Scarred retailers look ahead to bumper Christmas

Retailers are more optimistic than ever about festive season sales this year, but half say they won’t have the stock to meet demand, a new report reveals.

From famine to feast: retailers are worried they will not be able to meet the booming post-Delta demand. Picture: Paul Jeffers

Retailers have high hopes of a bumper Christmas sales period, but about half don’t believe they will have the stock to meet demand.

A Deloitte survey revealed that 80 per cent of retailers expected to see better sales this festive season than the last – 20 percentage points higher than the previous year and the highest in the report’s 10-year history.

In a further sign of widespread optimism, nearly 90 per cent of respondents expected trading conditions to improve, or stay the same, over the next 12 months.

The Australian Retailers Association and Roy Morgan estimated that Australians will splurge a record $5.4bn in the pre-Christmas Black Friday sales later in November.

The expectations for a bumper summer come after retail turnover suffered its biggest slump in recorded history over the three months to September, after NSW, Victoria and the ACT were forced into lockdowns through most of the quarter.

As cashed-up Australians look to spend big in the coming festive season, the Deloitte survey revealed that global supply chain issues meant only half of retailers expected that all of their stock orders would be received for the Christmas sales peak – “an alarming insight that highlights just how difficult the situation may become,” the report said.

Soaring shipment costs have also become “a major area of concern”, the report said.

More than 70 per cent of respondents highlighted that shipping costs were having a considerable or significant impact on costs.

A lack of shipping capacity has triggered a fourfold increase in sea freight rates over the past year, Moody’s Analytics said. And a recent global survey of 148 businesses by Oxford Economics found only two in 10 surveyed firms believed the worst of the global supply chain disruptions had passed.

 

Still, Australian retailers are expecting margins to remain steady this year, the survey showed, suggesting businesses could draw on existing stock or pass on higher costs to their customers this Christmas.

And forecasts of stock shortages come December are not shared by all segments of the retail industry.

In a recent annual general meeting address, Wesfarmers managing director Rob Scott said the conglomerate’s retail businesses – which include Kmart, Target, Bunnings and Officeworks – “have been effective in managing the disruptions in global supply chains and are well positioned with inventory for the important Christmas trading period”.

With more Australians working from home, retailers in city centres faced a considerably more uncertain future, the Deloitte report showed.

Nearly half of survey respondents expected it would take two years for CBD stores to return to their pre-Covid levels of activity, and a further 26 per cent expected activity levels to remain below pre-Covid indefinitely, the report said.