Christmas retail spending is expected to stagnate this December, falling by 0.2% compared to the same time last year, according to IBISWorld.
While not all categories are impacted, IBISWorld is attributing the overall decline to lower discretionary incomes, negative consumer sentiment, and price discounting across the retail sector.
Department stores’ profits are expected to decline this Christmas season, with sales expected to be 1.9% lower compared with the previous holiday season.
Over December 2017, consumers are expected to spend $111.64 per capita in department stores. This is down from $116.94 in the previous year.
IBISWorld analyst Jason Aravanis said etailers are the main threat to department stores this season.
“Competition from online retailers is expected to continue to negatively affect sales, particularly as Amazon seeks to capture market share over the Christmas period. Discounting and negative consumer sentiment is also likely to hinder revenue growth.
“The company’s launch in Australia has been significantly more aggressive in comparison to other countries, and IBISWorld expects Amazon to ramp up competition across retail industries."
IBISWorld expects major players such as David Jones and Myer to protect margins by pivoting to exclusive high-margin products and expanding their product ranges.
Conversely, budget department stores such as Big W are expected to compete primarily through discounting.
As other areas of retail take a hit, etailers are expected to be the most successful this Christmas season as consumers are driven online by lower prices and greater product ranges.
“IBISWorld expects spending during December to grow by 15% from last year as budget-conscious consumers seek discounted items and Amazon increases the popularity of online shopping. Per capita online spending this Christmas is expected to reach $83.34, up from $76.68 in the previous year,” said Aravanis.
Consumers are more likely to shop online for items that are unlikely to be damaged during shipping, such as clothing.
Increasing confidence in transaction security and shorter delivery times are also likely to spur greater use of online shopping platforms.
The entrance of Amazon is likely to significantly increase retail trade over future Christmas periods, as consumers become aware of Amazon’s discounted prices, short delivery times, and wide product range.