Retailers are bracing for another difficult year in 2019 after a string of data releases last week cast a cloud over hopes of a strong Christmas trade.
Retail sales shot up 0.4% to $27.1 billion in November, ahead of expectations, according to ABS data released last Friday, driven by strong uptake of Black Friday and Cyber Monday sales.
But the November data has prompted concern shoppers splurged early last year, only to tighten their purse strings during December, with retailers SmartCompany has spoken to reporting tougher trading and more discounting.
Commonwealth Bank card data revealed a 3.7% decline in spending between November and early-January, while Citi researchers tracked a 9% decline in foot traffic between Black Friday and Boxing Day.
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The prospect of a slow December is bad news for the sector, with an elevated level of at-risk businesses opening the door to another year marred by retail collapses.
Sales started early
Judith Treanor, founder of ethical gift retailer Temples and Markets, says while her business booked growth on last year, December was difficult.
“It was very tough. Sales started early, that was the real kicker,” she tells SmartCompany.
“In the last two weeks of November, it’s almost as if someone flipped a switch, then it slowed right down.”
For Dean Salakas, chief executive at retailer The Party People, the Christmas rush also started early, but didn’t prevent a solid December trade.
“December had five weekends in it this year, which helped us because weekends are when people celebrate,” he tells SmartCompany.
Tiffany Jade Benn, director of homewares retailer Hart Home Decor, says December was a bit quieter than usual, with customers ordering earlier, but Afterpay was extremely popular.
“I wouldn’t say Afterpay was 50%, but it was quite a big chunk,” she tells SmartCompany.
Benn says shoppers appeared to be burnt out by December, following months of heavy discounting in September, October and November.
Russell Zimmerman, executive director of the Australian Retailers Association (ARA) says he’s hearing a similar story across the sector, calling Christmas 2018 “patchy”.
“It’s fair to say some retailers have done really well, and other’s have struggled,” he tells SmartCompany.
“I’ve had many reports from people saying trade was down.”
The ARA predicted a 2.9% increase in pre-Christmas sales, which run from November 9 to December 26, to $51 billion.
Zimmerman said the November ABS figures point to a “sluggish” December, while consumers are tipped to spend $18.3 billion on post-Christmas sales from December 26 to January 15.
Not everyone SmartCompany spoke to reported difficult trading in December. Adore Beauty founder Kate Morris says her business achieved double-digit growth in the Christmas lead up.
“Certainly consumers seemed happy to spend — one of the most-wanted items was the Dyson Airwrap at $699 which sold out three times,” Morris tells SmartCompany.
Derek Sheen of Yellow Octopus also booked growth, saying Christmas was the busiest period yet for his business.
“Plastic junk” unwanted
Benn says she’s optimistic about 2019, predicting customers will turn away from cheap and low-quality home decorations.
“People don’t want to fill their houses with plastic junk anymore,” she says.
Supporting that view is data from retail giant Wesfarmers released today, revealing the first same-store sales decline for discount department store Kmart in several years.
Kmart’s like-for-like sales fell 0.6% in the December half, sparking further fears for the Christmas fortunes of the broader sector.
The year of the conscious consumer?
Treanor says shoppers are increasingly looking for ethical and sustainable products, predicting 2019 will be the year of the conscious consumer.
She also believes, as the convenor of a shared pop-up collective, retailers will increasingly team up to open physical stores, splitting rent down the middle in an attempt to avoid high costs.
“So many of us can’t afford to pay bricks-and-mortar commercial rent on our own,” she says.
Morris agrees 2019 will be a big year for sustainability and businesses that can showcase those credentials.
“Sustainability is going to be really important to consumers this year.
“In the absence of political leadership on this front, companies have an opportunity (and a responsibility) to stand out by making a difference on environmental and ethical issues,” Morris says.