The Australian Bureau of Statistics’ March quarter Consumer Price Index (CPI) report has revealed that price deflation and the impact of competition is impacting Australian retailers across the board.
The latest retail report from the ABS indicates consumers are spending less money than they have in the past, with fierce pricing wars, increased online competition, the influx of foreign retail chains, and weaker household spending all taking a toll on the retail industry’s bottom line.
According to the CPI, the main contributors to the fall in revenue for clothing and footwear retailers was a decrease in spending on women’s clothing (-2.5 percent) and garments for children and infants (-4.9 percent). In the last 12-months, sales in the clothing and footwear category dropped by 3.5 percent.
In the furnishings, household equipment, and services group, furniture sales also fell by 2.8 percent, due to increased online competition and heavy discounting activities within the sector.
Discounting pressure has already impacted the bottom line of some of Australia’s big name beauty retailers, as Priceline’s owners, Australian Pharmaceutical Industries say discount pressure is to blame for declining sales. For the month of February, Priceline reported a 14.4 percent drop in revenue, with sales down 1.7 percent overall for the first half of the year.
E-Commerce and Investment Growth Projections
In line with the ABS’ findings, National Australia Bank (NAB) conducted a survey to determine what retailers’ plans are for future investments in both e-commerce and in-store shopping experiences.
According to the bank’s findings, retailers are still feeling fairly confident in their investments in bricks and mortar retail, as just 50 percent of respondents said they wouldn’t be expanding in the next 12-months, while more retailers said they would be expanding, albeit moderately so, than shrinking.
“Looking at responses by business size (based on number of employees) expectations about the number of new stores were higher for larger firms, while smaller businesses were more likely to expect no change in the number of stores (and were a little more pessimistic about the number of store closures),” the report said.
When questioned about consumers’ online spending, and their investment in the online sphere, NAB’s findings were in-line with much of the industry, reporting that online spending is becoming the preferred method of shopping for millennials and even baby boomers.
In terms of online development and capital expenditure budget, 60 percent of retailers indicated they would be increasing their online development budget over the next two years.