Australia’s retail sector is bracing for a tough year, with a new report revealing widespread pessimism among business owners.
The National Retail Association’s 2024 Retail Sentiment Report paints a picture of rising costs, softening sales, and declining profits.
Key Findings:
- Diminished Expectations: Over 40% of retailers anticipate a drop in business performance compared to 2023.
- Sales Slump: Only a quarter of businesses expect sales growth in 2024, while nearly half foresee a decline.
- Profit Squeeze: A majority (55%) project falling profits, with just 15% expecting gains.
- Cost Crunch: Soaring overheads are a major concern, with 77% predicting cost increases.
- Wage, Energy, Insurance Woes: These are cited as the biggest obstacles to retail success.
Retailers Seek Government Support
The National Retail Association (NRA) is urging the government to address these issues in the upcoming May Budget. Rob Godwin, NRA Director, emphasizes the need for measures that lower energy and insurance costs, easing the burden on retailers. Mr. Godwin warns that rising interest rates and consumer caution have created a “cost-of-trading crisis,” jeopardizing Australia’s second-largest employer.
“High interest rates and low consumer confidence have pushed retailers into a cost-of-trading crisis, putting Australia’s second-largest employer at risk,” Mr Godwin said. The May Budget gives the Federal Government the opportunity to address skyrocketing energy and insurance premiums and take excess pressure off Australian businesses, the lifeblood of our economy. Supporting businesses in this Budget means supporting millions of Australian jobs – particularly of lower skilled and entry-level workers most of whom are struggling with cost-of-living,” he said.
The report reveals that nearly a third of retailers have cut advertising and customer engagement spending. This could have a ripple effect on Australian manufacturers and suppliers. Mr Godwin also expressed particular concern for regional and rural businesses that are especially suffering from poor Christmas trading last year. “Forty-nine per cent of regional businesses have reported struggling with inflated transport and logistics costs,” he said. Regional and rural areas have also been adversely affected by low ecommerce adoption rates, (5 per cent vs 18 per cent for metro) and limited staffing options. We urge the Government to address high transportation costs and the increased complexity of the supply chain by providing funding mechanisms that support regionally located businesses,” he said.
According to the report, 29 per cent of retailers have cut advertising costs, and reduced spending on customer acquisition and retention, which will have a knock-on effect for manufacturers and suppliers in Australia.
“If the Government steps up for businesses in May, retailers could start investing in sustainability, wages and innovation. Keeping businesses competitive is another way to reduce inflation. “However, if retailers are worried about their futures, concerns are certain to flow through to hiring and investment decisions, and that’s bad news for the entire Australian economy.”
You can find the 2024 Retail Sentiment Report here.
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