Money
Issue No. 62 - December/January 2011
Bricks and mortar retailing prospects
by Tony Catt
The retailing industry is facing many challenges, locally and globally. High levels of sovereign debt and the need for balance sheet adjustment in many countries suggests further headline buffeting of consumer confidence.
Relatively high levels of household debt, rising utility charges, a high A$ and changing purchasing technology platforms make post-GFC shoppers conservative and innovative. They are very different to their predecessors, who believed they could rely on rising asset wealth to underpin credit card expenditure and use housingbacked debt for investment purposes.
The Australian economy remains the envy of many developed nations, with strong terms of trade and forecasts for GDP growth over the next two years superior to advanced economies. Global events still affected our collective psyche to influence many aspects of daily life, none more so than how we deploy disposable income.
Historically, consumer spending trends are cyclical and closely linked to general economic activity, interest rates, employment trends and consumer confidence.
Retailing is an ever-evolving industry. Successful retailers are constantly updating and fine-tuning the shopping experience to retain and grow patronage. Many successful retailers who fail to evolve their formula have lost relevance, or over-geared balance sheets on the cusp of a cyclical downturn, to find themselves in the hands of administrators.
In many respects, current operating conditions for discretionary retailers are unprecedented. Consider the following challenges and economic settings.
High household debt
Prosperous times encouraged consumers to use and be comfortable with debt, to enhance their lifestyles by spending while rising housing prices covered the expanding liability.
While the GFC did not affect Australia as much as other developed nations, Australian house prices have been less robust over the past year...
