If we look beyond the headlines dominated by bushfires and then COVID-19 we find that whilst there is considerable economic uncertainty there are still many reasons for retailers to be confident about 2020 and beyond.
The domestic impact of the bushfires and the international shockwaves caused by the Coronavirus outbreak have fed into an economy already showing warning signs that, combined with changes in consumer buying behaviour to create a picture of disquiet among Australian retailers.
A natural reference point is the GFC in the late 2000s, but the economic data we’ve explored bears out a different – and far more nuanced situation in 2020.
So, what are the main factors influencing Retailers in 2020, and what does the data tell us about the real situation?
ECONOMY vs CONFIDENCE?
According to the latest KPMG/InsideRetail Australian Retail Outlook 2020, consumer confidence is the biggest challenge facing Australian retailers in 2020. Fully 56.4% of respondents nominated this factor in their top three challenges.
Consumer confidence is an indicator that tends to dominate headlines – and the figures make for grim reading. As expressed through the Westpac – Melbourne Institute Index of Consumer Sentiment, confidence fell by 3.8% to 91.9 for March 2020.
A score of 100 for the survey means that the same number of people feel confident about the economy as feel pessimistic. The latest score tells us that slightly more people are feeling pessimistic about the future of the economy than expecting things to get better.
For reference, the score at the height of the GFC in April 2008 was 79. We can therefore infer that consumer sentiment is holding up a lot better than during the GFC.
Below the top-line figure, consumers are taking a more balanced approach than in 2008. Sentiment regarding “family finances” and “time to buy a major household item” are well above their GFC lowpoints.
Underlining consumer confidence was generally flat wage growth through 2019, which ended the year with a 2.2% increase over the December 2018 quarter.
This means that wages are increasing slowly, but when compared against Consumer Price Inflation – at 1.8% for the quarter – it’s clear that wages are still rising faster than prices which mean that shoppers still have more money in their pockets to spend.
HOW MUCH OF MY BUSINESS SHOULD BE ONLINE?
Some Australian retailers have successfully embraced online and found a great balance between clicks and bricks, but is a work in progress for many.
The KPMG/InsideRetail survey highlights that for 35.1% of the retailers surveyed, their share of sales online stayed flat year over year, with smaller but still significant groups seeing a slight or significant increase.
Indeed, for the majority of retailers, online sales makes up a small proportion of their overall revenue. In 2018 online sales made up 5.6% of total Australian retail turnover.
Compared to other major economies, Australia is behind with the US at 8.9%, UK at 18%, China at 16.6%, and Canada at 8.2%. Even allowing for structural differences, it is clear that there is plenty of scope for Australian retailers to increase online sales.
Understanding who your customers are, and when they wish to start purchasing online or increase their online purchasing will be crucial to the success of your business in 2020.
WHO IS THE ETHICAL CONSUMER … AND SHOULD THEY BE MY FRIEND?
Ethical Consumers are shoppers who wish to match their purchases to their personal values. That may mean they prefer certain products or manufacturers, and they actively seek information about the how brands measure up.
The Choice website Ethical Consumption Review in 2018 highlighted that 73% of their readers agree or strongly agree with the phrase, “It is important to buy environmentally friendly whenever I can”.
Further studies from YouGov in late 2017 found that a majority of Australians (58%) believe businesses have a responsibility to ensure their supply chain does not harm the environment.
Your customers are increasingly making purchase decisions based on criteria beyond the traditional brand, functionality, price and ease or location. Retailers need to ensure they understand this behaviour, and employ messaging that addresses customer concerns regarding sustainability, ethical sourcing, community impact etc.
In a difficult economic landscape, where consumer buying patterns and rationale are changing, running a retail business is tough.
Retailers need to focus on the factors they can control – do I offer an attractive range or products, can my customers purchase from me in a way that is easy and convenient for them, and am I communicating with them in a way that is relevant and meaningful?
Customer relationships you can control. Customer Relationship Management software allows you to take control.
ABOUT NEXON NEXT GEN RELATIONSHIP MANAGEMENT
In this complex digital world, your organisation needs to make individual connections with diverse stakeholder groups including customers, prospects, suppliers, members, employees, and other stakeholders. That’s why relationship management is a focus for many successful organisations.
That’s where Nexon’s Relationship Management delivers real value. With over 15 years of experience, we enable you to manage the relationships and processes that matter most to your business and engage with any stakeholder group effectively.
Whether you need to attract prospects, engage and delight your customers, or manage memberships, contracts and compliance, we integrate systems that connect customers, products, people, and operations in meaningful ways.
Contact us for an obligation-free discussion to help understand whether cloud Relationship Management solution is right for you.