Retail sales flat over the next four years but ecommerce and household goods set to thrive: Deloitte

Retail sales are only set to grow by an average of 2.5% over the next four years as the industry undergoes a structural shift resulting in a “new trend” level, a new Deloitte Access Economics report has revealed.

However, the ecommerce and household goods markets are set to benefit the most over that time as pure online players receive more attention from bargain hunters and the property market spurs more sales in furniture and household goods.

Deloitte’s bleak outlook comes as yet another retailer, Queensland’s WOW Audio Visual Superstores, collapsed yesterday. It will add 17 stores to the more than 500 closures announced by companies including Borders, Angus and Robertson, Fletcher Jones and Billabong over the past year.

“We are now seeing sales grow at a new trend,” Deloitte Access Economics partner David Rumbens told SmartCompany this morning.

Rumbens says while in the past decade retail sales were driven by debt and higher property values, the next several years will see retail sales driven by higher household savings, slower labour force growth and shifting attention to different industries.

The Deloitte report said the past two years had been lean for retail, with sales growth of just 1.7% in 2010-11. In real terms, the figure did not even cover population growth of 3%.

And although sales are set to grow by an average of 2.5% over the next four years, factors such as the Eurozone crisis, slower jobs growth, low consumer confidence and the high Australian dollar still posed a risk.

The new trend will see some previously successful industries suffer while others prosper – but overall retail sales will stay lower.

And some sectors will certainly suffer. Over the next five years, department store sales will grow by just 0.7%, cafes and restaurants by just 0.8% and clothing and footwear by 1.5%.

However, there is some hope for 2012, when overall sales are set to rise by 2.6% in 2012-13, assisted by lower interest rates.

And some sectors will prosper. The ‘other retailing’ category, which grew at 1.4% in 2009-10 and 2.5% in 2010-11, will reach 4.7% in 2011-12 and an average of 4.3% to 2015-16.

“This category covers pure online players, and those that don’t have a bricks and mortar presence. That’s the key reason this group has been doing so well over the past couple of years,” Rumbens says.

“It also covers chemists, where sales have been growing pretty strongly. They’re likely to benefit from spending for health services over time.”

The household goods category is also set to strengthen, with growth of 2.3% in 2010-11, 3.4% in 2011-12 and 3.2% in 2012-13. To 2015-16, the average is set to be 3.5%.

And although this sector is tied up with property sales, Rumbens says lower interest rates should help that along.

“Housing construction is likely to dip lower in the next few months, but that’s expected to turn through 2012.”

Rumbens says although there’s some blue sky for retailers, the sector will need to adapt to less than 5% growth figures, far below the figures enjoyed before the global financial crisis.

“There is a short-term improvement coming. But there are plenty of risks around…and it’s simply a new trend we’re dealing with in the retail industry.”


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