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Based on a survey of executives and senior management from Australian retailers, the ninth annual Deloitte Retailers’ Christmas Survey 2020 analyses their sentiment for the Christmas period, key trends and their expectations and priorities for 2021.
The story of sales polarisation
For the first time in the survey’s history, more respondents expect +/- 5% sales growth than all other categories.
Despite the reopening of Victorian stores in November, 24% of our survey respondents expect that revenue will decline by more than 5% this Christmas. Retailers in the discretionary sector have done it tough this year, and the results of our survey reflect consumers spending more time at home, with the share of wallet for retailers shifting accordingly. This polarisation of the market means that there is not just one narrative around COVID-19 but many - from the travel agent that has been closed since the pandemic began, to other local retailers that have done a roaring trade with customers spending the majority of their time in the suburbs. Based on the responses to our survey, it doesn’t look like this polarisation will end any time soon, with retailers thinking of new ways to connect with customers and entice them to spend. Others are going from strength to strength as demand for their products soars over the pandemic period. Furniture, homewares, hardware, home office and electronics have been booming as consumers spend money in and on the home. After a long year, retailers across Australia will be counting on consumers safely stepping out of the bubble this Christmas - in store and in the home.
“Covid has caused a lot of concern with forced closures, but we have bounced back well after a refurbishment of the shop & sales have been consistently better. Customers are shopping local it would appear.” – Survey respondent.
What are Australian consumers thinking and feeling?
Reflecting this, Deloitte’s State of the Consumer Tracker has been measuring spending intent from consumers since April 2020 and whilst discretionary spend does appear lower across the board, apparel, footwear and food service are beginning to improve.
The Australian consumer has more confidence about shopping in-store relative to others around the world, with 72% of Australian consumers feeling confident about going to a store, compared to 61% in the US and 55% in the UK – reflective of Australia’s comparatively lower number of COVID cases. The recent outbreaks across the globe are a stark reminder that the landscape can rapidly change. The 29% of consumers that don’t feel confident going to the store undoubtedly have this in mind.
As for margins, the story is a little different. Whilst there remains a much larger proportion of retailers expecting margin declines of greater than 2% in 2020, in the main expectations are relatively consistent to last year. With some of our respondents highlighting that stock availability is an issue this Christmas, margins may hold up even if sales disappoint.
Online sales expectations
With apologies to Ernest Hemingway, change comes gradually, and then suddenly. Over the course of our survey, we have seen the share of online sales gradually increase, with the proportion of respondents expecting over 10% online sales this Christmas jumping to 44% this year.
Digital channels will be critical to success this Christmas. Some retailers may have been caught flat footed at the beginning of the pandemic, but with stores closed, retailers needed to move quickly. Those who invested in building digital capabilities were able to continue to trade throughout the initial lockdown period of March to May and even during the return to Victorian lockdowns in July. It is clear the shift to online and digital has been accelerated due to the pandemic, and we can expect this shift to last beyond Christmas. Digital capability provides options and an omni-channel approach enables retailers to continue trading through the peaks and troughs of forced store closures due to lockdowns.
“Our online sales have eased off slightly as Melbourne reopened, but we’re still expecting that online will be strong up until the Australia Post cutoff for Christmas. After that we’re expecting more foot traffic in-store, particularly in our suburban stores.” – Survey respondent
Online spending intent across categories
Despite Australia’s share of online spending intent remaining lower than international peers, it is well ahead of historical averages – in line with the trends we are seeing in our survey responses.
For the duration of the pandemic, Australian consumers have mostly spent on non-discretionary categories (e.g. groceries, household goods and medicine). Whilst there is a rise in online purchasing, non-discretionary categories have still seen a significant amount of in-store foot traffic during the pandemic. Consumers have also been deferring non-discretionary purchases, with 40% noting in early November that they are delaying large purchases.
E-commerce and digitally enabled in-store experiences
So how do retailers entice the 29% of consumers who are concerned about heading into a store? Shopping centres are doing their part. One centre has implemented a virtual queue system, with a QR code available for customers to join the queue, before getting a notification when they can enter and heat mapping to measure and disperse congested areas. Others are offering contactless pick up stations and integrating virtual fitting rooms with augmented reality to reduce physical contact. These kinds of innovations are providing retailers with the opportunity to reassure consumers that their safety and wellbeing is of critical importance.
E-commerce has exploded over the past six months and out of this, has come the opportunity to address last mile delivery capabilities. Over 50% of our respondents are confident in their last mile delivery capabilities and retailers are investing in technologies that enable ETA track and trace, dynamic routing, autonomous delivery and pick-up / drop-off networks. This investment is enabling a more seamless experience for consumers. With 32% of respondents highlighting digital and omni-channel capabilities as their most important focus to increase sales, last mile delivery capabilities will be a key priority for e-Commerce this Christmas and beyond.
JobKeeper a helping hand
Whilst time will tell the true impact of JobKeeper reductions on retail spending in 2021, our survey has shown that 72% of respondents believe that JobKeeper has helped them avoid making their staff redundant during the pandemic. JobKeeper has not only supported retail employees across Australia, but provided those employees with money to spend in the economy during the hardest-hit period.
This year’s Retailers’ Christmas Survey reflects the uneven impact of the pandemic on Australian retailers. Some have benefited from border closures and consumers spending more time at home, whereas others in the services, apparel and catered food market have taken the brunt of the downturn. The growing unemployment rates, interest rates at record lows and consumer confidence beginning to rebound from the last few months, have given a mixed economic signal to retailers as they head into the holiday season. Many of these retailers will hope that Christmas 2020 brings a welcome respite to the sector, and with the right strategies - digital enablement, customer engagement and a little fortune - this Christmas could turn out to be a cause for some optimism in 2021.
With more than 20 years’ experience working in the UK and Australia providing assurance and advisory services to a range of clients, David combines his deep insight into the retail sector dynamics with consumer and market trends to generate opportunities for growth. David specialises in the retail sector and leads Deloitte’s National Retail, Wholesale and Distribution sector group. Working closely with Deloitte Australia’s global and Asia Pacific teams, David directs all of the firm’s key retail sector activities to provide perspectives and solutions that enable growth and success for our retail clients.
Damien is a partner in Deloitte’s Retail, Wholesale & Distribution group. With over 12 years experience, Damien works with major ASX listed, multinational and large private entities to provide them with audit and advisory services. As a specialist in Retail & Distribution, Damien brings the benefit of significant industry experience to understand the key risks and challenges in the modern corporate environment and provide actionable insight to clients. Damien has experience working on a variety of engagements including: • Acquisition/divestment accounting advice • Assistance with structuring of Corporate Governance frameworks, financial and management reporting lines, forecasting and internal controls • Prospectus review including identification and review of non-recurring adjustments to pro forma financial information • IPO structuring and associated accounting treatments and disclosure