Harvey Norman boss Gerry Harvey has painted a bleak picture of Christmas retail trade, saying consumers are still somewhat shellshocked from the latest round of interest rate rises and retailers are being forced to resort to heavy discounting.
According to Harvey, consumer sentiment has still not rebounded following the RBA’s decision to increase official rates to 4.75% on November 2.
“What normally happens in a situation like this is that [cautious spending] goes on for one to three weeks and then the sentiment of Christmas comes into play and everyone gets happy again and they make up a lot of those sales in late November and December,” he told AAP.
“The problem is all the discounting has started now and it’s very competitive out there…If you’re in retail, you have been really belted at the moment.”
Harvey cites flat screen televisions as an example, a product which has experienced massive deflation as a result of heavy discounting.
He says flat screen TVs are a big category for his company and the current discounting will hinder company profits for the first half of the 2011 financial year.
“Australia has actually demolished the pricing of this product more than any other country in the world,” he says.
“The prices we are selling them at are absolutely impossible to make any money and we have demolished the price.”
National Retailers Association spokesperson Michael Lonie says retailers should look beyond discounting in order to spark sales this Christmas.
“Once you’ve discounted, it’s extremely difficult to resell that product at its full price,” Lonie says.
“Also, a lot of people don’t understand with discounting that a decrease in price means an increase in volume – you have to sell more of the same product to maintain the same bottom line profit.”
Lonie says smaller retailers therefore need be selective as to which items they discount, rather than discounting everything.
“A lot of retailers clearly understand what their best selling products are, but are unable to identify their underperforming or poor performing stock,” he says.
“These are the items that should be discounted because they’re chewing up space… Make the products work for their space.”
Lonie advises smaller retailers to get back to basics with regard to selling techniques over the Christmas period.
“It goes back to quality, customer service, and looking after your existing clientele. It’s far cheaper to maintain existing customers than to gain new ones,” he says.
“Smaller retailers in particular should have an understanding of their existing client base and work with that client base – use social media as a way of making contact.”
“Wherever possible, offer customers one-on-one time. That could mean staying open a little bit later one night, and offering customers a preview of new stock along with a glass of champagne.”
Brian Walker, managing director of retail consulting company The Retail Doctor, agrees smaller retailers should return to traditional selling methods.
“Building relationships with customers is more important than ever before, particularly as it’s something the larger retailers can’t emulate,” he says.
“Highly individualised, personalised service and value-adding will resonate with customers.”
“In addition to focusing on the customer experience, build up the retail experience with effective displays, attractive shop fronts, and change – always create change to keep the customer coming back.”