The Australian Bureau of Statistics released the latest Retail Sales turnover data yesterday showing the Australian Retail market in decline of 0.1% for the month of March (seasonally adjusted). The Financial Review has already labelled this as verging on recession. But is it?

A factor impacting this month’s trend to consider:

Tropical Cyclone Debbie hit Queensland in March impacting on their performance, showing the biggest trend decline of -0.4% amongst the states. If we exclude QLD from the results, the rest of Australia grew by 0.1%.

Weather impacts aside, what the ABS data doesn’t show us is what’s happening with international online retail sales.

Currently the ABS sizes retail spend based on Australian retail businesses, so it includes online sales for both bricks and mortar retailers as well as to pure online play businesses (think Iconic, Showpo and your small independent retailers with employees).

But what’s interesting is what ABS don’t include in their data:

  1. International retail sales (examples: Amazon, Shopbop, Net-A-Porter, and your favourite overseas fashion retailers)
  1. Marketplace and Artisanal sales (examples: your local growers market and all the stall holders at Finders Keepers). These sales are typically considered as wholesale (thus excluded from retail sales) or part of the cash economy which is covered by the ABS through a factor in the calcs. There is no concrete measure of this type of spend, which by what we can see looks to be rising.
  1. Retail sales made by majority wholesalers (examples: electrical wholesalers or artists selling both direct to public and to other retailers). As long as the majority of their sales are considered “wholesale” the retail portion of their business is excluded and lost from the result.

So what is happening in the Online Retail space?

According to the NAB Online Retail Sales Index, our online retail sales grew month on month by 0.8% in March (and 0.2% for trend growth).

What stands out in their numbers is the much stronger growth of SME (small online retailers with revenue of < $2.5M). This group contribute 36% of online sales and grew 4.1% in March and is 23% up in year on year growth.

Currently the split between local and international online spend is sitting at 80% vs. 20% for March. Even with the slowing effect of the depreciation of the Australian dollar on international retail sales, our spending is still rising year on year by 8.7%. Domestic online spend is also growing at 9.1% year on year.

Looking at this at category level, the categories slowing in the domestic online market are, not surprisingly, Fashion and Department Store spend. While the international online spend in these areas is rising. By contrast the areas showing annual growth in the domestic online market are Grocery (up 8.8%), Personal Goods (up 22.2%), Homeware (up 4.4%) and Toys (up 14.5%).

Rather than pointing to a recession in retail spend, we’d say that this points to the changing nature of our retail habits. Consumers are ever evolving, and with the maturing of the millennial now with jobs and income to spend, surely we need to amend the way we measure our retail sales to account for the shift to online spend with international brands through one reliable source.

On a side note, when Amazon arrive and start trading through local warehouses, their sales will be classified as “local online” since they will need to trade through an Australian business entity. But with their launch date now delayed to end 2018, there’s still a long time before we get this visibility into the auspicious behemoth through the ABS.

Finally, another issue about to have its impact (or not) on Australian retail spend is the incoming change to GST laws on imports under $1000. It’s set to commence in July 2017 – that’s just 2 months away! However the bill was referred to the Senate Economics Legislation Committee that have just released their report (link here) and recommended the bill pass but with a delay to implementation starting on 1 July 2018. The conclusion in this report states rather comically “The Treasurer has botched the policy development process, has failed to properly consult with stakeholders and has failed to develop a workable model for low-value imports that levels the playing field while maintaining suitable consumer outcomes.” No further updates are currently available on how this will play out.

Without proper measures of our full retail market, how will we measure the impact of change on our local and international spend?

Author Paula Bogaz

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