Australian retail update Q3

August 02, 2021

With on-again, off-again lockdowns, the Australian retail sector has experienced a rough ride in recent months.

But along the way, there’s been positive news, with sales showing signs of growth before recent COVID outbreaks and enforced restrictions.

So, let’s take a deep dive into the data looking at how retail performed in the period between April and June.

Most recent data

most-recent-data

The lead-in to the end of the financial year got off to a positive start, with April data from the Australian Bureau of Statistics showing sales were up 25 percent on the year prior and also enjoyed a 1.1 percent increase on March 2021.

By May, that growth has slowed due to lockdowns in Victoria, but was 7.7 percent higher than 2020, and rose 0.4 percent month-on-month.

Although the official ABS figures for June are yet to be released, preliminary results indicate the final month of the financial year is likely to paint a slightly different picture.

Reuters notes sales slumped 1.8 percent in June “as coronavirus lockdowns and mobility restrictions in much of the country hit demand, casting a shadow over the outlook for growth in the third quarter as COVID-19 cases continue to rise”.

Where people were spending

Much of the growth in retail trade in April and May was driven by discretionary expenditure.

 

April data from the ABS indicated:

  • In April, food retailing rose 1.4 percent ($168.3m) in seasonally adjusted terms, including a 3 percent rise in liquor retailing.
  • Household goods retailing rose 1.5 percent ($82.9m) in April, boosted by a 3 percent rise in electrical and electronic goods retailing.
  • Clothing, footwear, and personal accessory retailing rose 1.2 percent ($29.1m) with a 3.1 percent increase ($52.6m) for clothing retailing but fell 2.8 percent (-$23.5m) in footwear and other personal accessories retailing.
  • Department stores fell 6.7 percent (-$121.8m).

 

May data from the ABS indicated:

  • In seasonally adjusted terms, food retailing rose 1.1 percent ($141.4m) in May, driven by a 1.9 percent ($188.8m) rise for supermarkets and grocery stores.
  • Household goods retailing fell 1.1 percent (-$59.8m) in May, with the most significant fall in the furniture, floor coverings, housewares, and textile goods sub-category, which was down 2.4 percent (-$36.4m).
  • Clothing, footwear, and personal accessory retailing were relatively unchanged at 0 percent (-$0.7m).
  • Department stores fell 0.7 percent (-$11.3m) in May In seasonally adjusted terms.

(Data for June is due to be released on August 4)

Current outlook

current-outlook

With COVID cases currently growing and lockdowns in place in multiple states, the current outlook is that retail’s V-shaped recovery may not eventuate as planned.

Reuters reports ANZ economists have forecast retail sales will fall again in July as the Sydney lockdown intensifies, another Melbourne lockdown starts, and South Australia also falls into lockdown.

“As the risks of a long Sydney lockdown increase, so do the risks of a muted recovery,” they note.

Meanwhile, the Commonwealth Bank has issued their latest Household Spending Intention report and found:

  • Retail spending intentions softened in June 2021 against the same month last year – continuing the high level of volatility seen in recent months.
  • Relative to last year, spending intentions in June 2021 were higher for clothing & footwear, food & beverages, general retail, and recreation. Declines were seen for spending on household furniture & equipment.
  • Comparing June 2021 to June 2019 showed a much more robust picture, with a solid increase across most retail spending categories. This substantial increase included spending on clothing & footwear, bakeries, grocery stores & supermarkets, department stores, household furniture & equipment, pharmacies, personal care, and recreation.
  • Areas of weakness in June 2021 relative to June 2019 included: dry cleaners, tailors, souvenir stores, and duty-free shops.

A return to online shopping

The return to lockdowns in multiple areas has seen a boost to online shopping, with Australia Post reporting online shopping is currently up 6 percent on the same period in 2020.

Over the past financial year, online shopping grew 31.8 percent to June 30, 2021, which is almost on par with the growth seen in the previous financial year (33.2 percent).

Australia Post notes almost four million Australian households bought something online during the two weeks before July 10. The increase largely attributed to New South Wales, which accounted for 35.1 percent of all online purchases nationally.

Meanwhile, Queensland accounted for about 20 percent, and Western Australia and the Northern Territory also saw strong online retail growth – up 20.3 and 17.2 percent, respectively.

Australia Post explained that the growth in online shopping in areas experiencing COVID-19 restrictions was similar to the recent pandemic trends.

“We know that when restrictions tighten, people buy more online. In fact, during lockdowns, online purchase growth almost doubles when compared to non-lockdown periods according to our data,” Australia Post General Manager Parcel and Express services Ben Franzi said

“With this latest wave of the pandemic affecting different areas of the country, we’ve seen different growth patterns as many Australians experienced tight public health restrictions for the first time.”

 

What people are purchasing online

Australia Post went on to note the categories where people were purchasing online.

They included fashion and apparel, home and garden, and variety stores, which proved most popular, with baby and pet products in high demand by Australians in lockdown.

Key insights and tips for business

key-insights-and-tips-for-business

The current data and outlook offer a host of takeaways for retailers.

 

Omnichannel is essential

With on-again, off-again lockdowns likely to be a reality for the period ahead, a frictionless omnichannel strategy remains essential, allowing the retailer to process sales in-store and online.

 

Click and Collect remains critical

Earlier this year, KPMG predicted Australia faced a year of retailing bravely, and with the landscape shifting rapidly, that has proven to be the case.

They noted consumers are doing as much as possible through digital and contactless channels, even when shopping in-store.

As a result, the three growing trends that fuse the digital and physical shopping experience include:

  • click-and-collect
  • same-day deliveries
  • digital payments

 

Safety is a priority

Consumers naturally remain wary of public spaces, and retail is not immune from this concern.

Policies and procedures that enhance the feeling of sanitization and security remain imperative to physical retail’s ongoing operation.

Meanwhile, State and Federal Government’s commitment to contact tracing means retailers have been forced to adapt, implementing tools like QR-Code check-in.

With the situation changing regularly and with little notice, these tools will be required for some time yet.

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