Pitcher Partners partner Mark Harrison discusses the state of retail in Victoria following the announcement of Daniel Andrews' roadmap out of COVID restrictions.
Retail business has been fighting uphill for much of 2020 and the second wave of COVID-19 in Victoria has exhausted even the considerable energy reserves of small business owners.
And while many had hoped the roadmap out of lockdown released by the Victorian Government on Sunday would provide some relief, that wasn’t to be the case.
There was little to help retail businesses make it through the next few weeks, particularly with other forms of stimulus reducing or coming to an end.
Without financial assistance, many within this sector — a sector that employs more than 300,000 Victorians — will decide they no longer have the means to fight on and will be swept aside.
It might already be too late for some.
After such a challenging year, the reactivation date for ‘non-essential’ retail in Victoria is simply too far away for some operators, particularly local businesses that are unable to derive income from other states.
Many traders will not now be able to open until November due to social distancing rules and they are starting to ask why the risks for them are different compared to a supermarket or liquor outlet.
Summer and Christmas trade, for many retailers, is the most important and profitable time of the year.
Now most will get, at best, five weeks’ trade before Christmas and this will not be enough to fill in the financial hole created by the pandemic lockdown, with deferred costs carried into the peak selling season.
Besides a shortened season, summer and Christmas are likely to be weaker than past years due to poor consumer confidence, increased unemployment and fewer people out and about on holiday.
JobKeeper and rental reductions may be enough to keep some businesses on life support, but there are many operating costs that continue while the doors are closed, while staff are drifting away to new jobs.
Several shopping strips look like ghost towns and the prospect for reopening among 50 per cent vacancy rates does not look appealing or sustainable.
Central Melbourne retail will be fundamentally changed. There has been minimal trade this year, no daily influx of consumers working in the CBD and we can’t expect a quick return to the city even in 2021.
Regional retail will fare a little better with reopening likely to occur faster, but much of their demand is supplemented by those traveling from Melbourne and they will suffer this month losing the September long weekend.
It doesn’t have to be this way. Retail in every other state has shown a bounce-back with ABS data this week reporting a 3.2% rise in July. Some sectors are positively booming – electrical goods up 9%, clothing and footwear up 7%.
But Victorian retail fell 2% in seasonally adjusted terms, and that’s even before the tight second wave lockdown kicked in.
So, what options to retailers have without more targeted support? It’s slim pickings.
The Government stressed click and collect was still an option for non-essential retailers, and while they are better than nothing, rarely provide the volume of traffic required to support a business, particularly while customers cannot travel more than 5km.
Eventually the financial reality will hit, likely when it comes time for businesses to restock. They will have no certainty of future sales volumes and it will signal the end for businesses that only rely on this channel.
In contrast, switching to online and delivery has been the saviour for many businesses.
Those with well-established platforms and existing customer relationships have prospered; those without have had a lot of catching up to do.
Businesses that acted in the early stages of the pandemic by investing in a platform and engaging an existing loyal customer base have also stemmed their losses.
But for those retailers with little online presence and customer loyalty, it has been a devastating episode.
Victorian retail businesses have been waiting and wasting on the vine for as long as they can during this pandemic.
Action is needed now.