2016 forecast by sector

birkenhead, shopping, shopA look at which sectors of Australian retail will be strong, stable and weak performers in 2016.

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While volatility in global financial markets has lead some commentators, such as US economist Nouriel Roubini – aka ‘Doctor Doom’ – to predict that global uncertainty is the new norm, the 2016 retail outlook in Australia looks nothing but positive.

Consumers are benefiting from record low interest rates, falling oil prices and reasonably stable employment prospects in most parts of Australia. The key question for retailers this year is whether or not the current consumer confidence will hold up for the remainder of the year. In my experience, consumer confidence is made up of three key factors – employment growth and stability, residential house price growth, and household savings ratio.

Here is a breakdown of the retail sectors expected to be strong, stable and week in 2016.


Luxury retailers

The luxury apparel market has experienced significant growth during the 2014 and 2015 calendar years, as shown in the graph above. This is due to a number of factors, including:

  •  Luxury goods becoming increasing available to a wider Australian middle class due to increasing disposable incomes.
  •  Australians being much more knowledgeable about luxury goods than they were five to 10 years ago, partly due to exposure to international travel.
  •  While luxury consumers are predominately local, an increasing market segment is inbound tourists from Asia. This market has received a significant boost due to the devaluation of the Australian dollar.

Food services

Expect another reasonably strong year for this category, particularly in Sydney and Melbourne, where consumer confidence is highest. This will be aided by the major focus on outdoor and casual dining precincts within shopping centres and shopping strips, with will cause some concern for traditional food courts within shopping centres.



A positive year ahead for this sector, particularly in the more robust states of NSW and Victoria, as consumer confidence is highly correlated to spending in this sector.


There is a strong correlation in this segment to residential property prices and activity, so consequently Sydney and Melbourne should still perform reasonably strong, given their unit market is still active. Brisbane’s unit market is over-supplied and Western Australia’s remain’s poor. The recent administration of Laura Ashley and Dick Smith should help existing players in this sector.



Women’s fashion

The outlook for fashion, particularly ladies, remains patchy for 2016 due to a number of factors including the big five international fast fashion brands – Zara, H&M, Uniqlo, Topshop, and Forever 21 – taking the cream off domestic fashion players, with a few more internationals also set to arrive in 2016. The depreciating Australian dollar will impact margins as almost all fashion is now imported.

Bank branches

Due to stock market volatility, bank costs will be under increasing pressure and their retail branch networks will be under scrutiny. Citibank has recently announced it will close its Australian branch network and I expect banks will continue to rationalise their networks.


The depreciation of the Australian dollar ultimately translates to higher prices for diamonds, as they are traded in US dollars. Some jewellers may drop a level in quality (colour and/or clarity) of diamonds they sell to reduce the effect of the cost increase on retail prices. International tourists make up a small percentage of jewellers customers with some shops selling opals in the Sydney, Gold Coast and Cairns regions.

The margins amongst this market are travelling steady. The biggest issue for jewellers for several years now has been low co­­nsumer confidence due to events in Australia and overseas.

Simon Fonteyn is managing director of Leasing Information Services.

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