The future of Australian retail?

[Tyler Durden]

I've been hearing some conflicting reports lately about the retail sector - sometimes there'll be articles about how people are keeping their wallets closed this festive season, yet later another article will pop up about how Christmas sales this year are expected to be the same or higher than last year's. Oh, and there's also been the announcement of profit downgrades from JB Hi-fi and Kathmandu.

So I am curious to know what are your views on the future of the retail sector, based on your own experience when you are shopping?

I must say, JB Hi-fi still seems to get a lot of people through the doors, but it is more browsing than anything. When people do buy, they are only buying relatively small priced items, not the big screen tvs or the home entertainment system.

With department stores like Myer and DJ's, I went to them in Sydney yesterday at about 9am for the boxing day sales, and there really weren't that many people. They had security guards at each end of the escalators to prevent chaos, but there weren't enough people there to cause chaos (although by about noon the amount of people had about tripled).

I noticed two things during the day:

1. I think we live in a "I want it now" society, and people don't really want to travel up eight floors in large department stores to get it. JB Hi-fi probably has it right in this aspect - just have one floor, and create a 'frenzy' environment to make everything look cheap. I think the days of the glamorous high rise department store buildings are limited. I also query why they even need so many levels - no one really goes to them to buy DVDs, tvs or white goods anymore, as there are plenty of other stores that can do a better deal.

2. The 'discounts' weren't really that great. The Van Heusen business shirts they were selling for $40 can be bought at that price during sales at other times of the year. The really nice Van Heusen 'slim' shirts were still the same price as usual, no discount. I've also been keeping my eye on the PS3 deals at JB Hi-fi, and they haven't changed at all through Christmas and boxing day.

There's also been a lot of articles mentioning how online shopping may one day kill off brick and mortar retailers, but personally, I like to see and touch an item in person before I buy it, and I also don't like using my credit card online, so the price reduction would have to be really great for me to turn to online.

What does everyone think?

 

[skcots]

I went to Westfield today to buy a $10 item that was not in stock. Nothing took my fancy and I did not notice any price difference compared to any other day. People are obviously buying, as the place was packed and the lines at the registers were huge.

I buy almost all of my items online (including groceries) more often then not from the US or China. I only head to the shops to get single items that are not worth shipping or that I need immediately. I suspect there are a lot of other people who do the same especially for mid priced items.

I know in the motorcycle community a lot of people go the the shops to try on gear, get the size and then buy it from the US and why not when its 1/2 the cost.

I hold shares in one Australian retailer because I think their products are somewhat sheltered from the online market. Retailers who do not act will continue to get hammered on the stock market.

 

[Starcraftmazter]

It's simple - ignore any articles which predict what sales will be like. Especially from News/Fairfax.

I hold shares in one Australian retailer because I think their products are somewhat sheltered from the online market.

Which? I am highly curious.

 

[sptrawler]

Which? I am highly curious.

+1 which retailer do you feel are immune from the fall out?

 

[ChrisJH]

I think department stores are a little redundant in this day and age. Everything is niche-y these days; if a company focuses on the one thing it does and does it well then they can succeed. Department stores (Myer, DJ, etc)to me feel stuffy, inpersonal, and overpriced. (Of course, I go to the likes of Kmart to get cheap stuff).

I think retail in Australia has a bright future. I think the problem is that a lot of companies got used to easy money without having to try for it, and they have unrealistic expectations, and that when the times were really easy that a lot of companies that aren't necessarily good companies or well run companies made a lot of money; and that now that money is a bit tighter they are struggling to be as profitibable.

I've run a retail store for the last 6 years now, and this Christmas was probably one of my quietest. That said, we still made ridiculous amounts of profits, and I am in a market that basically all of my product is available from online retailers for a fraction of the price. And a lot of customers choose that over us. But we also offer a lot of services that online retailers simply can't match, and so we stand out because of that.

It's easy to compete on price - you just keep dropping it until you're the cheapest; but that is no way to run a business. We had a competitor that tried competing on price, and they ended up closing most of their stores and lost millions of dollars. Yes, you have to be competitive, but just being cheap doesn't work anymore. Because cheap you can get online.

The retailers that survive and thrive in the marketplace in the coming years will be retailers that can be competively priced (but not cheap) but that can also value-add and provide service or services that are worth the hassle of leaving the glare of the computer screen, and worth the few extra dollars it costs.

