20th September, 2022
As we approach the final quarter of 2022, can retailers hope for a bigger Christmas trade period than they’ve seen since before the pandemic or will rising interest rates take their toll?
Last week, the CEO of Australia Post Paul Graham was quoted in The Guardian urging consumers to get their Christmas shopping done early this year to beat the rush.
With ongoing supply chain issues and the looming challenge of talent shortages, Graham addressed the Australian British Chamber of Commerce in Melbourne, saying the national delivery services had already begun recruiting an extra 5000-7000 workers needed to handle the Christmas peak.
“If we get a similar sort of sales surge as we’ve got over the past couple of years there’ll be some challenges,” said Graham.
“If people keep their money in their pocket because of interest rates we’ll probably be in good shape.”
And there’s the rub.
In both NZ and Australia, rising interest rates are expected to continue until consumer spending falls – whether that happens this side of the New Year is anyone’s guess.
We recently spoke with peak retail advocacy bodies in both countries to get a sense of what retailers might expect from this year’s holiday trade period.
CEO of the Australian Retailers Association (ARA) Paul Zahra said retailers have been enjoying strong returns this year as consumers enjoy more freedoms.
“Retail sales are on a powerful trajectory – they’ve been at record levels with $34.7 billion spent in stores and online in July, an increase of 16.5 percent compared to the same time last year.
“Consumers have continued spending in the face of cost-of-living pressures, which is encouraging to see,” said Zahra.
“However, we haven’t seen the full impact of the interest rate hikes hit mortgage holders while inflation is yet to peak, so we could see sales start to soften into 2023.”
The ARA chief notes that, while the RBA began increasing rates several months ago, “it takes time for that impact to wash through the economy”.
Meanwhile in New Zealeand, the CEO of Retail NZ Greg Harford says things haven’t been quite as rosy for retailers with consumer spending already showing significant wobbles.
“Compared to last year, consumer spending is declining as 2022 progresses and the economy tightens up.
“Total sales are up compared to 2019, but there is variability by sector and costs have increased substantially, meaning the retail sector is under significant pressure as we head towards the end of the year.”
Harford attributes subdued consumer spending in NZ is likely due to a combination of rising rates and the cost of living, particularly high fuel costs.
“Consumer spending has significantly dampened over the last few months, most likely due to the depressed housing market, rises in interest rates and the increased cost of petrol.
“As prices and interest rates continue to rise, Retail NZ expects consumers will increasingly reduce spending on more discretionary items and ‘trade down’ to cheaper brands.”
In both nations, consumers and retailers alike have been transitioning quickly to online trade over recent years and this trend has only accelerated in the face of the pandemic.
However, while online shopping offers convenience and gives retailers access to more customers, it requires adequate delivery network capacity in order to guarantee supply.
To counter this, Harford recommended that consumers start thinking about getting their Christmas shopping done sooner and retailers should consider how to encourage them to do so.
“Retail NZ is encouraging people to shop early if shopping online; and to shop local from a New Zealand website they now and trust to make sure they are protected when shopping online,” said Harford.
The ARA’s Zahra echoed this sentiment.
“We encourage consumers that plan on purchasing their gifts online to allow plenty of time for deliveries.
“Christmas is the busiest time of year on the retail calendar and it’s best to get in early to avoid disappointment.”
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Both Zahra and Harford say retailers are likely already well advanced in their plans for this year’s holiday trade period and that much of the effort lie in baking in contingencies.
“The biggest issue facing retailers right now is staff shortages,” said Zahra.
“There are over 40,000 job vacancies in Australia’s retail sector and many businesses are struggling to trade at their full potential because they can’t get enough people to fill shifts.
“That means the recruitment of Christmas casuals will be a difficult one, as businesses are already struggling without the high demand of the festive season.”
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