The Australian retail sector failed to maintain its momentum in July, with turnover flatlining after two consecutive months of growth.
Retail turnover remained unchanged, following a 0.5% growth in both June and May, according to the latest seasonally adjusted figures released by the Australian Bureau of Statistics (ABS). The stability in turnover comes after mid-year sales drove increases in the previous two months.
Ben Dorber, ABS Head of Retail Statistics, commented, “After rises in the past two months boosted by mid-year sales activity, the higher level of retail turnover was maintained in July.”
Industry performance varied, with most sectors either experiencing declines or remaining flat. Clothing, footwear, and personal accessory retailing saw the largest drop, falling by 0.5%, followed by department stores (-0.4%) and cafes, restaurants, and takeaway food services (-0.2%). Household goods retailing and other retailing reported no change. The only sector to see growth was food retailing, which rose by 0.2%.
State and territory results were similarly mixed. Western Australia stood out with a 4.6% increase compared to July 2023, marking its seventh consecutive month of growth. However, other regions saw either modest gains or declines, reflecting the uneven nature of the retail sector’s performance across the country.
Ben Thompson, CEO and Chief Economist, Employment Hero: “The latest ABS Retail Trade release indicates stagnation in the retail sector, with volumes remaining unchanged month-on-month and just 2.3% since July last year. Similarly, monthly employee growth in the sector has remained stagnant at just 0.9% and 1% quarterly employee growth (2.2% YoY), based on Employment Hero’s latest SmartMatch Employment Report*.
“Retail businesses are grappling with shrinking profit margins, paired with a slow rebound in discretionary spending as the cost of living impacts Australian household budgets. Further, rising operational expenses and wageflation have pushed the median hourly rate for the retail sector to $35.00, a monthly rise of 1.8% and an annual increase of 6.1%.
“These pressures have pushed retail employers to do more with less, with median hours worked seeing a monthly drop of -2.3%, despite casual working hours surging 2.6% (up 12.8% YoY)- suggesting businesses are adjusting their workforce to adapt to current economic conditions. As we approach the holiday shopping season, it would be expected that median hours and employee growth would begin to increase, with today’s data indicating retailers can expect easing headwinds. A strong shopping season could provide a much-needed boost for retail SMBs and end the year on a high note.”
John-David Klausner, Senior Vice President of Business Development, Loop said: “As the Australian economy remains in a tumultuous state, the retail sector is one of the hardest hit; with store closures continuing to rise.
Cost-of-living remains high for Australians and for many, disposable income is becoming almost non-existent. The latest CPI indicator shows a 3.5% rise in inflation, which is a slight decrease from June and potentially a sign that the hiking cycle is ending, but it’s still not quite enough to relieve consumers from the burden of high costs.
Despite retail turnover showing slight growth in June, the 0.0% month-on-month growth in July indicates that we’re still in a retail slump. With costs remaining high across the board, retailers are still feeling significant pressure on profit margins as consumers cut down on spending to offset the high cost of housing, grocery prices, fuel, and general living expenses.
Through this spending slowdown, it’s essential that retailers review all opportunities to improve their supply chain and ultimately increase profit margins. For example, returns and reverse logistics are often an under-optimised part of retailers’ operations. They provide a unique opportunity as brands can leverage this step in the customer journey to deliver a best-in-class experience that drives customer loyalty and repeat purchases. Cultivating a quality, modern post-purchase experience can be a key differentiator for Australian brands, especially as they try to compete with giant digital marketplaces like Amazon, Catch, and Temu, which are all in the race to offer the most penny-pinching sales to cash-strapped consumers.
Moreover, modernising and optimising reverse logistics will help curb another issue Australian retailers are facing: fraud. Recent data showed 4 out of 10 Australian consumers admit they have (or know someone who has) engaged in at least one abusive, fraudulent, or other unfavourable return-related behaviour in the past 12 months and 60% of Australian retailers have experienced fraud and abuse in the past 12 months. While this may be a result of the existing cost-of-living pressures, it’s creating a massive loss centre for an industry already facing razor-thin margins. By revamping their post-purchase experience and implementing new protocols to counter the behaviour, such as return fees, brands can better protect their margins.
As we inch closer to the busy holiday shopping season, it will be interesting to see how retail volumes will trend compared to the past few years. We may start to see some relief in the sector as we enter peak season.”
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