The face of Australian retail has changed since the global financial crisis and the rise of online shopping. Adapting and thriving in this new environment begins with understanding how we got here and what the future holds.
Insight from founder and director of retail consultancy service Retail Oasis, Stephen Kulmar, reveals that three trends are driving Australian retail: value conscious consumers, increasing online shopping activity, and growing international appeal in the Australian market.
Mr Kulmar, a retail marketing and communication expert for Australia and New Zealand, has identified interweaving patterns that have led to these existing retail trends and can serve to help sellers get a grip on their market.
“First of all, we have the ‘value conscious shopper’,” he says.
Following global economic struggles, Australians began to tighten up on spending in the last five to seven years – marking a transition from negative household savings in 05′ and 06′ to ten or 11 per cent at the present time.
“Correspondingly, we’ve seen the share of the retail wallet decline from 35 per cent of the household income to 31 per cent.”
At the same time, Australians are going online to shop and – backed by a strong Australian dollar – are able to find a wider range of goods at lower prices, he explains.
“We’ve got this value-conscious consumer using the online space initially to identify cheaper ways to buy, but with that also learning so much more about products and services so we’re not just value-conscious, we’re much more sophisticated and knowledgeable in everything we buy – even our impulse buys we know so much more about.”
The third trend that comes into play is the signal that all of this Australian online activity is sending to retailers overseas.
Mr Kulmar points to the movement of major retail names such as Lowes, Zara and Top Shop into Australia over the last few years.
“All of that’s being driven because in the last five years we as consumers have started shopping offshore, identifying range improvement and range width identifying lower prices points, and more importantly alerting all these retailers of the fact that Australia has a healthy market when the rest of the world has been struggling.”
The marketing and communications expert says the message that Australian retailers need to walk away with is that they must be a lot smarter and more competitive in their approach to attracting consumers.
The depth of product information and sheer choice that is available to customers online, along with the strength of the nation’s currency, is really putting the pressure on the seller to tighten up its retail strategy.
“You would have had to of said that up until 08′, that Australia was a protected retail market and that the retailers in Australiawere a protected species,” states Mr Kulmar.
“It is now free game.”
He stresses that this changing market is going to put pressure on average price points, as well as wholesale relationships. Retailers can now go to the source themselves, effectively “cutting the middle man out”.
It was also recently revealed by the December 2012 National Australia Bank (NAB) Online Retail Sales Index that Australians spent $12.8 billion online last year, and that figure is only likely to grow.
While Mr Kulmar says that online shopping is not going to replace bricks and mortar, he finds that it is forcing retailers to think about what they are failing to deliver consumers.
“Australian retail is going to have to think a lot harder about what makes a great experience – a great consumer retail experience across a whole lot of discretionary, non-discretionary, impulse, general merchandise and food – and reassess the way in which they do things.”