The Aussie shopper is back! But something’s changed
Every Sunday morning, we bustle into the car, kids freshly washed and dressed. We come together to congregate in massive structures, with elevated roofs and wide aisles, seeking comfort and release.
I’m talking, of course, about Bunnings. Or Costco, or Direct Factory Outlet, or any number of the new “big box” warehouse-style retail outlets that have sprung up in our suburbs. Australians love to shop.
There has been much talk lately of the death of the Aussie consumer. The global financial crisis has battered spirits, but the Aussie shopper will not be beaten. Provided he or she can keep her job, that is. It is true households are saving more and opting to paying down their mortgages. The household savings rate is up. We are, on average, saving an about 10 per cent of everything we earn. Before the GFC, we spent every dollar, and then some.
But the savings rate has recently stopped rising. As long as incomes keep growing, this means consumers should have a little extra money to spare. And with the Reserve Bank having slashed interest rates to historic lows, 2013 looks set to mark the return of the Aussie shopper. Indeed, we may already be there.
Retail sales figures show turnover at traditional retail stores grew only about 3 per cent last year. But this only accounts for about 30 per cent of the total spending we do. It ignores, for instance, car sales and purchases of services like hairdressing.
According to Commonwealth Bank economist, Michael Workman, if you look at wider measures, consumers are well and truly spending again.
“The shocking reality is that overall consumer spending is growing at 6 per cent per annum, right in line with its 10-year average.”
So, we still love to shop. But our shopping habits have changed dramatically. We don’t love the same stores we used to. And we don’t shop in the same way.
As a consequence, despite growing spending, 2013 is shaping up as another year of massive upheaval in the Australian retail industry. Last year saw Darrell Lea and Payless Shoes went into administration.
The year before saw the demise of Colorado Group, Angus and Robertson, Borders, Sleep City and Ed Hardy.
Quentin Olde is a partner at insolvency firm Taylor Woodings. He’s a corporate undertaker, of sorts.
Olde predicts many other iconic Australian retail brands won’t survive the year.
“There will be a number of household brands that will disappear,” he said during an economic briefing last week. “Retailers are struggling. They will have to change their models.”
Increasing competition from foreign retail brands like Zara and Costco have fundamentally reshaped the retail landscape, says Olde.
Despite weak consumer confidence in recent years, Australians remain a relatively wealthy nation in a world where high joblessness in Europe and America means those consumers are keeping an iron like grip on the purse strings.
This invasion of foreign retailers offers Australian shoppers more choices while creating new jobs. But it is also putting pressure on struggling domestic retailers.
“During a time of low confidence, competition has increased,” explains Olde.
Retailers with high-cost retail foot prints are looking to restructure their businesses. Olde predicts there will be a polarisation of the retail space.
First, retailers will continue to embrace the Walmart or ‘big box’ warehouse style shopping experience.
“That’s about lowering your retail property foot print,” says Olde. “You take yourself out of the high street and put yourself into a low cost retail space.” The focus is on price, not customer service. “You don’t expect attention from a staff member when you enter the door. Consumers understand that model.”
At the other end of the market, there will be smaller, high street stores focused on offering quality products and the shopping “experience’’ to help part consumers with their money. “People who walk into a Louis Vuitton store aren’t going to worry about how much they’re going to spend on a handbag because otherwise they wouldn’t be there.”
Existing retailers are also adapting to the shift to online sales. JB HiFi, for example, has begun selling white goods, in addition to its traditional audio and visual products which people increasingly purchase on line. “People don’t buy a fridge on line,” explains Olde. “When people buy a fridge, they want to listen to how the door closes and see how the ice machine works.”
Other retailers, like Dan Murphy, have started offering “click and collect” services, allowing shoppers to purchase online and have their order ready to be picked up.
Olde also predicts shopping will increasingly focus on “the wellness concept” as shoppers seek goods and services that boost their family’s health and happiness, like sporting equipment, gyms, massages and pampering. Consumers will also increasingly spend more on experiences, like holidays, rather than things.
For all the gloom, the Aussie shopper is not dead, just sleeping. Given the retail industry remains the biggest employer of Australians, the return of the Aussie shopper would be very good news for jobs and growth. It is Aussie shoppers, not big miners, who must drive the economic recovery in 2013.
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