Deloitte's latest annual Global Powers of Retailing report reveals that the world's top 250 retailers generated US$4.53 trillion in revenue in FY18, up 5.7% year-on-year.
During 2018, new global retailers continued to enter the Australian market, as existing retailers also expanded their operations.
There were 11 movements in and out of the top 250, and while the Australian retailers remain unchanged, two non-store retail operators in the previously unrepresented Chinese geography – JD.com and Vipshop Holdings – have hit Australia's shores.
Major internationals like JD Sports and H&M continued their local growth through expanding their store footprints, while high profile exits from the Australian market included Gap and Forever 21.
Deloitte retail, wholesale and distribution group national leader David White said more Chinese entrants could be expected.
“China officially entered the local market this year in the form of JD.com and Vipshop.
“Despite Chinese businesses only commanding 5% of the top 250 retailers operating in Australia, we expect this will increase over coming years, particularly with the rise of omni-channel marketplaces throughout Asia.
“Our growing Asian tourist demographic is driving a marked increase in luxury and specialist retailers investing in their Australian operations to compete for the Asian tourist dollar.
“And demand for international luxury branded specialty goods has also seen diversified investment from the likes of Lotte Shopping Co., which acquired JR Duty Free in 2018 as it seeks to capitalise on the growing inbound Chinese and South East Asian market.”
White said that the outlook for 2019 is likely to present even slower growth.
“There is widespread expectation that global growth will slow further in 2019, and for global retailers, market conditions will mean slower consumer spending growth and potentially disrupted global supply chains.
“Australia’s retail environment was a tale of two halves during 2018.
"Performance was strong earlier in the year as cheap credit and rising asset prices fuelled confidence to spend, however by year’s end we saw significant declines in household wealth through both falling house prices and share market declines.
“This weighed on the retail sector. Sales slowed through the year to produce a lean Christmas, and purchases of consumer durables starting to top out.
“Retail sales volumes are expected to grow as stronger labour market conditions offset declines in wealth, but the early part of 2019 may be challenging.
“Retailers’ heavy reliance on imports has many watching the value of the Australian dollar closely.
"Any major decline in the currency could result in significant cost pressures at a time when there is little room to increase consumer prices.
“Consumer spending for the year ahead will be largely driven by wage growth as consumer wealth declines and the willingness to forgo savings for spending diminishes.”
Looking forward, there as still challenges at a global level.
“While the retail environment globally, as well as in Australia, continues to present challenges, the world's top 250 retailers collectively still achieved strong growth in FY18," White said.
“Ongoing competitive challenges from both domestic and international retailers remain a perennial feature of the Australian landscape, and online retail continued its growth trajectory.
“Although total online sales remain lower than many other developed retail markets, local retailers are starting to reap the rewards from earlier digital investments, and we can expect digital sales to be increasingly important to local performance.
“That said, the role of the physical store will remain critical, with digital integration and the creation of a meaningful customer experiences using innovative store formats, new in-store technologies and personalised customer service key to a successful strategy.”
The top ten global retailers continue to be dominated by US companies, with Amazon jumping two places in the ranking, to become the world's fourth largest retailer.
Based on current growth rates, only Wal-Mart will be bigger than Amazon in two years' time.
“This is an extraordinary feat considering Amazon only entered the top ten two years ago and remains a strong pointer for local retailers,” White said.
“The apocalyptic impact some expected Amazon to have on the Australian retail market not have materialised just yet, but the giant's subscription-based Prime delivery service is priced at more than half its US equivalent here, and its frictionless omni-channel delivery experience is increasingly challenging the speed of Australian retailer’s fulfilment models.
“We can certainly expect to see more investment and innovation on this front in 2019.
“Our local supermarket majors, Wesfarmers and Woolworths, continue to be ranked highly in the top 250, while JB Hi-Fi, has shot up the rankings, adding more than $1 billion of revenue on the prior year reflecting a full year's impact of its acquisition of the Good Guys.