Home improvement is booming. Are car sales next in the fast lane?

Doubts about using public transport and domestic rather than international travel could mean a recovery for the battered motor industry. Picture: Thomas Wielecki.

The home improvement and appliance industry has shown Australia that there are people out there with money to spend — it’s just a matter of tapping their pockets.

I’ve already set out how the home improvement and appliance sector has achieved unprecedented rises in sales during the last six weeks. A big proportion of the money being pumped into the economy is being directed this way. A lot of industries now need to look hard at how they can get a slice of the spending action.

For example, restaurants are being opened and other new avenues of spending are being given a chance to tap the cash in the pockets of income-earning Australians.

As I discuss below, car sales could be next. Google searches for new and used cars have risen rapidly in recent weeks and this could signal that demand for new and used cars has finally turned.

And in a strange way, we are also discovering that parts of the mining industry may also be set for a boost. Normally when there is a big rise in sales from an industry that relies on China for supply there are long delays fulfilling orders. This time Australians are seeing first-hand how severely the Chinese are being affected by the severe US downturn and trade clamps.

Chinese suppliers are welcoming the Australian orders and, at least in many areas, are quickly fulfilling requirements.

And there is a second Chinese paradox. Our retail buyers in conversations with the Chinese are discovering that business activity in the Middle Kingdom is much tougher than is generally understood in the west.

In the dispatches through normal channels Australia is being told not to expect big rises in iron ore ordering, but the tough conditions in China are making it likely that some of the new stimulus will be directed towards infrastructure, which will cause a rise in Chinese demand for iron ore and, perhaps, metallurgical coal, in coming months.

Australia should be on the alert for such an event, particularly as COVID-19 has ravaged Brazil, which might affect Australia’s main iron ore rival, Vale.

As restaurants and other new spending avenues open up they may find that simply doing things in the old ways will no longer work.

Among middle-aged homebound Australians, still earning an income, there is a heightened degree of safety awareness. Restaurants, zoos and other areas will need new skills to attract that middle income dollar.

Fascinatingly, the big home improvement and appliance chains used heavy print advertising and other promotions to boost the spending rate. And it worked. Another side of the increased time spent working and living at home has been an increase in digital subscriptions to newspapers. The rise in this revenue has at least helped offset declining property sales.

Two of the industries in the doldrums that should take note of the boom are home building and cars.

Home building was hit by the buying withdrawal of a big chunk of younger people whose income was ravaged by the COVID-19 clamps. But new approaches need to be tried such as convincing inner-city dwellers that it is better working at home in outer areas where there is more space.

The car industry should benefit from further COVID-19 relaxations. Australians have been slashing their expenditure on cars for many months and the COVID-19 restrictions did further damage to the industry because car travel was curtailed.

But the sort of people who are spending money on their homes are also potential buyers of cars and with public transport less safe, car travel is going to increase. In addition, airlines are out of action so holiday tourism is going to be directed towards country areas within easy driving range of capital cities.

If car makers and dealers direct their promotion to this market — just as the home improvement and appliance industry did — then we could see a partial recovery in the motor area.

And country tourism has a unique opportunity given that the airlines are out of action. But if the motor industry, country tourism and other industries are too battered and don’t adapt, they will stay in the doldrums.

There are a lot of Australians doing it tough but there are also many who have cash in their pocket, but they won’t necessarily respond to the old promotions. The challenge will be for enterprises to learn from the building and appliance industries and make it work.

Shareholders will be looking to see which companies have the necessary skills to tap the new markets.

Meanwhile, in coming weeks and months, expect some good reports from home improvement and appliance retailers plus others exploiting the spending boom. But we need to be wary of a rise in infection rates.