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Online Sales Spark Woes For Aussie Bricks-and-Mortar Retailers
In Australia, and across the world, there has been a clear shift in the way consumers shop during the key Christmas trade period, with online sales events causing problems for December foot traffic.
If you thought Australian shopping centres seemed quieter this December, you would be right. According to data from Citi Research and ShopperTrak, foot traffic was down by roughly eight to nine percent between Black Friday and Boxing Day.
“Shoppers continued to shift December shopping trips online”, Citi Research said. The research firm says this decline is a direct result of consumers shopping during notable online events like Click Frenzy and Black Friday, which both take place in November.
“We estimate overall foot traffic into stores from Black Friday to Boxing Day 2018 was down around nine percent on this measure, a deceleration from the same periods in 2016 and 2017.”
With November sale figures expected to be released on Friday (January 11), economists are reportedly reluctant to celebrate any wins, as any positive performance during November will likely detract from the number of purchases made during December.
Speaking to the AFR, Russell Zimmerman, the executive director of the Australian Retailers Association said that Click Frenzy, Black Friday and Cyber Monday seem to have attracted a lot of sales… “But that looks like it may be at the expense of people shopping in bricks-and-mortar stores in the December period,” he said.
“What my gut tells me, from talking with retailers … is the general consensus is Click Frenzy, Black Friday and Cyber Monday will have taken or detracted from December sales.”
This shouldn’t come as a surprise to most as 57 percent of Australians planned to shop both in-store and online during Black Friday, while a further 37 percent intended to shop Black Friday and Cyber Monday sales exclusively online. Research from Criteo that was released well before Christmas also suggested that consumers would start making purchase decisions as early as October, ready to process their online transactions during November’s online sales events.
For retailers that participated in these online shopping events, or ones that have a strong online presence, declining traffic in December will likely have less of an impact, as October and November become stronger sales months and begin to overtake December as the busiest time of the year.
This shift in consumer spending isn’t isolated to Australia, with analysts in the UK noting similar trends, claiming retail sales for the region had their worst year in more than a decade. According to a report from business advisers at BDO LLP, sales at UK bricks-and-mortar stores fell 1.9 percent in December on a like-for-like basis.
Much like in Australia, rather than visiting a retailer’s physical store, UK shoppers have instead opted to look for an online sale, further exasperating the existing issues facing traditional shop fronts, like diminished consumer confidence and rising rents.
In its report, BDO said that non-store like-for-like spending (online) rose 12 percent last month, indicating the strength of the online sector. As such, in the UK, high-end retailer, Next experienced an online sales boost of 15.2 percent over Christmas, while its in-store revenue fell by 9.2 percent. Meanwhile, clothing retailer, Joules says its sales increased by 11.7 percent over the period, with half of its total sales for the month coming from online purchases from both its own website and through concession partners’ websites.
Looking back to Australia, Dean Salakas, Co-CEO at The Party People says that October and November, and even December were particularly strong for his business. Speaking to Power Retail, the industry veteran said that he is lucky to have a product range that appeals to a broad customer-base outside of the traditional festive season, as well as a successful online model.
“October, November and December were particularly strong for us this year. Halloween was bigger in the days after October 31, by more than double the previous year’s post-Halloween trading days,” he says. “November was also strong due to good Christmas sales and also the post-Halloween sales.
“In particular, we have noticed customers’ baskets are shifting from low-quality, lower-priced items to better quality, more expensive items. We see this as a shift in customer expectations, where in the past they would settle for lower quality items, while today they have more choice, while they’re looking for value, not just low prices,” he continues.
In the lead up to Christmas, Finder.com.au estimated that the average Australian consumer would spend $1,325 during the silly season, equating to roughly $25 billion. The Australian Retailers Association, however, believed the total figure would be as much as $51 billion, once hospitality spending was also taken into consideration.
So far, no exact figures for Australia have been released, but judging by the trends that have been emerging over the past month, retailers with strong online models are likely to see Christmas trade results that outplay traditional retailers that have been slow to adopt a more digital-friendly approach.