Retail and department store buyers will be on the ground at the autumn/winter 2010 instalment of Fashion Exposed. The Australian Centre for Retail Studies looks back on how the picture has changed for these players since they last hit the winter circuit, and what they can expect in 2010.
Following an upturn in the domestic economy in 2009-10, demand for numerous consumer goods sectors will be boosted by growth in disposable income, stronger levels of employment and an overall improvement in the trading landscape for retailers. Despite much concern surrounding the current economic climate, revenue is expected to grow each year in the lead up to 2013, with the largest growth expected in 2011-12.
The table on the right lists the forecast revenue growth for retail trade in Australia over the years to the period 2012-13, according to research firm Access Economics.
Department stores
Revenue growth in the department store sector is likely to be driven by store growth and rising consumer sentiment from 2010 onwards. Myer plans to open 15 new stores in attractive markets over the next five years, with a longer term potential to expand up to 100 stores, while David Jones has announced plans to open between four and eight new stores in Australia’s capital cities by 2012.
The return of Myer in late 2009 to the stock exchange will also see competition between David Jones and Myer continue to shape the direction of the higher end of the market.
The discount department stores, namely Target and Big W, will also continue to drive revenue growth via store expansion. Increasingly, there has been a reliance on sales and discounts to generate store traffic, with key sale seasons starting earlier than they have previously.
Looking ahead, it is expected that discounting will continue to help increase store traffic, as well as combat high overhead costs. The sector will continue to be difficult for independent retailers as they have a smaller amount of market share, economies of scale, consumer reach and store footprint to aid future growth.
Clothing, footwear and personal accessory retailing
Clothing, footwear and personal accessory retailers operate in a similar market to department stores. Consequently, competition is expected to remain strong as these retailers fight for consumer dollars. Larger players will continue to use their buying power to maximise economies of scale, making them more resilient to economic uncertainties.
Industry concentration is anticipated to increase as franchise and chain stores continue to expand, encroaching on independent store market share. According to IBISWorld, over the next five years, industry revenue for footwear is forecast to rise at an average rate of 1.2 per cent per annum, while clothing is forecast to grow 2.8 per cent. With internet penetration in Australia increasing, clothing and footwear retailers cannot ignore the benefits of having online transaction facilities, with more Australians expected to turn to the web to find information and prices.
A strong Australian dollar will further encourage consumers to source cheaper priced goods overseas and make purchases online. While larger players will continue to invest in their well-established loyalty programs, smaller players will seek to develop innovative ways of attracting and maintaining a core client base.
Clothing, footwear and personal accessory retailing
The clothing, footwear and personal accessory retailing sector includes retailers of clothing, footwear, watches, jewellery and other personal accessories. Figure 1 displays the revenue performance for the sector for each quarter of 2009 and 2008. Total revenue for 2009 was reported to be $19.5 billion.
Clothing, footwear and personal accessory retailing followed a similar pattern in 2009 as it did in 2008, with the first half of the year positively affected by the government stimulus package. The June quarter showed strong growth from March in both years; 12.4 per cent in 2009 compared to 8.3 per cent in 2008.
This was followed by a decline in the September quarter, with the 2009 sales decline more pronounced, falling 6.3 per cent compared to 1.9 per cent in 2007. With low likelihood of future stimulus payments, this reflected consumer hesitation in purchasing frivolous fashion items, and shoppers restricted spending to essential items.
However, the sector recovered in the December quarter, recording growth of 27.7 percent to reach $5.8 billion in turnover as discretionary spending increased in line with rising consumer confidence. Looking at year-on-year performance for the December quarter, revenue increased by 6.6 per cent in 2009, which is in line with an increase of 5.1 per cent in overall retail sales for the same period (Australian Bureau Statistics, 2009).
Department stores
The department stores sector includes operators selling a range of products within the one store, such as clothing, perfume, glassware, housewares, footwear, electrical goods, and other household products. In 2009, department store retailing recorded total revenue of $18.8 billion, up 2.4 per cent from the previous year.
As illustrated in figure 2, 2009 started positively for the department stores sector, with sales increasing by 16.2 per cent from March to June, compared to a 8.4 per cent rise during the same period in 2008.
With consumers holding back significantly on discretionary retail purchases, this growth was primarily supported by the government’s economic rescue package and interest rate cuts.
However, this was offset by a steep decline in the September quarter as the stimulus package began to wear off, with sales decreasing by 4.8 per cent (although they remained slightly higher than the same period in 2008).
As a result of decreasing sales, the sector saw heavy discounting by retailers in the lead up to Christmas in an effort to encourage consumer spending; this played a crucial role in the final quarter. Growth in the December quarter closely mirrored the final quarter of 2008, with turnover significantly increasing by 40.27 and 42.1 respectively.
Turnover in December reached $6.06 billion, a marginal increase from the $6.01b turnover generated in 2008. Discount department stores were favoured during 2009 and continued to grow or at least maintain sales as consumers tightened their spending.