E-commerce grows amid overall retail slump

Online retail accounted for 5.9 per cent of total retail turnover in October, compared to 4.7 per cent a year prior and 5.6 per cent in September, according to data released this week by the Australian Bureau of Statistics.

Total retail sales increased by 0.3 per cent over the month, with clothing, footwear and personal accessory retailing leading the rise, increasing 2.6 per cent.

Household goods retailing (0.6 per cent), other retailing (0.5 per cent), department stores (0.4 per cent) and food retailing (0.2 per cent) saw increases, offset by a 0.9 per cent fall in cafes, restaurants and takeaway services.

While the results don’t show a thriving industry, the increase over the September results are welcome news for retailers ahead of the Christmas season.

“Although we would ideally like to see monthly increases of 0.4 or even 0.5 per cent, we welcome the fact that these numbers are trending in the right direction as we head towards Christmas,” National Retail Association deputy chief executive Lindsay Carroll said.

Economy dragged down by slower spending

The Australian economy grew just 0.3 per cent in the September quarter, dragged down by slower spending on discretionary items, according to the ABS.

Spending on non-discretionary items, such as food and housing, increased 0.3 per cent in the quarter.

The increased spend on housing, combined with consumers’ shrinking disposable incomes, resulted in the slowest household saving rate since December 2007 at 2.4 per cent.

But while these factors may have hurt retailers in the quarter, newly released ABS data on the sector’s productivity shows that retail has outperformed the market in productivity growth over the past two decades, thanks to increased competition and advancements in technology.

In particular, automation and digitally-enabled retailing have replaced more labour-intensive practices in the industry over the past two decades.

Since 1995-96, the retail sector has seen multi-factor productivity growth of 1.5 per cent per year, compared to the broader market sector’s growth of 0.9 per cent. Multi-factor productivity growth is that which can’t be explained by changes in labour or capital inputs. For instance, it could be the result of organisational change, economies of scale, or new management practices.

The ABS report cites changes to opening hours, increased online retailing and the adoption of less labour-intensive technology, such as self-serve checkouts, automated ordering and shelf-ready packaging at brick-and-mortar stores as some of the drivers of multi-factor productivity growth in retail.

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