Yes, more retailers may close their doors. But that's life and that's business; the world is an ever changing place. We must adapt quickly, or fade into obscurity...

 

[greggles]

Interest rates are at historic lows, but consumers don't appear to be spending with retail sales flatlining and retail sales growth experiencing its worst annual performance since the 1990-91 recession.

https://www.smh.com.au/politics/fed...recession-as-jobs-weaken-20191104-p5378r.html

If this continues, it's likely to be a miserable Christmas season for retailers.

Are you going to be tightening your belt this Christmas or spending like a lunatic?

 

[Jack Aubrey]

Are you going to be tightening your belt this Christmas or spending like a lunatic?

I've never been a Xmas shopper so my own behaviour is probably irrelevant. It is concerning that those tax offsets and mortgage savings are not making their way into the real economy. Years of low wages growth, the recent downturn in house prices, and the threat of recession seem to be holding back household spending. I HAVE cancelled a planned OS holiday next year on the basis of the low dollar and recession fears, but that's (possibly) good for the Oz economy.

 

[SirRumpole]

I won't be spending any more than I have to, but that's normal for me.

 

[satanoperca]

I think the general population has finally cottoned on:
RBA lowers IR's to record lows = economy crap, better tighten spending
Pollies tell us everything is sunshine and lollipops = Pollies are crap at lying.

However looking at the ABS figures for online sales, that is where the real growth is.

 

[Smurf1976]

It is concerning that those tax offsets and mortgage savings are not making their way into the real economy. Years of low wages growth, the recent downturn in house prices, and the threat of recession seem to be holding back household spending.

If you've experienced years of drought then it's a natural response to hoard any water which does fall from the sky.

I can't see the situation changing until consumers see a sustained period, a few years, of rising wages without rising prices and particularly the price of essentials - food, clothing, housing, utilities, petrol, mandatory government charges (rates, rego, licences) and so on.

I think there's also a psychological impact when people hear of big well known companies losing money. I've heard a few people who normally take little interest in financial matters mention Virgin airlines in that context. I think most people just don't expect big companies like that to lose serious money and it gives them a few doubts as to the overall economy when they hear of such things happening.

 

[Smurf1976]

I think the general population has finally cottoned on:
RBA lowers IR's to record lows = economy crap, better tighten spending
Pollies tell us everything is sunshine and lollipops = Pollies are crap at lying.

They might not always agree with RBA decisions but as an institution I'd be surprised if the public didn't have far more confidence in them than in politics at the moment.

Anyone who's listened to what's being said, even just the mainstream media reports, would likely see far more sense in what the RBA Governor is saying than what the Treasurer is doing.

 

[sptrawler]

However looking at the ABS figures for online sales, that is where the real growth is.

I think that is the crux of the matter, with my four middle aged kids and seven grandkids, I notice now if they want something they just buy it they don't wait till Christmas.

The last decade has had some significant changes and I think one of the main ones is online shopping EBAY, Amazon, Catch etc, it has nailed the "see it buy it" generation.

Christmas will never again be like it was, when you had to head into town to see the shop front decorations and layby Christmas presents, if retailers think those days will return I think they had better have an asprin and a lay down.
That model is going the way of the dinosaurs.

 

[qldfrog]

And airlines are very good indicators of economic health so with both Qantas and Virgin closing routes, rba or gov can say what they want..... No-one trust them

 

[satanoperca]

They might not always agree with RBA decisions but as an institution I'd be surprised if the public didn't have far more confidence in them than in politics at the moment.

Anyone who's listened to what's being said, even just the mainstream media reports, would likely see far more sense in what the RBA Governor is saying than what the Treasurer is doing.

Don't think that is how the mainstream thinks.

Joe, reads the mainstream news, Pollies say everything is going great, the bean heads in the RBA say the same, but keep dropping IR's. Joe thinks to himself, why do they keep dropping IR's when everything is okay. Eventually Joe thinks, it is not alright, I don't trust any of them. Tightens belt.

Mind you, I do not blame the RBA, they only have so many levers to pull.

So in the end, no one is to blame, it is just the ebb and flow of life, economics, business.

I will maintain one stance. We need some street fighting leaders, not this lot we have, who eat to much avocado's.

