Apparel spending growth has weakened at the start of 2017 and looks set to slide further, according to the latest Deloitte Access Economics Retail Forecasts for May.
Despite initially bucking retail trends in recent months, the report indicates that hype surrounding fast fashion has all but faded, leaving retailers to compete over apparel price points.
Results highlighted that a number of major fashion retailers across the nation had begun to struggle, with Topshop Topman the most recent.
Deloitte Access Economics partner and report author David Rumbens stated that retail will be facing several retail risks in the coming months, with the arrival of Amazon remaining the number one contributing factor.
”There are plenty of technology, political, economic and competition risks on the horizon for Australia and for retailers, China’s economy stumbling badly would be a major concern.
“But the imminent arrival of US giant Amazon clearly presents a series of challenges for existing retailers in terms of heightened competition in both online and in-store sales.
Rumbens identified the main areas retailers needed to focus on should they wish to endure the entry of the retail giant but also noted that the impact of Amazon will come down to the size of a business as well.
“An effective omni channel strategy, as well as strong brand equity and excellent customer service will be crucial to keeping shoppers where retailers want them. Prices will get squeezed as Amazon has so much scale to absorb very low margins in most of its products.
“The bigger the retailer, the more a threat Amazon’s entry will be. But on the other hand, small players have a chance to thrive by leveraging Amazon’s role as a consolidated marketplace.”
However, there was good news to come out of the report, as SMEs were identified as strong players when it came to online retail growth with total online retail sales growth at 9.0% for the year to March 2017 and online retailing now accounting for around 7.3% of total retail spending.
While total online retail sales growth is up, it is estimated that SME retail growth was in the order of 23%.
Overall, real, inflation-adjusted, retail turnover growth was 1.2% for the year to March 2017.
The report projects total nominal retail spending to come in at 3% in 2016-17, with this moderating to 2.6% in 2017-18.
However, more of the growth next year may come from volume growth with prices increasingly under pressure – retail volume growth in 2016-17 is expected to be 1.6%, rising to 2.2% in 2017-18.
Jobs growth is steady in aggregate terms, but the rise in part-time employment, which now accounts for 33% of jobs nationally, has been linked with rising underemployment.
Rumbens said the overall the March quarter indicated a low point for retail, with many of the challenges that negatively impacted the industry set to linger for the next 12 months.
“The March quarter was a low point for retail spending, continuing what has clearly been a problematic 2016-17 for the retail sector.
“The current challenges are also likely to remain in 2017-18, however we are forecasting that expected labour income growth will drive improved spending growth over the next few years.”