Australian retailers are increasingly watching 2019 forecasts on economic climate and consumer trends and evaluating their impact on domestic and international retail.
This topical issue was addressed by Craig Woolford, Head of Research at Citi Australia/New Zealand, and Brian Walker, Retail Doctor Group’s CEO, at the latter’s thought-provoking CEO Breakfast on Thursday 15 November.
A key takeaway from the discussion is the expected continued sluggishness of retail sales in 2019 as the wealth effect fades, with retail spending growth projected to be 3.5% to 4.5% at best over the next 12 months.
This year, larger retailers of 10 or more stores have outperformed smaller retailers, largely fed by faster online growth facilitated by access to high-performing IT systems that allows a better integration of online sales channels and brick-and-mortar stores. This trend is forecasted to continue in 2019 as larger retailers continue to win more market share through scale and online growth.
According to Woolford, cost pressures will be the key issue for many retailers to navigate in 2019, as operating costs continue to grow faster than sales margins, particularly as online sales is rarely incremental. This driven by a number of factors, particularly the continued discount game that many retailers participate in, as well as increases in labour costs. With a good chance of a labour government being elected in May next year, such labour costs are only expected to increase. For bigger retailers, a 1% increase in wage could mean a 2% drop in profit.
The mixed effect of technological trends was also explored. For instance, increase in both the availability and usage of ‘click and collect’ services – now comprising 20-40% of online sales ¬– has seen an increased blurring of the boundaries between online and physical retail. This means it is increasingly important for retailers to focus on growing and integrating their omnichannel offer.
Increased prevalence of tap-and-pay services and Afterpay offers also offers mixed results, providing some retailers access to a bigger catchment, while merely increasing costs for others – in some cases, merchant fees can comprise up to 4% of total sales.
Overall, valuable insights were revealed in this high-calibre overview of 2019’s projected economic and retail trends, complimented by a thought-provoking review of 2018’s top trends and best practice retail presented by Retail Doctor Group’s CEO, Brian Walker.
Walker stresses that building an efficient omnichannel network and increasing operational efficiencies should be top-of-mind for retailers entering into the new year – but without sacrificing the important experiential factor that distinguishes emotional, loyal ‘shopping’ from transactional ‘buying’.
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