 

[sptrawler]

And airlines are very good indicators of economic health so with both Qantas and Virgin closing routes, rba or gov can say what they want..... No-one trust them

I may be wrong, but my impression is, things aren't as bad as they seem.
I think a lot of consumer sentiment, has been driven by media hysteria, the constant 24/7 coverage of how bad things are has driven consumers into a shutdown mode.
Yet I believe, the media are using old modelling methods, when ascertaining people's behaviour.
Those in Sydney and Melbourne who took on crazy home loans, or geared ridiculous amounts have been caught in a falling market, how many in reality is that? Everyone else has received lower interest rates and a tax cut.
I just think people are not as silly as everyone thinks, and are paying down debt, as fast as possible.
The 20-30 year old's seem a lot more canny, than the 30-40 year old's, just a personal observation.
I feel there is a whole new demographic evolving, that society hasn't recognised yet and hasn't started adapting to the changes that come with it. Including retailers.
Even if the Government sent out $900 cheques, I think they wouldn't be spent, IMO the wait and see approach and infrastructure is the go.
Just my thoughts.

 

[Smurf1976]

Don't think that is how the mainstream thinks.

Joe, reads the mainstream news, Pollies say everything is going great, the bean heads in the RBA say the same, but keep dropping IR's. Joe thinks to himself, why do they keep dropping IR's when everything is okay. Eventually Joe thinks, it is not alright, I don't trust any of them. Tightens belt.

Our news sources might differ but what I'm seeing is more akin to "RBA says government needs to get of its ass and help the economy".

That basic theme, expressed politely but bluntly, seems to have come up a few times now on more than one mainstream media outlet. RBA says government needs to build infrastructure etc.

I won't claim to know how everyone actually thinks but I do get the impression that "Reserve Bank says we need to invest in railways, roads, power, water etc" resonates a lot more with the average person being caught in traffic jams, facing recurrent train delays, hearing about towns with no water and threats of blackouts etc than "Treasurer says it's all fine" which doesn't sound right to anyone paying attention to what's going on around them.

 

[Smurf1976]

Those in Sydney and Melbourne who took on crazy home loans, or geared ridiculous amounts have been caught in a falling market, how many in reality is that? Everyone else has received lower interest rates and a tax cut.

I think we've basically got two separate countries economically:

1. Sydney and Melbourne

2. Everywhere else

That's not being against the big two cities, it's just an observation really that economically they've diverged a long way from the rest of the country on pretty much any measure.

 

[Smurf1976]

I think that is the crux of the matter, with my four middle aged kids and seven grandkids, I notice now if they want something they just buy it they don't wait till Christmas.

Agreed there definitely.

In 2019 Christmas for most seems to be basically, in random order:

Buying toys for young children for whom Santa is still a real being.

Various social gatherings with associated eating and drinking.

For many but not all, some time off work.

Out and about family activities - Christmas carols, looking at light displays, etc.

Apart from shops selling toys and the hospitality industry, there's no real spending boom in any of that these days. If an adult needs a new whatever, they don't wait until Christmas to buy it.

 

[sptrawler]

I think we've basically got two separate countries economically:

1. Sydney and Melbourne

2. Everywhere else

That's not being against the big two cities, it's just an observation really that economically they've diverged a long way from the rest of the country on pretty much any measure.

That is exactly my thinking, but the media is so Sydney/Melbourne focused they can't see it, all the reporters seem to be well paid yuppies that have no appreciation of reality.
There is a drop in living standards in Australia in general, that has to happen with a reduction in higher paid tertiary industry jobs and the massive contraction in FIFO jobs, but people adjust and move on.
That is what is happening at the moment IMO, I can only go off the people in my immediate circle of aquaintances, but they are a general cross section from glaziers to underground sparkies, library workers, retirees on the pension etc.
All of them are resetting their lives post election, two have sold their investment properties and are working to a long term retirement plan, the retirees have all realised that their fortunes could change as quickly as a change of Government, everyone seems to be focusing on their own "plan".
Which for the Australia I grew up in is most unusual, the she'll be right mate attitude, has gone.
The election changed Australia in a lot of ways and I don't think it has finished morphing yet, but it will be a better Country for it. IMO

 

[qldfrog]

Which we can summarise by
After 20years of mindless growth, absence of real economic issue for every day people,:
since the gfc, we have seen a slow descent of wealth and now real working poors exists, and we have a backward move in term of real wealth for a majority of people
We as a nation start having to face reality, and there will be no fast answer.avoiding recession at all cost means that
A pretty high cost now and for your children
Once again, look at Europe in the 1990/2000 and this is where we are
Look at europe now and this is where we will be
Plan your retirement and investment accordingly