New research confirms a mixed outlook for Australia's retail
sector, but the good news is almost half of consumers say they are
maintaining or increasing their spending, and young consumers
remain up-beat.
The research, conducted by Sydney-based Research Now for
management consultancy firm Growth Solutions Group, shows weak and
declining spending by consumers but also indicates there are signs
of hope for besieged retailers.
The survey of 1007 respondents found:
- More than half - 61 per cent - believe their purchasing power
has decreased in the last 12 months, with just 24 per cent saying
it has increased;
- 50 per cent say their discretionary spend on non-essential
items has declined, with 28 per cent saying it has stayed about the
same and 22 per cent saying it has increased;
- 22 per cent say spending on non-essential items has increased
in the past 12 months, with spending growth particularly strong in
the 15 to 34-year-old age groups;
- 35 per cent of those surveyed will be spending less this coming
Christmas than during Christmas 2010, 36 per cent will spend about
the same as last year and only 13 per cent plan to spend more;
- 21 per cent will be spending more online this year than last;
and 20 per cent will also be spending less.
Of those 503 respondents who say their purchasing power has
decreased, consumers aged over 35 are feeling the pinch more.
Seventy-one per cent (355 respondents) aged 35 to 64 say their
purchasing power has decreased compared to 36 per cent (122
respondents) of consumers aged 15 to 34. And more people aged 35 to
64 - 41 per cent - will spend less this Christmas compared to 24
per cent of under 35's.
A vast majority of these respondents, around 64 per cent, blame
the increased cost of living for spending less. And almost half -
46 per cent - say they would open their wallets if purchasing power
increased. Lower interest rates would be an incentive to start
spending more, according to 21 per cent of respondents.
A third also say a better range of products and brands and
better customer service would encourage them to increase their
discretionary spend at retail outlets.
The survey follows a recent report from Deloitte Access
Economics which showed retailing posted its worst results in 20
years in the 2010-2011 financial year.
According to Growth Solutions Group managing director Graeme
Chipp the key outcome of the survey from a retail perspective is
that despite a "doom and gloom" scenario there are people willing
and able to spend.
"Importantly, the survey highlights that there are in fact some
pockets for optimism and this is where retailers need to better
channel their marketing efforts," he said.
"What the survey shows is that there is, in effect, a
three-spend economy that is as significant as the two-speed economy
we have heard so much about. There are the young spenders, the
middle Australia family handicapped by cost of living increases and
very keen to see some mortgage relief and extra cash via lower
interest rates, and the mixed spenders and savers at the 65-plus
end of the population.
"What retailers need to be asking in the present conditions is
how they can drill down deeper and think through how to reach that
particular percentage of the population that clearly can be enticed
to spend more, or at least maintain spending levels."
Mr Chipp said the survey strongly reinforces recent discussion
and debate about the need for much sharper customer segmentation
and creating marketing solutions focused on the mindset of that
customer.
"There are clearly very significant differences between what a
25-year-old wants, expects and is willing to pay and a 45-year-old.
The writing is now on the wall in terms of being far, far
more targeted in order to reach the consumer who is able and
willing to spend, and that the line between bricks and mortar and
online stores is indivisible, whether retailers like it or not.
"Constant price-discounting doesn't cut it. If a third of
consumers are saying better service would encourage them to spend
more, it's time to directly ask exactly what they mean by this and
start making changes. Screaming price and leaving the rest of the
journey to the shopper is not going to win."
Survey respondents complained about a wide range of factors in
addition to customer service and the in-store experience, including
uncertainty about interest rates, share prices, slowing wages
growth, convenience and new taxes.
Mr Chipp said the survey reflected the most recent ABS data
which indicated incremental or zero growth during July.
"It seems the reality is that some retailers are hurting
severely, others are managing to hold steady, and a few others are
enjoying real success stories," he said. "I would say the
differences between them come down to how definitively they have
defined the job to be done for their customer and focussed their
product offering accordingly."
(ENDS)
Media enquiries:
Graeme Chipp - 03 9670 4700 or 0411 127 846
Growth Solutions Group, a specialist growth advisory,
market insights and co-creation consultancy
www.gsg.com.au
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