The week ahead with Michael Pascoe
It's been a steady theme of 2012 that all the local retailers having trouble are blaming you naughty consumers for shopping online.PT4M46S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-2bref 620 349 December 21, 2012
For the last time this year, let's have another crack at busting a big myth as the predictable retail bleat reaches a Christmas crescendo: No, Santa is safe, right up there with the Easter Roo - it's the one about Australian consumers slashing their spending. Not true.
The usual suspects in the retail sector don't like facing up to that as it calls their models, management and execution into question, but the facts are there in the national accounts, never mind the monthly retail sales figures.
The punters keep spending more than they used to. The rate of growth of their spending isn't as high as it was back in our pre-GFC bubble days, but those days were dangerously unsustainable and a nonsense.
Traditional retail is not dead yet.. Photo: Rohan Thomson
You can't buy a bottle of soft drink for sixpence any more either.
Where consumers chose to spend their extra money continues to evolve – the record amounts being splashed on motor vehicles, personal services and travel are documented well enough. But what must really stick in the craw of the more lacklustre retailers is that, for all the hype, it's the bricks-and-mortar opposition who are really eating their lunch.
Yes, online retail has been enjoying strong growth, but off a low base, and bricks and mortar shops have been growing as well. A nice piece by Trevor Clarke earlier this month summarised a couple of retailer surveys that put the bleating in perspective.
A Christmas retailers survey by Deloitte found 73 per cent of retailers expect to increase their physical store numbers in 2013 and 33 per cent nominate new stores as their biggest growth driver.
And 60 per cent of retailers said their main competition next year will be from local and foreign bricks and mortar stores – only 25 per cent said their greatest competition as coming from overseas online retailers and just 6 per cent nominated local online retail.
The proof is in the building, rather than the rhetoric. There are empty shops in Paddington and Toorak, but the big retailers are rolling out plenty of new stores, the foreign shops keep coming, and different types of shops in different types of retail precincts are doing well enough.
It all still comes down to having the right offer at the right time and place with the right value and the right service. Those that get that lot right survive, while those that don't, don't.
I'm not suggesting retail is anything but hard work – the easy days of uninformed consumers with limited options spending ever greater amounts of their income are over.
The reality yet to register is that it's no different for the online industry.
Sure, there are flash growth rates, but profits are hard to come by.
Here's a sobering fact: the daddy of online retail, Amazon, was founded way back in 1994. It employs some 81,000 people, is valued by the stock market at about $US110 billion and has annual revenue of more than US$58 billion – but it didn't make a profit in the year to September.
Michael Pascoe is a BusinessDay contributing editor.