Fashion brands and retailers operating in the middle ground are really struggling to maintain growth and market share, according to Roy Morgan.
In its Future of Retail FY27 address, the research firm reveals that the retail market overall is becoming a barbell.
“At one end, premium retailers are winning through specialisation, experience, and desire,” Roy Morgan head of retail research Catherine Jolly says. “At the other end, value retailers are winning through price certainty, familiarity, geographic spread, and reliability.
“The middle is under pressure because it often asks customers to pay more without giving them enough reason to do so.”
This comes as demand splits by category, and consumers are split on their spending power.
Jolly says demand is now asymmetric, in that the consumer hasn’t stopped spending overall, but that spending is much less evenly distributed.
Through late April to late May 2026, spending on homewares, clothing, cosmetics and footwear are down year-on-year – with homewares and clothing both down 2.9 per cent respectively, with footwear down hardest by 4.1 per cent.
Meanwhile, spending on personal entertainment, sporting equipment, BBQ and camping gear, small electrical goods as well as TV and home theatre are up. Personal entertainment in particular is up 24.3 per cent, with sporting equipment up 16.1 per cent.
This adds to the split between consumers.
“Retail is now operating in a two-speed consumer economy,” Jolly says. “On one side, there are people who still have money to spend but need a strong reason to spend it. And on the other side, there are people under real pressure, looking for ways to control an already tight budget.
“One side needs a better reason to say yes. The other needs help making the budget work.”
This is putting pressure on the value that retailers offer to consumers, which is currently being hampered by the influx of cheap players like Shein and Temu.
“The price benchmark keeps going lower,” Jolly says. “That has consequences for local retailers, because marketplaces are not just taking share of spend, they're repricing expectations.”
Roy Morgan also pointed out that shoppers can distrust a retailer and still use it when the value equation is strong. More than 5 million Australians shopped at Temu in the last 12 months, but Roy Morgan also pointed out Temu is the most distrusted online retailer here.
So, as value gets stretched among the wide consumer base, with many consumers likely having to buy Shein and Temu because that’s all they can afford, and with many others trading down in some categories so they can afford other categories, the middle is in a tough predicament.
Jolly says the notion that the middle ground is a dangerous place to be is nothing new. But in 2026, it is more pronounced than it has ever been.
At the premium end, she says, the promise is motivation. “Customers need to feel that the retailer gives them a stronger reason to choose: better advice, better design, better service, stronger identity, or a better experience. That's how premium retailers protect higher margins.
“The middle gets squeezed when it offers neither price certainty nor a more motivating reason to buy.”
At the value end, Jolly continues, the promise is clarity. “Customers know why the price is low, why the range is predictable, and why the retailer can deliver it consistently. That clarity matters when households are watching every dollar. It protects volume, keeps customers coming back, and can defend margin because the model is built for the price point.”
As interest rates stay elevated and inflation refuses to budge, it is unclear whether this dynamic could change this year. For mid-priced retailers, Roy Morgan suggests focusing on why consumers should buy from them.
“The danger is ambiguity. Customers don't know what the retailer stands for, so price becomes a very fragile deciding factor,” Jolly says.
And while many mid-market players are struggling to maintain growth, there are some managing to do so at record pace, including Universal Store.