Christmas is just seven weeks away, but already it’s looking like this holiday season is going to be a mixed bag for the retail industry.
Although figures released yesterday were better than expected, and showed a 0.6% increase for September, there’s a lot to be concerned about. This is a patchwork industry with different sectors growing at different speeds.
As the Australian Retailers Association pointed out yesterday, it’s going to take a lot more than just one rate cut to get some sectors back in the black. Retail is undergoing a structural shift towards multichannel buying, and unfortunately, some sectors are being left behind.
How will your sector perform? SmartCompany has taken a snapshot of the 12 most prominent retail sectors to see how each one will perform:
Yesterday’s ABS figures show liquor sales remained flat in September, which is an understandable result as consumers still hold onto their cash. However, conditions could improve by the end of the year. With the rate cut, and the natural incline of liquor sales towards Christmas, the sector could see a relatively strong end to the year.
Supermarkets and grocery stores saw sales rise by 0.5% in September. It’s a mixed bag in this sector, with Coles going strong but Woolworths admitting earlier this week that it needs a bit of a shake-up.
Ultimately, however, Christmas is a huge sales time for this sector and this year should be no different, even if consumers are holding back their money from buying extravagant gifts. Food sales should remain resilient.
Specialised food retailing was up 0.8% in September, so it’s a good bet this sector will perform well also.
The furniture, floor coverings, housewares and textile goods retailing market rose 1.3% in September, which is a solid result for an industry that is feeling the effects of the downturn in the housing market.
With the rate cut encouraging more prospective home owners to buy, there is some hope for the furniture and homewares industry – although more impressive results may show up next year instead once construction starts to improve.
There’s been plenty of activity in the hardware market lately, with Bunnings and Woolworths set to go head to head. The seasonally adjusted estimate for the market rose 1.3% in September, which is a testament to the take-up in DIY projects.
Consumers bent on saving have leaned towards repairs and upgrades rather than buying a new property, and that result is likely to come out at Christmas as well. Hardware isn’t a typical Christmas gift, but it’s a fair guess to say this sector will hold up well.
The electronics market is suffering. Rising only 0.2% in September, retailers are having a hard time mostly due to price depreciation and the rising Australian dollar.
Cheap products and offshore alternatives will make this market a hard one in which to succeed. Although some larger players such as JB Hi-Fi may perform moderately well, this is definitely set to be one of the worst performing sectors this Christmas.
If consumer electronics is set to be the worst performing market, then department stores aren’t very far behind. The September estimate rose just 0.1%, and already Myer and David Jones have been warning for some time this Christmas won’t be a good one. The sector has already declined by 2.3% in the past quarter, according to the ABS.
Online alternatives are just too good to pass up.
Try as the local publishing industry might, it can’t escape the grip of online. With two major casualties this year in Borders and Angus & Robertson, it’s little wonder the sector’s estimate fell 3.4% in September.
Online book retailers are set to receive a boost but for bricks and mortar shops, the industry is in a rapid decline.
This isn’t the biggest sector for Christmas trading but it appears to be holding up quite well, up 0.4% in September. Cosmetics should deliver it a relatively modest result.
The cafes and restaurants sector rose 1.2% in September, and the end of the year should see it deliver a solid result as well due to the rise in Christmas parties and other celebrations. Overall the industry is hurting due to its strong connection to the beleaguered tourism market, but the next several weeks should give it a lift.
Take-away outlets usually do well throughout any type of downturn, with discretionary retailing often the last sector to feel the pinch. So it’s a wonder why the estimate only rose 0.4% in September.
Nevertheless, the summer should see this industry be given a rise, particularly as more people start taking holidays and spend time outdoors. Warmer weather in Sydney and Melbourne should help things turn around.
Over the quarter, food retailing has actually increased 1.4%, so it’s a good bet this sector will see some good times in the next few months.
Apparel is one of the biggest growing sectors online, but unfortunately, that isn’t enough to stop the decline as more dollars are being sent overseas. Clothing retailing rose by just 0.1% during September, and that’s only going to get worse.
You only have to look at the collapses this year to see boutique fashion is out of the question, and with more mid-range companies like Colorado going under, and Country Road predicting a troubling holiday season, it’s going to be a long Christmas for apparel retailers.
Footwear and accessories isn’t much better, growing only 0.2% in September. There are simply too many online alternatives for consumers to pass up.
Over the past quarter, clothing, footwear and personal accessory retailing has plummeted 8%. Christmas should give it a boost, but there is no doubt in the fact this industry continues to suffer.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
