Retail ready for joy of Christmas sales boom

Christmas is the most critical time of year on the retail calendar, when many discretionary retailers, particularly those in fashion, footwear and personal accessories, make up to two-thirds of their profits. Picture: NCA NewsWire/Paul Jeffers

As we exit the final lockdown, there’s no looking back.

The retail recovery is ramping up. Shops are back open across Victoria, NSW and the ACT, people who have been locked down for months are back out and about, enjoying the warmer weather, planning holidays and get-togethers with family and friends. There’s a buzz in the air and retailers across the locked-down jurisdictions are hoping to capitalise on pent-up demand in the lead-up to Christmas.

Christmas is the most critical time of year on the retail calendar, when many discretionary retailers, particularly those in fashion, footwear and personal accessories, make up to two-thirds of their profits. Every day of trading counts in the lead-up to Christmas – particularly this year, when these are the categories of retail that have endured the longest lockdowns. Along with CBD retail, hair, beauty and travel, these businesses – and many small operators – have been the most damaged by the pandemic.

Fortunately, there are positive signs for consumer spending in the weeks and months ahead. Our forecasts in conjunction with Roy Morgan show Australians will spend about $59bn in the pre-Christmas sales period. This is in line with last year’s spending – and up 11.3 per cent on pre-pandemic conditions – so there’s good reason for retailers to be optimistic about trading conditions in the months ahead.

While there’s a lot of Christmas cheer in the spending forecasts, there are significant challenges facing the retail industry – many of which are outside their control.

Supply chains have been an ongoing issue throughout the pandemic, and this has intensified as we enter the busiest shopping months of the year. Some distribution centres and warehouses have been affected by reduced staffing levels due to Covid cases, we’ve had industrial disputes from delivery drivers and port workers, while state border controls and limited domestic flights have also affected the movements of goods. At a global level, retailers are reporting that the capping of incoming flights has put significant pressure on shipping, and we are seeing container costs rising up to four times their usual rate. All of this is creating the perfect storm for retailers and consumers, so the message is to shop early to avoid disappointment.

Staffing is also a challenge as businesses go on a casual worker hiring blitz in the lead-up to Christmas. Many businesses rely on international students and skilled migrant workers to fill these positions, but both these cohorts are largely absent given the international border restrictions, so many of these positions will go unfilled. While it’s great to see quarantine-free travel for international arrivals and plans in place to allow students back in the country, it will be a gradual ramp-up and not an immediate snapback to pre-pandemic migration levels.

Australian Retailers Association chief executive officer Paul Zahra.

As we build towards a recovery, it’s important to acknowledge the many genuine gains from the pandemic. Online trading is on an incredible trajectory and many small businesses are now confidently operating as omni-channel retailers. Consumers are now expecting retailers to “meet them where they are” – and we’ve seen businesses that were previously offline accelerate their investments in digital so they can cater for customers whichever way they interact with their products – through a mobile phone or computer to complement existing in-store transactions. At least 85 per cent of Australian shopping remains in physical stores, with shopping now recognised as an outing as much as a necessity. However, digital investments have become an important future hedge with online sales keeping many businesses afloat through the darkest days of lockdowns.

Customers of all ages have embraced online shopping, and once customers change their habits, they tend to stick.

The innovations that have stemmed from Covid will also last for decades, with the introduction of AI and augmented-reality offerings bringing a new dimension to the shopping experience that even small businesses are embracing. Customers can see how a new couch will look in their living room, or whether a new shade of lipstick or pair of earrings are the right match for them – all without having to leave the house. Businesses have discovered the power of knowing their customers’ needs and preferences using online data and are reaping the rewards.

Retailers – always agile – have also taken their skills to new levels. Despite the very difficult impact on staff of navigating increased customer aggression, our teams have strengthened their resilience and gone above and beyond. Our staff saw the powerful and positive impact of their role on the frontline – with many the only social connection some people experienced during severe lockdowns. Retail staff elevated their customer service skills to the next level and, while difficult at times, it has built confidence and resilience in the retail workforce.

Navigating the inconsistent approaches from state and territory government around Covid restrictions, lockdowns and vaccine requirements have been a constant frustration during the pandemic. But retailers have got on with it with minimal fuss, adapting quickly to the health and safety requirements that are often put in place with little notice and little consultation from government. It’s been difficult, it’s been frustrating, but businesses are now looking forward to maximising their trading potential without the threat of future lockdowns.

We’re going to be living with Covid for some time, but the worst of the pandemic is now behind us. Retailers have learned some valuable lessons during this period – they have adapted, innovated and embraced new ways of working. All of which sets them up well to capitalise on a post-Covid spending boom and success into 2022 and beyond.

Paul Zahra is CEO of the Australian Retailers Association