While recent reports often highlight the challenges facing the retail sector, the general consensus among wholesalers at the Reed Gifts Fair in Melbourne last week [August 7] was “things are on the up”.
Though most wholesalers acknowledge the industry is tough, with cautionary buyers leaning towards purchasing things they need rather than things they want, there’s a general feeling of improvement in the sector. The Australian Bureau of Statistics (ABS) figures for June, released this month, state that retail turnover rose 1 per cent.
“People are making lots of smaller orders rather than large orders,” says Display Plus Imports sales manager Brett Kidman. “But we’re still going to make target.”
Silver Phantasy gift shop owner Leon Daly attributes the improvement to an increase in consumer confidence. “The carbon tax came July 1, and the whole world didn’t cave in, so people are more optimistic,” Daly says. Daly also acknowledged that the Olympics, and a more positive media cycle, helped matters by taking the focus off financial struggle, albeit for a short time.
Nearly all wholesalers acknowledged that international distributors, online price cuts and eBay were making sales challenging. The prices are difficult for wholesalers to match, says Roc Eyewear Territory Manager Alex Margoulis. “When there are fewer sales, there are fewer orders. This means manufacturers put their prices up, so wholesalers have to put their prices up, which extends to retailers.”
For those embracing the online market, the year has not been as difficult. Daly attributes 5-6 per cent of his sales to online retail, and that figure is growing.
For Palas Jewellery, embracing social media platforms, such as Facebook, Twitter and Pinterest, has proved fruitful. “It’s a lot of work”, acknowledges Palas marketing/administration assistant Sophia Gentile. “But it’s worth it. We’ve had a great year.” The “great year” can be attributed to the company’s willingness to embrace increasing digital demand by consumers. This is further enforced by testimonials on the company’s website, where many customers site online browsing as the precursor to their purchase within retail stores.
The improvement in the wholesale market mirrors recent reports from other retailers, with Wesfarmers citing a 6.1 per cent increase in Coles for the year ending 24 June 2012, and a 5.6 per cent increase in Bunnings. And while retailers Target and Kmart were down and equal to last year, respectively, both retailers reported strong fourth-quarter growth.
Navigating international waters
Aesop CFO Kieran Rivett notes that there are plenty of challenges for Australian retail, particularly with foreign brands entering what has been a largely unchallenged local market. “The Australian markets aren’t used to coping with that,” Rivett says. “They’ve had it reasonably good for some time.”
“We’re [Aesop] a bit different, particularly overseas. We’re a smaller fish in a bigger market so it’s about execution, connections with local communities. In Australia where the business is more mature, it’s about maintaining the loyalty and continuing to build up the brand. We’re proud of that loyalty. We don’t take it for granted. We believe we’ve always had well-executed retail.”
While National Retail Association Executive Director Gary Black welcomed the latest figures, he states that overseas-based retailers have advantages in tax-free products and differing workplace conditions.
“We know this unfair tax loophole is costing Australian jobs,” Black said in a 2 August media release. “Notwithstanding today’s very pleasing results, we have seen employment in retail decline to around 2004 levels, according to the ABS.”
For the time being, it appears that challenges to the retail sector are here to stay, and with so many retailers working on various strategies to capitalise on the sector, if you’re local and not strategizing, now might be time to start.