Reflections from Covid and the retail recovery

Paul Zahra, CEO of the Australian Retailers Association, reflects on the resilience of Australian retailers in adjusting to the changing needs of consumers.

Key points

  • Household goods are outperforming other retail categories.1
  • Retail is moving towards data-rich decision making and artificial intelligence.
  • COVID has increased the speed of which retail trends have occurred.

The dust is starting to settle after one of the most challenging years in our lifetimes. Retailers felt the full brunt of the pandemic, managing lockdowns with little notice, economic losses and then adjusting to the new normal of reopening and operating in a Covid-safe way. We’re all looking forward to the rollout of the vaccines providing business certainty and stability, but overnight success is not guaranteed. The economic climate is still a challenging one for many retailers, with JobKeeper due to wind up at the end of March and international border restrictions still in place and the threat of potential domestic state-based lockdowns still raw.

Overall, retail sales in recent months have been incredibly strong but it doesn’t paint a complete picture of what the sector is going through. Travel retailers, like those at airports and retailers of both goods and services in CBD locations are struggling and are preparing to shed thousands of jobs post JobKeeper. These businesses are in crisis – some have lost 90% of their revenue since the pandemic started and face a long road back. We continue to advocate strongly to the Federal Government for there to be ongoing targeted support to help these deeply affected businesses.

At the other end of the scale, retailers who’ve done incredibly well through Covid have been those in household goods. With so many of us confined to our homes during the pandemic, and now choosing to work flexibly, people have invested in household items like new furniture or office and tech equipment. The latest ABS figures show a 20% year on year increase in household goods in January, and it’s far outperforming the other retail categories1. That spike is reflected in the half-year profit results some of the big retailers have reported recently and some businesses have even paid back the JobKeeper wage subsidy, given their success during the pandemic.

The virus has resulted in a powerful shift in the way people live and work and retailers have had to adjust to meet the changing needs of consumers. You only have to look at Australia Post’s data and insights to see how the dynamic has shifted. More than 5.2 million households made an online purchase in January – a 25% increase on the same time last year2.

With the incredible growth of online sales, and the move towards data-rich decision making and artificial intelligence - future skills in retail are becoming more science based. Having said that, brick and mortar stores still have an important role to play - it’s where the bulk of retail sales still occur – so store managers, sales assistants and the like are still in-demand roles.

2020 has brought about an acceleration of trends that had already been occurring in the retail industry. Due to COVID, we’ve seen about ten years’ worth of trends in ten months - this is phenomenal! Hence, we expect to see retailers continue to reduce their physical footprint and invest heavily in digital.

Overall, retailers are approaching 2021 with fresh optimism. There’s still some nervousness with the wind up of JobKeeper and the impact that will have on businesses and consumer spending. Our priority as Australians needs to be on ensuring no one is left behind in our economic recovery.

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This is an opinion piece and is provided for general information purposes only. It is not intended to be specific advice for your business needs.

1 Australian Bureau of Statistics Retail Trade, Australia, January 2021

2 Australia Post 2020 eCommerce Industry report