Data from Airwallex and the ABS show shoppers slashing spending ahead of the holiday period.
Revenue to slump 12% in gloomy outlook for retailers
Retailers are on track for a 12 per cent drop in revenue this year compared to 2022 as monthly turnover slumps due to wavering consumer confidence, according to payments company Airwallex.
Managing director Luke Latham said it had been a slow year for many retailers judging by its forecast, which was calculated using a representative sample of its customers.
“One in two shoppers are saying they’ve recently purchased a different brand to what they usually would due to price,” he said. “The elevated cost of living means price will stay firmly front of mind for consumers.”
He said retailers should examine their costs and find other ways to bolster profits.
“Businesses need to take stock of all their costs right across the board. It’s not just big-ticket items that eat into profits – there’s dozens, if not hundreds, of unnecessary everyday costs that are chipping away at the bottom line,” he said.
The predicted fall in revenue comes as the latest ABS figures show retail turnover grew by just 0.2 per cent in August, below economist expectations and down from 0.5 per cent in July.
ABS head of statistics Ben Dorber said consumers had been pulling back on spending to cope.
“Considering how high inflation and strong population growth has added to retail turnover in the past year, the historically low trend growth highlights just how much consumers have pulled back in response to cost-of-living pressures,” he said.
The figure had been buoyed by consumer spending related to the FIFA Women's World Cup, which created “strong demand for fan gear and increased spending across cafes, restaurants and takeaway food outlets as large crowds attended matches and live sites across the country”.
Household goods and food retailing led the slowdown.
Retailers selling household goods saw a third consecutive fall in turnover (-0.4 per cent), and the ninth monthly fall in turnover in the past 12 months.
Food retailing also decreased for the second month in a row by 0.3 per cent as food inflation continued, particularly for fruit and vegetable prices.
ABS data also showed 38,5000 retail sector job vacancies listed in August, down 16.5 per cent compared to the same month in 2022.
Australian Retailers Association CEO Paul Zahra said the year-on-year decline meant retailers were cutting back on hiring due to financial pressures, and smaller businesses were hit the hardest.
“The number of vacancies is still somewhat problematic heading into the all-important Christmas trading period, but we fear the main cause of the decline is due to the cost-of-doing-business crisis,” he said.
“With increasing costs of wages, rent, insurance, utilities, materials and supply chain costs, some retailers are battling to avoid making redundancies – let alone hiring additional staff.”
“Many retailers – particularly smaller discretionary retailers – are struggling to survive financially and aren’t able to hire staff.”
Mr Zahra said the retailers that were posting vacancies would still be struggling to fill the roles.
“More businesses are being impacted likely as a result of skills shortages,” he said.
While much has been made of consumers’ cost of living, retailers were also facing a “cost of doing business crisis”.
“Retailers will be concentrating on offering the best service and value for budget-driven shoppers as they lead into the all-important Christmas trading period.”