Australian Retail Industry Research and Statistics

The retail sector is an important contributor to the Australian economy. The following table is a summary of a survey conducted by the Australian Bureau of Statistics on the industry in June 2007. These figures include both motor vehicles sales as well as fuel retailing.

Employment in retail:

Working proprietors and partners account for 9.2% of total retail employment. As at June 2006 retail businesses employing fewer than 20 people accounted for 52.8% (82,665 businesses) of all retail businesses. These businesses accounted for 30.9% (380,279 persons) of retail employment and 29.7% ($86.9 billion) of total income.

Businesses without employees accounted for 43.3% (67,832 businesses) of all retail businesses and just 4.3% ($12.4 billion) of total income. Retail businesses employing less than 20 people generated $228,500 in income per person employed whereas businesses employing between 20 – 99 people generated an average income of $304,600 per person and the 621 largest businesses derived an average income per person of $229.000.

Retail industry by state and territory:

New South Wales accounted for 32% of the total employment in the retail industry and 32.8% of the sector’s income from goods and services. Victoria was the second largest contributor employing 25.5% of Australia’s retail industry and providing 25.5% of the sector’s income derived from goods and services.

Retail trade figures 2008:

The tightening of conditions in the financial markets and the reduced confidence about the current and future economic conditions have seen households reducing their expenditure on consumption in the first quarter 2008. While it grew strongly throughout 2007 the indications are that there has been a noticeable slowing down in the March quarter. These figures do not include motor vehicle sales or fuel sales.

Real retail sales fell by 0.1% in the quarter to be, which is 3.1% higher than last year but well below the 5.0% growth in 2007. Trading conditions have remained subdued in April and May. The fall in consumer sentiment which is 10% below the April average suggests that households have become more cautious about the future and less willing to spend. This is a view also shared by the Reserve Bank.

The above graph from the Reserve Bank clearly demonstrates the downward trends and there is nothing currently in the economy to indicate any change to these trends.

Household sector:

The Reserve Bank in its May Statement on Monetary Policy showed that the pace of retail spending slowed in the March quarter and was particularly marked in Western Australia.

Retail sales by state:

Total retail sales as recorded by the ABS for the year ending March 2008 were $237,488.2 million.

Breakdown of retail sales by industry group

The following table gives a breakdown on the total industry group for year ending 31 March 2008. Food dominates retail sales comprising more than 41% of overall retail sales.

Food:

Food retail is dominated by supermarket sales which accounts for 70% of all sales. However fresh food retailers have consistently shown significant growth over the past three years which is possibly at the expense of the supermarkets where the offer of pre-packaged goods is not always to the consumer’s liking. This is especially so in bread, poultry, fish, fruit and vegetables and in recent times there are indications that this is occurring in meat as well.

Clothing and softgoods:

This sector is now in decline with growth expectations for 2008/2009 likely to be below the 4% mark and in some instances, if the cycle follows that of the nineties, it could even be negative. There is heavy discounting taking place in this category and unless the margins are being supported by suppliers it is unlikely that retailers will generate sufficient increase in sales to offset the discount. Furthermore, with price increases now being reported on new stock the sales will not even meet the cost of the new goods. Power restrictions in China combined with labour shortages and strong local demand will place additional stress on this sector.

Household goods:

In the past twelve months this group has been the stand out performer in retail driven by the uptake of new technology especially in the computer and home entertainment sector. These figures still indicate strong performance but are skewed on a yearly basis by the numbers in the first three quarters up to December. The statements by Harvey Norman and JB Hi-Fi to the stock exchange in the past month have both indicated a significant downturn going forward and revised forecasts show that they cannot match anywhere near this growth for 2008/2009.

The sector has also had a substantial benefit with the importing of deflationary prices as a result of improved technology and surplus capacity in production in China and other parts of Asia. However as with the clothing sector there are indications that there will not be the same benefits going forward.

Other retailing:

The cost of pharmaceuticals has delivered good increases in this sector. However there has been a significant decline in the sales of jewellery and antiques as the current economic climate bites into the discretionary spend. Climate and water restrictions have also impacted upon the garden suppliers.

Recreational goods:

The newspaper and books sector has been in decline for the past three years and is struggling to show any positive increase. It has not kept up with inflation for the past two years and there is every indication going forward that will continue as people seek to get their news information elsewhere whilst books have suffered from substantial discounting and parallel importing.

Hospitality

Hotels have continued to struggle to increase sales over the past twelve months while cafes have continued to grow well above the inflation rate.

Inflation

The March quarter delivered a strong inflation outcome with all capital cities reporting inflation above 3.5% with the weighted average of the eight capitals coming in at 4.2%. The largest contributors were automotive fuel, housing costs, food, financial and insurances services and seasonal increases in electricity, health and education costs. Clothing and household goods fell.

Article courtesy of Australian Retailers Association