What is in store for retailers this Christmas?

Plenty of articles have been written about the long-waited (now here) opening of Amazon. Below is a summary of the most recently released market statistics.

Amazon represents a seismic shift in our market so watching the data is key for every retailer as we enter the key trading time for most operators.

Retail sales – largest quarterly loss since September 2009

Seasonally adjusted ABS retail sales data for the quarter ended September 2017 showed a decline of 0.8% on the back of reductions of 0.3% and 0.5% in July and August 2017, respectively (sales were neutral in September 2017).

The ‘household goods’ category suffered the largest contraction during the quarter (-3.5%), followed by the ‘clothing, footwear and personal accessory’ category (-1.3%). Contractions were also reported in all states and territories.

A rebound was seen in ‘department stores’ in August and September after three consecutive months of contractions, to report marginal growth of 0.3% over the quarter.

Online sales – some volatility, continue to outpace traditional retail sales

Despite disappointing retail sales figures, online sales grew in July and August 2017 (0.5% and 1.4% respectively), partially offset by a contraction of 0.6% in September 2017.

The September performance was driven primarily by a reduction in the largest spend share category, ‘homewares and appliances’ which experienced a monthly fall of 2.9%. There may also be some impact from consumers holding off on purchases and “waiting for Amazon”.

‘Media’ continues to experience consistent growth, reporting growth of 19.5% for the 12 months to September 2017. Given media is a target category for Amazon, we expect competition to increase in the coming months, putting pressure on operators in this space.

Consumer confidence – some signs of optimism

One positive for retailers is that consumer confidence grew 3.5% to 99.7 between June and November 2017 (briefly entering optimistic territory in October 2017 for the first time in 12 months). Whether this translates to sales improvements is yet to be seen.

Improvements occurred across four out of the five component indices between July and November. The biggest movement in a component index was in the ‘family finances vs a year ago’ category which improved 7.1%. The measures of perceptions and expectations around family finances and economic conditions all strengthened over the period. The only component index to retreat was ‘time to buy a household item’, however it remains firmly in optimistic territory.

Conditions are set to remain challenging across many categories as we head into Christmas.

We expect price based competition to intensify in the lead up to Christmas in the battle for market share. Operators will need to remain responsive to competitors’ pricing and tactics to avoid carrying excess inventory into 2018.