Retail spend is up. Here's what it means for you.
Learn how small-to-medium businesses like yours are faring right now – and learn about key retail innovations – in this quarterly macroeconomic update.
If there was a single word that described the past few years in Australian retail, it could be “tumultuous”. Since 2020, retailers have navigated lockdowns, pandemics, floods, fires and the rise of artificial intelligence, all coupled with a cost-of-living crisis that has tested consumers and small businesses.
However, the latest data reveals that most macroeconomic indicators are moving in the right direction for small businesses and retailers.
Discover what that means for businesses like yours in the first in a new series, ‘The Quarterly Small Business Briefing’, below…
Consumer confidence is currently hovering around a three-year high, at 92.21, inflation is steadily falling2, thanks to the recent interest rate cut from the Reserve Bank of Australia, and retail spend is (slightly) up.
“We’re still in the eye of the storm, but we’re cautiously optimistic,” says Fleur Brown of the Australian Retailers Association.
Her sentiments are echoed by retail strategist Brian Walker, the CEO of The Retail Doctor, who explains: “Compared to last year, retailers are observing a slight economic upturn.”
"Compared to last year, retailers are observing a slight economic upturn.”
Walker adds that the recent rate cut means that the average consumer now has more discretionary income. Australians with a $600,000 mortgage, for example, are now saving at least an additional $92 each month. “That’s not huge, but it’s emblematic of a return to the psychology of spending.”
Numbers to know in retail
80% of ecommerce businesses are already harnessing AI3
Why it matters: “There’s a race on to capitalise on technology, and Artificial Intelligence,” says Walker.
How retailers can respond: Smaller retailers shouldn’t assume that AI is the preserve of large brands, says Brown. “It’s not always the case that smaller retailers can’t stay ahead. They can often take risks that bigger players, who have more to lose, cannot. Often bigger players are slower moving, too… or they’ve invested so much in an existing tech stack that if they want to adjust something, it’s a monumental board-level decision.”
70% of global consumers will purchase from outlets or off-price retailers in 20254
Why it matters: Amid a cost-of-living crisis many shoppers are cutting back on spending and searching for value.
How retailers can respond: One of the biggest challenges retailers currently face is convincing cash-strapped shoppers that their products are worth buying. However, there are a range of ways to communicate value, says Walker: “Retailers should focus on offering competitive pricing, loyalty programs, and personalised promotions”.
20% of Australian shoppers purchased with Temu in 20245
Why it matters: Global platforms like Temu and Shein are making inroads in Australia thanks to their low prices and speedy delivery.
How retailers can respond: Australian retailers, especially those that are smaller, could consider emphasising the local nature of their offering “whether that it’s locally made or has an ethical supply chain” says Brown, who adds that local retailers can also appeal to shoppers looking for quality products from trusted businesses. “All Australians care about the safety and quality of the product they’re getting.”
75% of Australian Retailers Association members report a rise in retail crime6
Why it matters: Not only is retail crime on the increase, but, according to reports, it’s growing more violent. “The wellbeing of retail staff is the top concern for retailers, but the loss related to retail theft is also a really significant concern,” says Brown.
How retailers can respond: Many retailers are exploring increasingly sophisticated tech to combat organised retail crime.
"The wellbeing of retail staff is the top concern, but the loss related to retail theft is also really significant ."
What next for retailers and small business?
The next few months on the retail calendar include the Easter holidays – which can deliver an uptick in sales related to home improvement – as well as Mother’s Day as well and End-Of-Financial-Year sales.
The federal election is also looming, and both Walker and Brown agree that the uncertainty that surrounds elections tends to cause fluctuations in retail spend. Meanwhile, the flow-on effect from Donald Trump winning the US election is still unclear.
“There is an opportunity now for many retailers who are well differentiated to focus on margin and growing back margin because they have been giving away a lot of gross margin to make sales,” says Walker.
Retail innovation radar
Stay up to date with the retailers changing the game on tech and innovation
Next-gen loyalty
Many retailers are focusing on loyalty programmes. Adairs’7 half-year results showed that its million-strong Linen Lover members account for 85 per cent of sales. Some brands, like PetStock8, are opting for personalised rewards, such as free DIY dog washes, over traditional discounts.
AI innovations
Petbarn recently made headlines with its first-of-a-kind Gen AI solution that offers tailored vet-approved advice and product recommendations, while The ICONIC is using AI10 to automatically scan and tag product photos with in-depth metadata, which has driven productivity gains.
In-store payments
When Adore Beauty opened its first physical store in Melbourne this year, it launched a QR code payment system that enables customers to scan their shopping cart and make an immediate and secure payment on their device. The brand also offers an in-store skin analysis system.
And Decjuba has partnered with resale site Authentified to enable customers to resell pre-loved pieces. Not only does the platform make reselling simple, it increases purchase frequency. A pilot programme found that 89 per cent of shoppers went on to purchase another Decjuba product. The launch comes as a growing number of retailers launch in-house resale programmes.
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1 Australian Consumer Economics, 2Reserve Bank of Australia, 3 Highlights from the State of Commerce Report | Salesforce, 4 Business of Fashion, 5 Temu passes eBay market share for the first time | Fonto, 6 Australian Retailers Association, 7 Adairs, 8 Woolworths Group, 9 PetNews, 10 Retailbiz
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