22/07/2020 Luke Goldsworthy

Australian Retail Recovery

The effects of restrictions easing, plus the injection this month of the second round of stimulus payments and early access to superannuation, has seen Australian consumers go on a spending spree.

According to the Australian Prudential Regulatory Authority, in the week to July 12, nearly 600,000 people withdrew up to $10,000 from their super, totalling $6.2 billion. Coupled with around 5 million people receiving their $750 stimulus payments from July 13, economic advisory company AlphaBeta found that spending was up 17% compared to pre-pandemic levels.

“It’s pretty mind-blowing how quickly people were able to get the money and spend it,” said AlphaBeta director Dr Andrew Charlton. “It was nearly $3000 spent in a couple of weeks. For most people it was normal shopping but amped up… The superannuation is the real sleeper here, I don’t think anyone had any idea how significant the impact was going to be.”

The effects of lockdowns was highlighted by Victorian spending being 15% below other states, raising fears of what could happen if further restrictions are required in New South Wales or other states due to a second wave of coronavirus infections.

Dr Charlton warned that we may not have yet weathered the storm, and spending levels may fall once the super money has washed through businesses, and government programs and support is reduced. 

Fortunately for businesses, the government announced this week that support via the JobKeeper and JobSeeker programs will be extended for an additional six months until March, covering the crucial Christmas trading period, though at a reduced rate. Currently, 3.5 million workers receive the JobKeeper wage subsidy, while over 1.5 million are on JobSeeker.

The boost in retail spending continues the recovery that began in May. Data for that period, released by the Australian Bureau of Statistics this month, showed a 16.9% increase in overall retail turnover from April to May, and a year-on-year increase of 5.8%. This follows a fall of 17.7% in April and a rise of 8.5% in March.

CEO of the Australian Retailers Association, Paul Zahra, was also cautious about the extent of the recovery due to economic indicators such as the unemployment rate. “Though most shops have reopened, retailers are facing significant financial challenges due to interruptions or loss of revenue, the cost of additional hygiene protocols, and reduced foot traffic,” he said. 

“It’s pleasing to see online shopping playing a vital role during these unprecedented times as Australians embrace convenience with sales growing 13.6% year on year.”

Once famously derided by retail icon Gerry Harvey as “a complete con”, online retail now accounts for 10% of all retail spending in Australia. “What we’ve been seeing for a number of months now is an incremental step change in the way people shop,” Ruslan Kogan, founder of Kogan.com, told The Sydney Morning Herald. “And once [customers] start shopping online, I don’t think they’re ever going back to a store.”

Kogan’s business is now valued at $1.75 billion (more than Myer and David Jones combined), has seen its share price increase by over 120% in the past three months, and has doubled its sales in the last quarter. A major investor is Wilson Asset Management. Portfolio manager Tobias Yao says, “We’re strong believers that pure online retailers can continue to take market share away from traditional, bricks and mortar retailers.”

“When we first invested in the e-commerce space we recognised that Australia really lagged behind the US and UK for total online retail penetration, and we thought we would see the same seismic shift here in Australia over time.”

That shift is here, amplified by Covid-19. Increasing the opportunity for all retailers, big and small, to maximise their online eCommerce business.

Online is expected to double to 20% of retail sales over the next five to ten years, making it a $50 billion industry. “What we’ve said will happen, is starting to happen,” adds Kogan, “but Australia still has a long way to go. What we’re seeing is just the beginning.”

Whether your business is an established brick and mortar with eCommerce or your retail business is eCommerce led, now is the time to ensure you are fully putting your strategy and execution in place. In a recent talk, Playhouse’s CEO, Luke Goldsworthy, stated: “Christmas trade is fast approaching and therefore time to validate your eCommerce execution is being reduced daily.”

Now is the time to make sure you are online ready.

Get in touch with our team and we can talk to you about this or any eCommerce questions you may have.

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