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January retail sales improve defying Omicron, supply chain woes

Retail sales fared better than expected during January, with most retail sectors seeing year on year growth, despite facing the highly infectious COVID-19 Omicron variant and impacts on staff and supply chains.

According to Mastercard SpendingPulse, which measures in-store and online retail sales across all forms of payment, retail sales across Australia increased 4.9 per cent in January compared to the same time last year and are up 14.4 per cent from pre-pandemic levels two years ago.

Australian Retailers Association CEO Paul Zahra said it’s pleasing to see that the Omicron outbreak has failed to dampen retail sales despite initial concerns about the foot traffic and staff constraints in early January. 

“January was an up and down month for retailers – we began the year with a surge in Omicron cases, which impacted local supply chains and forced tens of thousands of workers into isolation each day. 

“However, towards the end of the month, we saw daily caseloads start to come down, close contact isolation requirements were eased for essential workers, and consumer spending started to lift. Overall, we’ve had a soft landing from Omicron, and the impacts on sales have not been as severe as we originally feared,” Mr Zahra said.

Household goods sales increased 10.4 per cent in January compared to the previous year, followed by clothing sales, which rose 8.5 per cent. Department stores were the only retail category to fall, falling 2.7 per cent, marking the eighth consecutive month of negative growth.

Previously, Australian retail sales fell in December 2021 after two months of spectacular gains helped by the holiday season in October and November. According to data released by the Australian Bureau of Statistics, retail sales fell 4.4 per cent in December to $31.9 billion, following a massive 7.3 per cent increase in November.

Mastercard SpendingPulse January 2022

 Jan-22 vs Dec-21Jan-22 vs. Jan-21Jan-22 vs Jan-20
Department stores+7.0%-2.7%-2.3%
Household goods+2.9%+10.4%+25.6%
Food retailing+2.6%+4.9%+14.8%
 Jan-22 vs Jan-21Jan-22 vs Jan-20
Western Australia+5.1%+23.4%
South Australia+0.5%+8.2%
Australian Capital Territory+1.7%+14.4%
Northern Territory+2.5%+20.2%

Uneven recovery

However, Mr Zahra warned that sales are still uneven and depend on the type of business and where it is located. Cashflow concerns, combined with rising supply chain costs, remain a challenge for many retailers.

“CBD retailers are a focus on our path to recovery with foot traffic through our capital cities still quite low with the absence of international tourists and exacerbated by people continuing to work from home,” Mr Zahra said 

“We are looking forward to the international border reopening, which is the first step towards the revitalisation of our city centres.

“Staff shortages will continue to compound recovery challenges, and we continue to engage state and federal governments on solutions to this crisis. Supply chain issues are also continuing to bite. Due to manufacturing and shipping delays, many businesses have to make earlier upfront payments for stock, with container costs significantly higher than their usual rates.

“Retailers have been resilient throughout the pandemic and will be breathing a sigh of relief that the worst of Omicron appears to have passed and that consumer spending has remained fairly upbeat through this challenging period.”

Supply-chain instability will challenge retailers 

Stories of empty shelves, container shortages, airfreight disruptions and other supply chain crises have dominated retail news throughout last year and into 2022. 

Nati Harpaz, Former Catch.com.au Managing Director and now Co-Founder of TradeSquare, warned that retailers should expect more of the same ahead.

“Factories worldwide have been short-staffed due to Covid-related shutdowns and worker absenteeism, the suspension of cross-border travel has reduced air freight capacity, and there has been extensive congestion at ports and transhipping facilities.

“The result is that retailers of all sizes have struggled to maintain stocks on-shelf and inventory shortages at factories and wholesale level, leaving customers frustrated by less choice – or at times unable to buy goods at all.

“This has bred contrasting fortunes for wholesalers: on the one hand, they’ve struggled to satisfy customer orders, but on the other, opportunities have arisen to expand ranges and develop new sourcing channels. 

“Digital B2B channels like TradeSquare in Australia have helped bridge the gap, allowing suppliers and retailers to forge new relationships, easing out-of-stocks and mitigating supply bottlenecks.”

Buying and sourcing local is more important

Since Covid-19 hit Australia, there has been a greater sense of community. Communities have banded together and found ways to help local businesses.

“We’ve noticed a significant uptake in the number of businesses sourcing stock, supplies and products from local businesses rather than looking abroad,” Mr Harpaz said.

“Cross-border supply chain challenges have compelled people to look local to avoid delays with imports – and businesses both small and large are reaping the benefits of establishing strong, reliable relationships with fellow Australian businesses.

“This is already leading to stronger relationships with suppliers – and a migration away from sourcing products and stock from offshore, online platforms towards local marketplaces where vendors are easily accessible, and recourse is easy should something go wrong – a stark contrast to the relative anonymity of overseas marketplace platforms.”

Here’s the link to the full report.

Here’s the link to ARA’s media release

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Yajush Gupta

Yajush Gupta

Yajush is a journalist at Dynamic Business. He previously worked with Reuters as a business correspondent and holds a postgrad degree in print journalism.

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