The soaring price of petrol is squeezing retailers from two sides, with increased costs putting pressure on margins and consumers pulling back on spending.
Petrol prices have skyrocketed above the $1.60 a litre mark in recent days, driven by higher fuel prices both in the US and the Tapis fuel market that supplies Australia.
Combined with interest rate rises and the broader economic slowdown, sustained fuel prices at current levels could see retailers go out of business, according to Australian Retailers Association chief executive Richard Evans.
“Smaller businesses in particular are feeling the pain, and with the weather impacting too we are already seeing the first signs of closure in the fashion sector, so petrol prices are having a significant impact,” Evans says.
The key vulnerability for fashion retailers, and those in other sectors such as sport and recreational goods, books and hair and beauty, is that they rely primarily on consumers’ discretionary spending.
“People do say they will keep that jumper for another 12 months or put off that haircut when people are looking to cut costs, so retailers that rely on that spending suffer,” Evans says.
Retailers in metropolitan outer suburbs, where commuting consumers tend to spend a bigger proportion of their income on petrol, are also being harder hit, Evans says.
Unsurprisingly, the spike in oil prices is also affecting the sharemarket, with buying in energy stocks such as Woodside yesterday pushing markets higher.
Today, however, oil and metals prices have come back a little, knocking the S&P/ASX200 down 1% on yesterday’s close to 5768.9 at 12.20pm.
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