What’s the Current Market Outlook for Brick-and-Mortar Retailers?

 

Over the last several years, all one has to do is read a newspaper or ask anyone in the retail industry to know trading has been quite tough for most Australian ‘bricks and mortar’ retailers.

 
According to the Economic Structure and Performance of the Australian Retail Industry inquiry conducted by the Australian Productivity Commission released in December 2011:

 
“The growth rate of retail sales has generally trended down over the past two decades, due to long-term or structural changes in the economy and consumer behaviour. The share of retail spending in overall consumer spending fell from over 35 per cent in the early 1980’s to just under 30 per cent currently.”

In its inquiry, the Productivity Commission outlines three main contributing factors for the downward trend:

 
• Consumers are saving more and spending less disposable income as they seek to repair their household balance sheets in uncertain times.

 
• The appreciation of the Australian dollar has reduced the costs of many imported retail goods, and as a consequence, although consumers are buying more retail goods, these goods are at lower prices.

 
• Intensifying competition brought on by both domestic and offshore online retailers. Due to the strength of the Australia dollar, the attraction for consumers to online shopping
(particularly with offshore retailers) are lower prices, convenience and a wider range of goods to choose from compared to those available from bricks-and-mortar retailers.

• The Commission also points out online sales in Australia are projected to grow by between 10% and 15% per annum over the next three years due to greater internet capability and the use of electronic devices such as, tablets and mobile phones. With the challenges of the current trading environment, bricks-and-mortar retailers are even more focused (or should be) on the following goals:

 
1. Growing ‘Customer Lifetime Value’ by increasing purchasing frequency and average sales value with timely, relevant information and offers.

 
2. Growing their databases with new prospects who most closely match the demographic and psychographic profile of their best customers.

 
3. ‘Win Back’ of past customers in a cost effective manner.

 

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