26 May 2017   

5 min read
The continued outlook for retail for 2017 looks likely to be focused on change – new global retailers entering the market, a transitioning Australian economy and evolving customer preferences.

Looking at the macroeconomic picture for Australia, it’s a mixed bag. The housing market is slowing and wage growth is modest, but interest rates remain low, which should still give Australian shoppers a reason to spend rather than save. When the Fair Work Commission’s penalty rate changes start to take effect from July, retailers will find themselves with more room to stretch. 

Citi analyst Craig Woolford puts retail sales growth in the early part of 2017 at 2.9% and expects retail spending to grow at 3.5 to 4.5% over the calendar year. While these results are softer than this time last year, economic growth looks like remaining steady in the short term. 

Paul Chapko, NSW Strategic Analyst for the Australian JLL research team believes with interest rates at record lows, the “consensus is that the cash rate will remain steady in 2017 and then potentially rise from late 2018.” 

While Australia’s unemployment rate remains at 5.9%, just above the 20-year long-term average of 5.8%, and wage growth is relatively subdued the uplift in jobs expected in 2017 should support retail spend growth over the year. 

He cites the Australian economy as delivering an estimated 145,900 jobs over the year to March 2017, which reflects employment growth of 1.2%. If you’re looking for a part-time job, you’re likely to find one with the number of part-time workers increasing from 20.8% of the total workforce in January 1990 to 31.7% of the total workforce in March 2017. 

What about spending? 

Last year apparel spending grew faster than any other retail category. In February 2017, the strongest performer was accessories, which posted 3.6% growth. There’s room to be optimistic with the retail sector receiving a boost from international tourism, particularly from China, and the arrival of new international brands lifting apparel spending. 

In food retailing, Craig Woolford reports that food sales will gather pace pointing to supermarket sales, which rose by 3.7% in February 2017 better than the 1.6% growth rate recorded the month before. Liquor sales were also up by 4.2% and café and restaurant sales improved by a healthy 4.4%. 

Strong sales in February 2017 were recorded in electronics, which climbed by 3.0% and furniture sales, which increased by 1.4%. 

Annabelle Atkins, research analyst with the Australian JLL research team says there will be continued disruption in retailing this year with “the imminent arrival of UK department store Debenhams… and TK Maxx’s aggressive rollout across Australia’s eastern seaboard markets”, both of which will add to challenges for Australian retailers. 

While the success of international fast fashion retailers has been mixed, there’s no doubt that more players will arrive and those already in Australia will continue to expand, and traditional clothing retailers will need to adapt to stay relevant.