The Business of Retail 2011 Report

Exploring the options of the retail industry in Australia

Australia-first research reveals the state of the retail industry in 2011

The Business of Retail report, launched by BRW & AMP Capital Shopping Centres, outlines retailer thoughts on the economy, their goals and their concerns

Sydney, 19th May – Australia's most comprehensive study into the nation's $2441 billion retail industry, released today, reveals that Australian retailers see blue skies on the economic horizon.

The in-depth report, based on online responses of nearly 300 retailers, found that although there was cautious optimism about some short-term prospects, the majority predicted a more robust economy in three years. This outlook was supported by some bullish ambitions, with 8% rating 'expanding the business' as their top business goal in 2011.

The Business of Retail report has been commissioned to mark the first ever BRW & AMP Capital Shopping Centres Australian Retailer of the Year Awards, recognising the best retailers Australia has to offer.

What are retailers' business priorities in 2011?

Retailers were called on to rate their business ambitions for the next year, revealing a focus on growth and cost control in order to succeed, signalling a positive intent after a period of defensive strategy during the GFC. When asked to rank goals for 2011, the responses in order were:

Despite the ability of respondents to identify plenty of business needs and plans for 2011, one of the surprising findings was how few retailers had gone on to develop a comprehensive business plan. One in five (20%) of survey respondents hadn't developed a strategy for their business while almost half (45%) have had discussions without forming a concrete written approach, while a third (35%) of retailers interviewed has a documented strategic plan.

Retail as a benchmark of the Australian economy

Commenting on the Business of Retail report, Bryan Hynes, Managing Director, AMP Capital Shopping Centres, emphasised the importance of retail to Australia:

Many retailers have undergone a challenging time throughout the GFC, and we thought it was time to look at what innovation has taken place, and to celebrate it. This research shows that blue skies are ahead, with the increasing optimism of retailers revealed.

We are proud to have spearheaded, in close partnership with BRW, such an important initiative. We are delighted to be celebrating the achievements of an industry that employs 11% of Australians and represents 4% of the country's GDP.

Sales fatigue expands from shoppers to retailers

Building on earlier research into the phenomenon of 'sales fatigue' among shoppers*, the report found retailers have also fallen out of love with discounting, with many saying that expectations of constant sales are a significant business challenge. Almost half (45%) of those surveyed believe sales are now less effective, and that cynical shoppers simply don't expect to pay the recommended retail price.

Stuart Langeveldt, Head of Marketing and Communications, AMP Capital Shopping Centres, believes this statistic is indicative of a wider trend:

Based on our in-depth conversations with retailers, they understand they are dealing with a new and more demanding consumer. The key now is to take this knowledge and really apply it to marketing strategy, particularly as local retailers are now, thanks to the growing penetration of e-commerce, competing in a global marketplace.

A web presence is certainly important, as shoppers now expect a seamless transition between the on and offline environment. Having said that, there are still plenty of reasons why customers elect for a real world store; that's why retailers have to prioritise differentiation through great customer service, well trained and motivated staff, clever advertising and use of social media and loyalty schemes, as well as establishing meaningful credentials around the community and environment.

Fundamentally, this is a hugely responsive and evolving industry that reacts quickly to changing consumer needs. There are exciting times ahead as retail continues to evolve!

What's holding business back

When asked 'what's holding business back', broad themes emerged relating to cashflow and the global economic environment, demonstrating the ongoing tough conditions that many Australian retailers are having to contend:

Commenting on the findings, Kate Mills, Editor of BRW, said:

Despite the strength of the Australian economy, there are still a couple of major issues facing retailers. Firstly, we're expecting interest rates to go up, which will make consumers nervous again; secondly, and perhaps more seriously, the strength of the Australian dollar has made the US and other destinations significantly more attractive.

Australian retailers need to work really hard to keep that dollar here at home. The one thing they should take away from this research is that service is critical to winning back shoppers; I would urge them to invest in outstanding customer service as a priority.

1ABS 31 March 2011 Annual Core Retail sales (seasonally adjusted)

*In September 2010, AMP Capital Shopping Centres issued a Recommended Retail Practice which examined the behaviour of shoppers, finding that 45% were suffering from 'sales fatigue' and believed that items were always on sale