Facing the great slowdown

There is a super new feature on eBay for consumers which is not so super for retailers. If a shopper likes a particular dress, pair of shoes or other item but is not so enthused about the pricetag, they can take a photograph and use an eBay app to search for another vendor and a cheaper price.

Try $6 for a dress that was on the racks of a local retailer for more than $80, courtesy of a Chinese or Southeast Asian supplier that is, in all probability, pirating the design and infringing intellectual property rights.

Is it any wonder that most fashion retailers are struggling to survive and facing in the months ahead a push by Amazon for a larger slice of the apparel market?

Of course, fashion retailers are not alone in their troubles, with online platforms like eBay, Amazon and Alibaba providing virtual shopping malls.

Bricks-and-mortar retailers are facing a perfect storm in their search for ways to boost sales and, more importantly, profitability.

The lure of online

The online incursion is an obvious issue as more and more consumers opt to buy a wider range of products from internet vendors and sales platforms.

Consumers are increasingly confident of the security of buying online, and at $6 a dress – shipping and GST included – who cares if some items aren’t of great quality and don’t last very long?

Citigroup’s Shoppertrack indicates that foot traffic in shopping centres fell by eight per cent between the November Black Friday sale and Boxing Day, a statistic that is consistent with my observations of parking and customer levels in centres I visited in Melbourne.

The numbers did look better from Boxing Day on into the first week of January, but arguably the damage would have been done for many retailers hoping a bumper Christmas trading period would be a sign of greater consumer confidence and a willingness to spend.

It will be interesting to analyse online sales patterns in the Christmas trading period and into the new year, especially as November has pipped December in the past two years for the highest monthly sales.

I would expect the November sales to beat December trading again in 2018, in part, buoyed by the Black Friday promotion. But that won’t be comforting news for retailers trying to defend margins and profitability.

Online competition is not the only issue for bricks-and-mortar retailers, of course, with changing consumer behaviour, the drag of high legacy rents in both malls and high-traffic strip centres and wages that are set to rise sharply in the months ahead.

The changing consumer behaviour is probably the issue of greatest concern, as you can meet rising costs provided sales are increasing and maintaining, if not improving, margins.

Confidence collapses

Online buying is obviously a significant change, but a relative decline in actual consumer spending power is also a key factor in lagging sales. There is even a reluctance to visit shopping centres to avoid the temptation of spending money and overreaching household budgets.

There is a disconnect between federal and state members of parliament spruiking the performance of the economy and employment rates and consumers sitting at their kitchen tables trying to juggle bill payments.

The ever-increasing level of part-time jobs doesn’t help to meet mortgage and car payments, let alone provide for discretionary spending.

For self-funded retirees, the sharemarket and other investments, including property, are not providing reliable income or capital appreciation, and household debt levels are continuing to trouble the Reserve Bank.

The tightening of credit by banks and the loss of the debt buffer provided by increases in house prices is also taking a toll on consumer confidence and forcing household spending cuts.

There are some retailers that have apparently had good Christmas sales, but it is doubtful that Myer or David Jones and many retail chains, especially in the apparel category, had much cause for celebration.

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