Amazon is on the top of Australian retailer’s minds as the Christmas shopping peak period nears, and with subdued household spending – the outlook in the industry is gloomy and retailer’s confidence is down.
Retail sentiment in Australia remains flat moving into the final quarter of 2017 despite an uptick in mid-year trading, according to Dun & Bradstreet’s latest Business Expectations Survey.
The upcoming Christmas period has done little to lift spirits in the troubled retail sector, with expectations uncharacteristically low for the December quarter, according to the report.
“As 2017 draws to a close, business expectations remain broadly steady, which points to ongoing moderate economic growth. Actual business activity ticked higher in the June quarter, but it remains in a range that points to the economy neither being strong nor weak, but rather something in between,” says Stephen Koukoulas, economic adviser at Dun & Bradstreet.
Amid uncertain trading conditions, consumer spending is predicted to lower in coming months due to Australia’s low wage growth, increased unemployment and higher utility costs and mortgage rates. Amazon is front of retailer’s minds as well, adding fuel to the grim outlook.
“Though our Business Expectations Survey doesn’t focus on the reasons behind the lack of optimism, we see a number of trends affecting these low retail expectations, including low consumer confidence, political uncertainty and the impact of market disruption and international competition,” says Dun & Bradstreet’s chief executive, Simon Bligh.
“As pay packets get consumed by large mortgages and high rental payments, there’s less to be spent on the silly season and less reasons for retailers to smile. This is creating low consumer confidence. Political uncertainty is a drag on confidence as well – it effects short-term cashflow, spending decisions and makes it difficult to plan long-term. For retailers, this means consumers are spending less and saving more. And finally, there’s been a lot of talk of the arrival of Amazon on Australia’s shores and what it means for retail,” says Bligh.
While e-commerce juggernaut Amazon hasn’t confirmed its launch date locally as yet, analysts at Citi have tipped it will roll out its full offering here in a matter of weeks, even perhaps this month, following confirmation of its first fulfilment centre in Melbourne’s Dandenong South.
Amazon’s arrival here has certainly sparked Coles’ and Woolworths’ e-commerce efforts. Woolies launched its new e-commerce platform in June this year, while both supermarket giants have been focusing heavily on up scaling their e-commerce capabilities, including logistics and delivery.
Amazon sent shivers down retailer’s spines following the purchase of US organic bricks and mortar grocer Whole Foods Market in August, which saw it slash the prices of its merchandise by up to 40% the day of the takeover. If it goes down a similar path here it could spell trouble for our retail grocery sector.