Retailer's Christmas Survey 2018
Deloitte 2018 Retailers’ Christmas Survey: higher sales, higher margins, confidence reigns
15 November 2018: Australian retailers are approaching the all-important Christmas trading period with a strong sense of optimism, according to Deloitte’s 2018 Retailers’ Christmas Survey.
Now in its 7th year, key survey findings include:
· 80% of retailers expect to see higher sales this Christmas compared to last year, with 41% predicting growth of 5% or more
· 56% are expecting to see some form of margin increase
· 79% are expecting to experience growth of 10% or more in online Christmas sales
· 62% will be discounting to help drive sales, but most only after 25 December
· 83% believe Amazon won’t have any impact on their Christmas trading performance
· More than 90% expect to see positive sales growth in calendar year 2019.
David White, national leader of Deloitte’s Retail, Wholesale & Distribution Group, said: “Broadly speaking, our retailers are optimistic. The overall market has performed relatively well in 2018 and, in spite of competitive and economic challenges, they appear to be carrying this optimism forward into the Christmas trading period.
“They expect to increase both their sales and profit margins compared to last year, pinning their hopes on two key areas in particular – a strong product mix, and an uptick in online sales on the back of investments they’ve made in omni-channel business models.
“Discounting will remain an important Christmas sale strategy, with more than 60% of retailers planning to discount, and a further 21% still to make a call on this front. Importantly, they are looking to hold strong on pricing this side of Christmas, with lower pricing only on the agenda as part of Boxing Day sale strategies.
“Their intentions on pricing auger well, but they will be highly dependent on customers being enticed by great products, convenience and customer service, whether in store or online.
“With shoppers choosing to look and buy later and later each Christmas, helped by continuing improvements in online offerings and faster and more reliable delivery services, the first trading week in December will be of intense interest, and likely to cause at least some jittery nerves.”
Online: the new(ish) battlefield
“2017 saw a significant increase in retailers strategically investing in their digital capabilities,” White said. “This year, it appears they are looking to reap some reward from these investments, and online is set to be a key sector battlefield this Christmas.”
Nearly 80% are expecting growth of 10% or more in online Christmas sales (compared to the US, where consumers expect to spend a staggering 57% of their holiday retail budget via online).
“Australia might finally be seeing the true acceleration of online retail that other developed markets have already experienced,” White said. “We’re undoubtedly seeing a local shift to similar business models – it’s just taking more time.
“Of course, that doesn’t mean the physical store is in need of life support. The role of the store is changing away from just being a transactional space to an opportunity to build brand through an experience and service that can often only be achieved face-to-face with the customer.
“Customers can expect to enjoy more innovative store designs and concepts this Christmas, as retailers experiment with new ways to build brand and connect.”
Competitive landscape requires a winning strategy
“In the face of increasing competition, retailers now more than ever need to be bold in investing in understanding their customer preferences, how they want to shop and when,” White said.
“Retailers would appear to be attuned to this need, with 35% identifying customer engagement and experience as their number one strategic priority. Running a close second is omni-channel at 31%, which aligns with retailers telling us they see building sales outside their store networks as critical to their growth strategy.
“Amazon remains at least one very large elephant in the room. While we’ve yet to see the full force of Amazon locally, its Prime offering isn’t as compelling, yet, as in the US and UK in terms of driving volume of impulse buying and loyalty to the platform. This may help explain why 90% of our respondents said Amazon hasn’t affected their business since its local launch.
“But it’s important to learn the lessons from other countries where Amazon has been so successful. Amazon Australia continues to invest heavily in its infrastructure and people, but it’s not realistic to expect the creation of a multi-billion dollar business overnight. So it’s a word of warning – under-estimate Amazon at your peril.”
White said that, despite some warning signs for the broader economy, such as falling house prices, the prospect of higher interest rates, rising energy costs, and a weakening dollar, retailers still remain relatively bullish about their prospects for next year.
“Over half of our survey respondents expect consumer confidence to decline in the next 12 months, but more than 90% expect to see positive sales growth in 2019, and nearly a third are predicting growth in excess of 10%,” he said.
“The role of the store will continue to be a critical part of retailer strategies, but it seems they are confident their investment in digital will provide the impetus to drive their growth prospects in 2019.
“Amazon has set the cat amongst the pigeons, bringing scale and capabilities that have the potential to strike in those areas in which Australian retailers are most vulnerable. Opinions remain divided on the size and timing of Amazon’s impact, but this Christmas will give us a better idea of just how much progress they’ve made.
“Over 50% of respondent retailers are currently not generating revenue from overseas, and only a third are currently considering building overseas operations. But with the Australian market becoming more saturated, it’s only a matter of time before they do, and perhaps have to, shift their attentions offshore.”