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A Christmas light at the end of the lockdown tunnel – Retail update September
With less than three months until Christmas, the Australian retail sector is gearing up for what is traditionally the highest-earning period of the year.
But this year’s Christmas lead-in comes after a tough few months of lockdowns in the major capitals.
So, let’s examine what’s occurred in the recent quarter and the forecast for the period ahead with a round-up of the most recent retail news.
The impact of recent lockdowns on retail
According to the most recent figures from the Australian Bureau of Statistics (ABS), the impacts of lockdowns in Victoria and New South Wales were quickly felt across the retail sector, with sales slumping 2.7 percent in July.
The results, which were issued on August 27, represent the largest monthly fall this year and follow a fall of 1.8 percent in June 2021, after a rise of 0.4 percent in May 2021.
July’s figures particularly highlighted the effects on New South Wales, which was the first major state to enter lockdown.
ABS data indicated the first full month of lockdown in NSW saw retail turnover in the state fall 8.9 percent, which was the largest fall of any state and territory since August 2020.
Although ABS data is yet to be released from August and September, it paints a telling picture of the effect restrictions have upon the retail sector.
Retail verticals impacted
The ABS noted the largest falls for July were in cafes, restaurants and takeaway food services (-12.3 percent), clothing, footwear and personal accessory retailing (-15.4 percent), and department stores (-11.4 percent).
“These industries were highly impacted by physical store closures,” the ABS stated.
“Food retailing (2.3 percent) saw the largest rise as coronavirus restrictions kept households at home, limiting their mobility. Other retailing (0.6 percent) also rose, in part due to additional online sales.”
Consumer sentiment stabilising
Despite volatility in July, the most recent Commonwealth Bank consumer spending intentions report indicated retail spending intentions showed some signs of stabilisation in August.
They noted retail spending in August 2021 was stronger than in August 2019, with department stores, electronic stores, pet shops, hardware stores, florists, and book stores seeing the most encouraging increases.
“This was offset by weakness in spending on furniture, home equipment, women’s and men’s clothing stores, jewellery and watch stores, shoe shops, window and floor coverings, camera stores and stationary & office supplies,” the Commonwealth Bank reported.
Further data from Mastercard also indicated a slight rebound in August.
They noted retail sales across the country increased 1.1 percent in August compared to July (seasonally adjusted) and were up 1.6 percent compared to before the pandemic in August 2019, but were down 2.3 percent compared to August last year.
But with NSW and Victoria both now given roadmaps for reopening, it begs the question, what’s ahead in the coming months for the retail sector?
Positive Christmas retail forecast
On September 13, the Australian Retailers Association issued their Christmas forecast for 2021, finding the majority of Australians are set to spend more this year than they did in 2020.
The ARA predicts Australians will spend around $11 billion in total this festive season, with much of that purchasing set to be completed online.
Their research indicates Australians intend to spend an average of $726 each, with most (79 percent) looking to spend the same or more than they did last year.
Last year, the ARA predicted consumers would fork out around $500 each in Christmas spending for 2020.
“The past few months have been a uniquely challenging time for most retailers, in particular small businesses navigating extended state-imposed lockdowns and restrictions that have limited their ability to trade,” ARA chief executive Paul Zahra said.
“Despite this uncertainty, the good news is that consumer sentiment is upbeat for Christmas and retailers can look forward to healthy trading conditions over the busy festive season.
“We might be in September, but we’re already seeing Christmas levels of demand with current online purchases.”
How Australians intend to spend this Christmas
The ARA said Australians would continue to turn to the internet to complete their Christmas shopping list.
They found around 48 percent of Christmas presents are likely to be purchased online, with 58 percent of people saying they’ll purchase more or significantly more items online than they did last year.
According to the ARA, the most popular gifts are likely to be:
- Toys, jigsaw puzzles and board games (20 percent)
- Vouchers and gift cards (18 percent)
- Clothing, shoes and sleepwear (16 percent).
However, nearly half of Australians (45 percent) say they are yet to make up their mind about what gifts they’ll purchase.
You can learn more about current trends emerging in retail and how to meet the increased customer expectation this Christmas here.
