High levels of competition, increasing digital disruption, and weak household income growth is slowing down retail growth according to Deloitte Access Economics’ latest report.
The quarterly Retail Forecasts subscriber report figures indicate that real (inflation-adjusted) retail turnover growth was 2.6 per cent for the year to March 2018, while overall real retail turnover is expected to lift modestly from 2.4 per cent in 2017-18 to 2.6 per cent in 2018-19.
“Current growth is being driven primarily by categories closely tied to the housing market, which have benefited from now cooling higher property prices, while intense competition in apparel and department stores has resulted in falling prices but rising sales volumes,” says Deloitte Access Economics partner David Rumbens.
“The biggest drag on headline retail growth was food spending, a category closely tied to fluctuations in household income growth which has struggled to pick up over the past year or so.”
More and more overseas retailers entering Australia and the increasing popularity of online shopping puts a lot of pressure on local retailers, especially in the household goods and apparel market.
“Regardless of category, retailers that offer omnichannel solutions, create brands that align with consumer values, and harness new paths to purchase will be the longer term winners,” Rumbens says.
“With GST not payable on smaller purchases from overseas online platforms, some domestic retailers believe they have been at a disadvantage when it comes to prices and margins. But this is about to change, and the industry will be watching closely as GST on these smaller purchases comes into effect on 1 July.”
He adds that after last month’s budget consumers will have more money to spend, with income tax estimated to put around $13.4 billion back into consumer pockets over the next four years.
“Given the weak wage environment, these tax cuts are a welcome development for household budgets. And for retailers, the sector is likely to be a major beneficiary of the improved household income position.”
By Marion Gerritsen
