs on 50% off sales and big red balloons on the latest vacuum…hoping
to switch to the 20% off one on the way in…But, to put our best foot forward
and excite the consumer to shop again with smarter, multi-channel and exciting retail
experiences they have seen overseas, be that in-store or online!
So the learnings of 2011?
All retail is being impacted by the digital revolution in some form…so learn
quickly how digital is impacting your category, then take on the challenge to engage
with consumers in this fundamentally new landscape to survive…and thrive
If you would like to understand your category in more detail, your relative performance,
or how to better engage your consumer, RetailOasis has extensive retail experience
and can assist you with future business development based on rigorous quantitative
analysis and insights. Contact Steve Kulmar or Nerida Jenkins at RetailOasis on
+612 9976 6222 or follow the link below to order a report
Click here to view detailed
charts.
Click here to order custom report.