Between 2004 and 2019, the retail industry, which is considered to be a major contributor to Australia’s economy, has been on a tremendous growth trajectory. Furthermore, in 2019 the total Aussie retail turnover recorded AUD 329.6 billion, thus surpassing the previous year’s total by close to AUD 9 billion. Unfortunately, due to the prevalent Covid-19 pandemic, the country’s retail industry suffered a major blow as it recorded a massive decline in sales transactions for the first and second 2020 quarters. This is because of the lockdown measures and social distancing regulations that limited the physical operations of retail stores.
With the Australian Government recommending that people stay at home in order to be safe, retail stores resorted to multiple channels such as online marketing to stay competitive. The high brand awareness rate, internet publicizing, and influencers’ trends are some of the factors that have been helping the retail industry cope with the economic effects of the pandemic.
What are retail sales and how do they help a country’s economy?
Retail sales occur when consumers purchase finished goods from sellers for individual consumption. The sales transactions can be done through several channels such as brick-and-mortar storefronts, direct mail, direct sales, or online. The underlying concept in a retail sale is that the end consumer of the good is the actual buyer. Retail sales consist of four key categories which are art, consumables such as clothes and shoes, food, and hardlines like furniture and electrical appliances.
Tracking the sales transactions between consumers and retailers gives an indication of where a country’s economy is head .The figures represent key economic metrics that provide data on events that are moving the market and are often report monthly. In simpler terms, it is a major economic barometer that measures the existence of inflation. Additionally, Government analysts and experts use retail sales reports to gauge the health of a country’s economy. This is because consumer spending is the key contributor to all countries’ GDP (Gross Domestic Product).
Australian retail sales turnover boosted
A report on the Australian retail sales revealed some outrageous figures that came out of the Covid-19 pandemic. Seemingly, the figures appear to be much better than if the pandemic had not disrupted the economy. According to the report, real turnover gained 1.2% for the March 2022 quarter. With the Government easing Covid-19 restrictions, many retail stores are reaping massive rewards from improved traffic. And even though some stores are still experiencing an overall turnout lower than the pre-Covid levels. Their average transactions have increased.
A recent retail forecast report revealed that retail spending is currently ahead of the pre-Covid trends by approximately 6.2%. The report attributed this to the surge in retail spending and the 1.2% real turnover gain. Moreover, clothing, department stores, and restaurants are also expect to experience sales growth and drive a further 5.5% growth.
Experts warn of challenges despite the turnaround
Despite the turnaround in retail sales, experts warn of challenges that could arise due to inflation. The latter could put a cap on the overall spending during the second half of 2022. This is attribute to the fact that retailers are facing a shift to increasing business costs, margin squeezes, and value purchases. Experts have stipulated that inflation now looks more like a reality for most households and retailers, even though the growth outlook was promising.
What are those challenges and how should retailers prepare for them?
Retailers face the challenge of households reducing the use of non-discretionary goods like food and fuel. As a result, this could put substantial pressure on other spending items. By the end of 2022, food prices are forecaste to surge to 7.6%. Whereas retail price growth is predicted to peak at 5.5%. Therefore, it is possible that prices, instead of sales volume, will drive a significant amount of real turnover. According to experts, retailers should thus consider lowering costs. Furthermore, expanding their supply chains will be instrumental in keeping retailers competitive.
