The retail sector is under pressure as the rising cost of living limits consumer spending across the board. Prices of non-discretionary goods and services are increasing as fast as discretionary items, data emerging this month showing groceries at record highs and households around the country paying almost $2000 more a year than they were just 12 months ago.
The current economic headwinds facing the sector follow elevated retail spending last year at levels above market expectations. Consumers spent $36 billion per month in 2022 compared to the $28 billion per month recorded pre-pandemic, according to JLL’s latest Australian retail report.
The last quarter of 2022 saw Sydney’s CBD continue its transformation into a luxury fashion precinct. New openings included flagship stores for Valentino, Dolce and Gabbana, Missoni, Cartier and Brunello. In December, however the strong retail figures driven by discretionary spending evaporated, the last month of the year recording a decline in all retail subcategories except for food, which went up 1.1%. Retail rents in the city remained stable during the quarter with the exception of the CBD precinct where they continued their steady slide downward, JLL reporting a drop of almost 27 per cent since June 2020. Meanwhile, the state of NSW recorded a 13.2% rise in year-on-year retail spending to December 2022, above the national rate of 11.4%.
Melbourne mirrored Sydney with retail spending dropping in the last month of the year, contrasting with a bullish November when Black Friday and Cyber Monday sales sparked a jump in Victoria’s overall retail spending by 13.1% - surpassing the national growth rate.
Benefitting from tech
The sector’s current challenges are all the more reason for retailers to embrace technology if they haven’t already according to Brian Walker, CEO and founder of Retail Doctor Group. “The future of technology dictates the future of retail, the future of shopping, and the future of mixed-reality experiences,” he said. “If you think about the whole point of retail, you realise that it exists not only to generate revenue from sales, but rather, to generate an interest in items on display so that the consumer may consider making a purchase.”
In light of the sector’s situation, KPMG has just released a comprehensive report Retail’s delicate balance Retail sector – people, profit and planet - KPMG Australia detailing ways in which retailers can not only survive but make the most of the period ahead. Among recommendations are to focus on adopting new technologies, fulfilling environmental, social and governance (ESG) responsibilities and training and upskilling existing workforces.
Meeting shopper expectations
Retailers are also being advised to meet ever-broadening shopper expectations, both in store and in the digital world. Retail solution provider Zebra Technologies’ Zebra Technologies | Visible. Connected. Optimised. latest Annual Global Shopper Survey Zebra 15th Annual Global Shopper Study found that today’s customers want the stimulation and ease of an omnichannel experience - the term for placing products and services across all channels and platforms to maximise eyeballs, reach and sales – despite the fact most of are back shopping in-store just as much as they were pre-covid.
Zebra Technologies spokesperson Brett Newstead said retailers staring down the barrel of consumers tightening their belts could benefit from concentrating on three areas in particular:
- Ensuring optimised inventory If a product isn’t available then be prepared to lose customers. In a less volatile market this wouldn’t be such a big issue, but now “product availability is non-negotiable” Mr Newstead said, citing a Zebra study showing product availability a top reason for choosing to shop at any store.
- Providing seamless commerce experience across channels Elements that physical retailers can use to increase profitability include modernising in-store fulfilment using “real-time inventory views to streamline order fulfilment tasks,” Mr Newstead said. “Retailers need to have a broadened view of the distribution network and optimise reverse logistics by using data insights to drive efficiency and better business outcomes for inevitable returns.” Also of benefit will be the use of unified commerce platforms (UCPs) and digital order managers (DOMs) - in effect creating a system of connection points to view the location of products as well as Point-of-Sale (POS) and e-commerce data. “For most segments today, this is more of a strategic imperative than a deployable technology,” Mr Newstead said. “But in 2023, new concrete options will start to emerge, and retailers should begin to connect disparate systems with this end goal in mind.” Aside from tech upgrades, retailers can benefit from reviewing their store layouts which could perhaps allow more space for picking up online orders, self-checkouts, returns and service counters.
- Empowered and tech-enabled front-line associates Human-centred automation is playing an increasingly important part in improving a retailers’ efficiency. “With the help of robots and software to do the repetitive and tedious parts of a job, associates can have more time for higher-value work such as assisting customers,” Mr Newstead said.