Sagging consumer confidence set to drag down retailers in 2012

Australia’s embattled retail industry won’t have much joy in 2012, according to a new report, as businesses grapple with the challenges of discounting, consumer confidence and online retailing.

 

According to Inside Retail’s Australian Retail Outlook 2012, this year promises to be another precarious period for retailers.

 

The report includes a survey of more than 500 Australian retailers, who voiced their opinions on issues including business strategy, eCommerce, international competition and leasing.

 

According to the report, 33.1% of the retailers surveyed believe conditions in 2012 will be a little bit worse than in 2011, while 7.4% expect the retail climate to become a lot worse this year.

 

However, 29.6% of respondents believe conditions will improve a little, while 27% believe conditions will remain the same as 2011. Only 2.9% expect to see a big improvement in trade.

 

Factors contributing to Australia’s volatile retail climate include diminished consumer confidence, an unstable Federal Government and global economic conditions.

 

Other factors hurting the sector include technological change and the increased costs of doing business.

 

One respondent cited “a lack of fresh ideas” and “rude, unfriendly staff” as detractors of retail, while another accused both major political parties of failing to “remedy” consumer confidence.

 

According to Craig King, chief executive of fashion retailer General Pants, it’s a wonder the industry continues to exist in Australia given the sector’s high cost model.

 

“The world is getting smaller and low cost models are crossing our borders. It’s hard to imagine there won’t be a correction of sorts at some time,” King said in the report.

 

Meanwhile, Bunnings managing director John Gillam said the government needs to “think hard” about what it can do to ensure the sector is not disadvantaged by “ill thought-through policies”.

 

But Chris Beer, chief executive of Luxottica Asia Pacific, said if retailers “put the effort into focusing on their business rather than complaining, opportunities will come”.

The news comes on the back of surf brand Quiksilver’s claims that discounting and promotions have compounded recession-like conditions in Australia.

 

Quiksilver co-founder and executive chairman Robert McKnight has admitted the retailer’s Australian and New Zealand businesses remain challenging.

 

McKnight has highlighted Quiksilver’s strong performance in markets such as North America, Latin America and parts of Europe, but singled out Australia as a tough retail environment.

 

“Australia’s economic recession [has] created a highly promotional selling environment,” McKnight has said.

 

Quiksilver is the second surfwear group to highlight the poor trading conditions circling the sector, after rival Billabong sounded a similar warning last year.

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