The previous record of uninterrupted economic growth – 26 years – was held by the Netherlands; Australia surpassed it two years ago and economists are predicting the trend will continue until some point in the next two years.
What is confusing, however, is the current state of the retail sector. Consumer spending has fallen to its lowest level in a decade and the economy has slowed further over the past year with GDP growth tumbling under 2 per cent – there was only a 0.4 per cent increase in first three months of the year for year-on-year growth of 1.8 per cent, the slowest growth since the September quarter in 2009.
This combination of circumstances has lead National Australia Bank (NAB) economists to declare that Australian retailing is “clearly in recession”, following the bank’s Monthly Business Survey for May 2019, which found further deterioration in business conditions.
Somewhat confusingly, the same survey found that business confidence increased by 7 per cent. What is going on?!
NAB is not alone in its view. Management at Woolworths Holdings, the South African-based retailer that owns David Jones (DJ), also says Australia’s retail sector is in recession after writing down the value of the department store by $437 million for FY18.
According to a company spokesperson, the business is under “unprecedented economic pressures’’.
On the other hand, you have Harvey Norman’s executive chairman Gerry Harvey declaring that the retail trade might be flat but it’s “not in recession”. Australian Retailers Association executive director Russell Zimmerman agreed, calling it “not as bouyant as it should be”.
Again, what is going on?!
DJ has been struggling for years but so have almost all department stores worldwide. Are DJ’s problems with the Australian economy or is an out-dated business model to blame?
Super Retail Group, the owner of Supercheap Auto, Rebel, BCF and New Zealand apparel and equipment brand Macpac (formerly Rays Outdoors) is one retailer that’s doing well. The group’s auto stores in particular continue to increase sales and maintain margins.
Could it be because this owner of traditional bricks-and-mortar stores focuses on customer service and actually has staff on the floor?
Retailers can no longer be all things to all people, which is why the once almighty Myer and DJ business models are doomed. Specialty retail encompassing a customer- focused traditional store along with a healthy online presence is the only future; however, it’s not all roses for those businesses either.
Jewellery retailing is doing it tough and it’s not just an Australian phenomenon; there are problems worldwide. The diamond industry is one sector facing major challenges.
As has happened in the past, most of the industry’s problems are self-inflicted. For example, many Indian diamond-trading companies have been affected by a tightening of credit regulations following a number of high-profile frauds and bad loans.
From banking and finance to supply and the changing consumer, the international diamond market is undergoing a re-structure. This is happening at the same time as high- end jewellery sales are stagnating. I ask again, what is going on?!
I don’t know but one thing is sure – standing still is going backwards. You need to be looking for new opportunities and new ways of doing business, and this goes for suppliers as well as retailers. The Sydney fair is upon us. Maybe the difference between your store going backwards and going forwards could be on display there. Maybe you should visit?
Regardless, as the famous US Army General Norman “Stormin’ Norman” Schwarzkopf Jr once said, “Just do something!”
He was right!
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