Retailers face tough times but consumers are starting to spend

Christmas Shoppers In Brisbane’s Queen Street Mall this week. Picture: Glenn Campbell

Retail performance has long been a bellwether for our economy, and this year’s Christmas and peak trading period have never been more crucial for Australian ­retailers.

As we reflect on 2024, the past year has certainly packed the punches for a sector which employs one in 10 Australians and contributes an enormous $430bn to our economy.

Encouragingly, we are projected to end the year with a welcome spending boost, as Australians prove eager to embrace the festive season and spoil their loved ones, despite undeniably tough economic circumstances.

This year’s challenges have pushed businesses to innovate and adapt like never before. Amid global and domestic economic instability, the industry faced multiple obstacles.

From slower consumer spending brought on by the cost-of-living crisis and supply chain challenges to the ongoing impact of higher costs across the board, retailers have had to navigate a shifting landscape.

To add to this, the presence of online disrupters such as Shein and Temu compelled traditional businesses to rethink their strategies, particularly with the rise of e-commerce and changing consumer behaviours.

While shoppers were, understandably, displaying cautious shopping habits throughout most of the year, forecasts show Australians will inject $69.8bn into retail during the lead-up to Christmas – a period when discretionary retailers can make up to two-thirds of their annual income. That’s up 2.7 per cent on last year’s figure. This modest growth in consumer confidence and spending is ­welcome in a year of economic volatility.

It’s been fascinating to reflect on some of the shopping trends shaping the back end of 2024.

When times are tough, Aussies get together, and gathering to celebrate with loved ones continues to see food and hospitality as one of the strongest spending categories, with Australians ready to fork out $28bn on festive food and $10.6bn on hospitality.

Our research shows shoppers began their planning for Christmas early, with more than half of Australians saying they finalised their shopping lists during October and many commencing gift-buying then too. This shift towards early shopping reflects not only a desire to secure deals and the best gifts for loved ones, but also an effort to reduce stress in a tough year.

While online channels continue to grow, most shopping – in fact more than 80 per cent – continues to take place in stores, with many Australians enjoying shopping as an experience and an outing and not just a necessity.

This year’s Black Friday and Cyber Monday events were bigger than ever, with shoppers predicted to have spent around $6.7bn over the four-day period, up 5.5 per cent on last year’s figures. We know that many use this event as an opportunity to buy discounted gifts. Our department stores offered exceptional discounts of up to 70 per cent, and the most popular categories were cookware, kitchenware deals, fashion and beauty. The growing popularity of Black Friday and Cyber Monday demonstrates the significance of sales events in driving holiday spending, as well as the role these events play in retailers’ end of year ­strategies.

Despite the early shopping trends, as we head into the final days of Christmas, gift-giving has shown no sign of slowing down. This year, 16.7 million Australians are getting into the festive spirit, spending a total of $11.8bn on presents, and these generous gift-givers will be spending an average total of $707 each.

These figures reflect Australians’ commitment to making Christmas special.

Small businesses have had a challenging 2024.

They have faced higher operating costs, supply chain disruptions and competition from international e-commerce giants. However, these businesses have demonstrated remarkable resilience in the face of various setbacks.

The Australian Retailers Association and American Express Small Retail Index found that many small retailers will be innovating this festive season by offering new product ranges and unique experiences to attract more customers.

We also learned that 44 per cent of small businesses surveyed were expecting their sales to be up on last year’s results.

This optimism is a testament to the adaptability and creativity that small retailers continue to display, especially as they focus on personal customer experiences, local offerings and niche markets.

In addition to product innovation, small businesses are leveraging digital tools and platforms to enhance their customer reach. The pandemic accelerated the adoption of online shopping, and small retailers are increasingly utilising e-commerce, social media and customer engagement strategies to meet consumers where they are.

This year, Australians have demonstrated their commitment to making Christmas special, and retailers have responded by providing an ever-evolving shopping experience that meets the demands of the modern consumer.

Despite the hurdles of 2024, it seems the Christmas spirit is well and truly alive, and Australian ­retailers are embracing the festive season with optimism and ­excitement.

As we enter the new year, we will take new lessons with us – from the growing significance of e-commerce to the importance of consumer values and experiences.

This peak season will no doubt help shape the future of Australian retail for years to come.

Fleur Brown is the Australian Retailers Association’s chief industry affairs officer.