The latest KPMG Australia Retail Health Index (RHI) indicates that a slower than expected Christmas trading period will see a sluggish return to positive health for the retail sector no earlier than mid-2025.
The big winners over Q2 FY24 were clothing and footwear retailers with consumer spending increasing by 28 per cent followed by furnishings and household equipment by 19.1 per cent compared to the September quarter.
“Household savings rates have now dropped well below their long-term average as consumer dry powder available for spending is redirected to needs vs wants responding to the cost-of-living surge driven by interest rates and the rapid rise of input costs impacting retail prices,” KPMG head of retail and consumer, James Stewart, says.
Immigration remains the saving grace for retailers and the key driver of growth combined with a slight increase in consumer sentiment.
“The positivity associated with the ‘Santa Claus effect’ felt at the start of January 2024 quickly fell off and consumer sentiment is now back down to levels seen at the end of last year,” KPMG chief economist, Dr Brendan Rynne, says.
However, retailers are optimistic about the future as they are looking to capitalise on emerging mega trends including AI, in-store technology and the rise of social commerce.
According to KPMG research, 70 per cent of retail leaders believe the adoption of AI will be a game changer for customer experiences well as overhauling retail models impacting supply chain, product development and demand planning.
Stewart adds the rapid rise of socially digital retail disruptors will also force local businesses to adapt their offerings and reshape the way they engage consumers.
“If we look at the popularity of Shein, it is essentially leveraging social media to drive customer discovery, product development and D2C transactions. Social media is creating a new future for the industry where entertainment and retail are a blended experience for consumers.”
