Holiday Joy to the World of Retail

Retail & Consumer Products

December 12, 2016

Holidays Presents

Even though retailers continue to grapple with intense competition from global chains, digital disruption, high overheads and inefficient store networks, Australian consumers are tipped to spend 2.3 percent more (AU$48.1 billion) on Christmas at Australian retail stores this year compared to 2015, according to The Australian Retailers Association (ARA) and Roy Morgan Research.

While this will bring joy for some retailers, for those who may look to close stores in the hope that online sales will fill the gap, 2017 may not repeat the sounding joy.

Although a large bump in online sales has been experienced by U.S. retailers facing similarly modest sales (a 3.3 percent increase over the same holiday period), Amazon currently accounts for $1 of every $3 spent online in the U.S. As Amazon moves into Australia in 2017, the likely continued accelerated growth of online sales may not bring any joy to Australian retailers.

Most large retailers continue to engage in highly promotional activities that ultimately are harming their underlying business. What choice do they really have? With a few exceptions for standout brands, holding line on higher price points will not get the sale made. Smart shoppers have come to expect large retailers to be at least price competitive with online – or else they will move on quickly. But winning the sale under these conditions is not nearly as easy or profitable as it used to be.

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