At the recent Australian Retailer Association (ARA) event, the Peak Seasons Insight Breakfast brought together key industry leaders to address the current retail landscape and peak season outlook. The session featured Laura Demasi, Head of Retail Research at Roy Morgan; Craig Woolford, Senior Analyst at MST Marquee; Jo Jericho, Strategy Director at Monitor Deloitte; and Kevin Azzopardi, Director of Partner Marketing ANZ at Afterpay, each providing nuanced perspectives on consumer behaviour, spending trends, and market expectations as Australia heads into a pivotal sales season.
Australian Retailer Association (ARA) event, the Peak Seasons Insight Breakfast
1. Consumer Confidence Rising Yet Mortgage Holders Remain Hesitant
This year’s consumer confidence, as measured by the ANZ-Roy Morgan Consumer Confidence Index, has shown modest improvements, averaging above 80 for 2024. However, mortgage holders continue to feel the financial pinch, with uncertainty surrounding potential rate increases affecting their outlook. The ANZ and Roy Morgan forecast suggests that if the rate cycle stabilises, we could see a rapid 20-point recovery in consumer confidence. This quick rebound would ideally usher in a period of stronger retail spending – a positive signal as retailers look to close the year on a high note.
2. Tax Cuts Yield More Caution than Consumption
Recent tax cuts have had a surprisingly muted effect on consumer spending, a trend confirmed by CBA income deposit data. Instead of driving immediate spending, a substantial 74% of income earners report that the cuts have had no discernible impact on their day-to-day lives. Only 10% found the cuts helpful for savings, and a mere 14% felt it eased their cost-of-living burden. This tendency to save or perhaps avoid non-essential purchases underscores a cautious consumer mindset in response to lingering economic pressures.
3. Hope for Stability as Consumers Look Toward 2025
As we approach the new year, the outlook is becoming more stable, if not fully optimistic. Findings show that 53% of Australians believe their financial situation will remain the same, with only 18% anticipating improvements, while 20% remain concerned about potential worsening conditions. This sentiment reflects an ongoing balancing act for consumers between cost-of-living management and the desire for financial security, shaping a steady, albeit conservative, demand trajectory into 2025.
4. Retail Spending Levels Normalise After Pandemic Peak
Australia’s retail sector has witnessed a significant recalibration over the past eight quarters, with per capita retail spending contracting as part of an anticipated return to pre-COVID norms. This “retail correction” marks the end of the pandemic-driven spending surge, with household retail spending now aligned to traditional levels relative to overall household expenditure. This reset is largely complete, and the sector can now shift focus to adapting to new spending patterns rather than managing the spikes seen in previous years.
5. Online Retail Dominates Growth Amid a Cautious Spending Environment
Online retail has outpaced traditional retail significantly, growing 6.4% annually and hitting $2.9 billion as of August 2024, while overall retail sales rose just 1.7%. One in four consumers report higher online spending this year, with many citing online events like Prime Day and opting for lower-cost online marketplaces to maximise value. According to Power Retail, over half of online shoppers delay purchases to coincide with peak sales events, a behaviour change that continues to bolster online spending as a cost-effective shopping method.
6. Peak Season Sales Forecasts Show Steady Growth, Driven by Strategic Spend
Peak season spending is forecasted to increase by 2.7% to $69.7 billion, with growth segments including:
Clothing: $5.7 billion (+3.3%)
Hospitality: $10.6 billion (+4.7%)
Household Goods: $10.7 billion (-3.8%)
Department Stores: $3.6 billion (-1.5%)
This seasonal uplift represents a resilient consumer base, with hospitality emerging as a standout sector, as Australians increasingly prioritise social experiences and dining, reflecting a subtle shift from goods to experiences.
7. Black Friday and Cyber Monday Evolving as Primary Christmas Shopping Events
For many Australians, Black Friday and Cyber Monday sales now represent a vital component of holiday shopping, with a projected 5.5% increase in sales reaching $6.7 billion. A growing number of consumers – approximately 6.4 million – plan to shop during these sales, including 80% who intend to purchase Christmas gifts. Additionally, 60% plan to buy for themselves, and 40% view the sales explicitly as a means to manage holiday spending more affordably. This November shopping surge has, to a large extent, shifted spending away from December, marking a notable evolution in consumer holiday shopping behaviour.
8. Non-Food Retail Growth Expected to Outpace Broader Trends
MST Marquee anticipates 3% growth in non-food retail for November, surpassing the year’s overall trend of 2%. While modest, this forecast indicates renewed energy in discretionary spending segments outside of food, aligning with peak season dynamics and potentially capturing consumers’ heightened willingness to spend during sales-driven events.
9. Budget-Conscious Consumers Continue to Shape the Retail Landscape
With a low savings rate, Australian consumers remain focused on budgeting and price sensitivity. The stability in the national savings rate, even with rising house prices and low unemployment, has led to increased “trading down” as consumers prioritise value amid ongoing inflationary pressures. For retailers, the challenge and opportunity lie in meeting these value-driven expectations, particularly as cost-of-living concerns weigh heavily on spending choices.
10. A Challenging Yet Hopeful Retail Outlook
Despite economic pressures, Australia’s retailers maintain cautious optimism for 2024’s peak season and beyond. The stabilisation in consumer confidence, albeit slow and segmented by demographic factors, provides a foundation for moderate growth. As consumer spending patterns shift, retailers are called upon to blend innovative online experiences with compelling in-store offerings, emphasising value while catering to evolving holiday shopping timelines. This multifaceted approach will be essential in navigating the “new normal” of Australian retail, where every sale counts and consumer sentiment shapes a challenging yet hopeful horizon.
The Australian retail environment is in cautious recovery, driven by adaptable strategies that align with evolving consumer expectations. As cost-of-living pressures remain top-of-mind, both physical and online retailers are positioned to harness the growing preference for digital channels, strategic spending during sales events, and a shift toward experiential purchases. The sector’s resilience is clear, with modest growth forecasts illustrating the balance of optimism and prudence. Moving into 2025, this balanced approach will be critical as the sector navigates economic fluctuations, adapting to a consumer landscape defined by value-conscious spending and a steady demand for meaningful retail experiences.
Reference: Additional data sourced from Power Retail “https://powerretail.com.au/over-half-of-online-shoppers-hold-out-for-sales-season/”
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