This Goes With That in Retail

Business has been pretty tough for Australian retailers over the last year with nominal annual retail sales growth (2% to 3%) well below the 6% per annum average over the last decade. The Australian consumer has tightened spending since the GFC and although consumer spending is increasing, would-be shoppers are still cautious, opting to save more of their disposable income. The savings rate for in Australia is currently around 10%, a significant increase from 4% in the 1990’s. This cautious consumer sentiment has been intensified by the dawn of online retailing and combined with the strong dollar has essentially turned the global marketplace into one ‘Big Store’.
I had the pleasure of speaking with Brooke Gillham, Business Manager (QLD) at the Sussan Corporation early this month, to discuss her thoughts on the current retail environment and what she believes are the opportunities and threats for her business. Brooke has been in the retail industry for 10 years and has worked in both the shop front as well as State offices. Sussan currently operates over 180 stores nationwide and has a long history as a clothing retail giant in Australia. Her insights proved to be very valuable in understanding what retailers are facing in this current environment.

Retail is currently experiencing the toughest market we have seen in recent times. With a number of big retailers closing their doors, there is a feeling of instability both for team members and customers. It has become a buyer’s market as retailers have conditioned customers to no longer expect to pay full price for goods and in fact should wait for the inevitable further percentage off. As retailers continue to slash prices, consumers are sitting back and waiting it out until they can obtain the goods at a significant discount.

While this all sounds quite negative, it is certainly not all doom and gloom. Retailers have an excellent opportunity to really focus on what it is that makes them stand out in the market, and that is service. When retailers are fighting for every dollar the customer has every right to expect a higher level of service, and if retailers intend to make sales they need to be able to provide it. Customer service, exceptional product knowledge, and good value are 3 of the key things that retailers must provide to remain competitive in an increasingly tough environment.
There has been a lot of talk about online retailing affecting physical stores and further damaging retailers, however it is important to remember that while online trading will definitely have some impact, the key to success is the ability to effectively manage both online and stand alone stores.

Customers want the convenience of online shopping, however nothing can replace the in store "experience"; getting tactile with the product and interacting with the sales team. Now, more than ever, creating the experience, and taking the customer on a journey from the moment they enter the store is essential to not only making the sale but in obtaining customer loyalty.
There are still plenty of opportunities that exist for retailers and as the market becomes tougher before it becomes easier. Retailers have 2 choices: they can either close their doors or they can react to what the customer is saying they want. The step forward is to create an in store experience that drives irrational buying and encourages loyalty, provides good value, makes shopping easy by providing a variety of shopping options, and most importantly, shifts the benchmark of service levels.

Welcome to 2012 - Confidence in Retail?

On New Year’s Eve $31,000,000 dollars was up for grabs in Gold Lotto’s annual mega draw. The very thought of the sum gets all to wondering what they’d do with the money. Live off the interest? Splurge on exotic sports cars and endless holidays? Invest in a promising venture? Regardless, the confidence gained by the eventual 32 winners would have been sky high. Conversely, in 2009, Australian taxpayers were divided as to how they would spend their $900 stimulus bonus comprising both savers and spenders despite the federal government’s intention to boost the economy through local retail expenditure. The Westpac-Melbourne Institute’s Consumer Sentiment Index at the time reported a measurable increase in confidence and a shift in optimism.

Come 2012 and what now is the sentiment held by Australian consumers and what are their financial resolutions? What will the year hold for retailers who have seen stagnating growth over the last five years? What market conditions will ultimately determine the year ahead in the economy?

Fast facts:
· The current cash interest rate is 4.25% which is the lowest level since April 2010
· 50% of consumers plan to spend less while 45% plan to save more in 2012
· Woolworths remains atop the retailing industry with $35.3 billion in turnover through 2011
· The Australian unemployment rate is relatively low at 5.3% (Greece is 17.5%)
· A strong Australian dollar has seen over 600,000 people taking an overseas trip per month spending an average of around $4000 per trip
· Online shopping is worth an estimated $10b per year in Australia with growth of over 8% per year

Following anticipated economic trends it could be expected that the retail sector could see a return to some normality in 2012 or at least a steadying that might be accepted as the new reality. Woolworths and Coles will remain the all powerful duopolists, online retailing will continue to terrorise bricks and mortar retailers or at least ensure they diversify, Australians would like to pay off more of their debt but would rather go on holidays and retailers who innovate, diversify and adapt to the ever changing retail landscape will find themselves having a happy 2012!