By Claire Reilly
SYDNEY, NSW: The slowing retail market has been closely linked to the boom in online shopping of late, and many retailers are concerned online trade will outstrip bricks and mortar. However, according to figures released today by Macquarie Equities Research, e-commerce shouldn’t take all the blame for a lagging retail economy.
Rob Blythe, an analyst specialising in retail at Macquarie, said that while online sales are on the increase, “The greatest adverse impact on retail sales growth over 2010–11E is increased saving.”
In a broad examination of the scope of online retailing, Blythe reported that the growth in online sales of goods, excluding services such as travel and event ticket sales, was 8.4 per cent during the 2010 calendar year (CY10), compared to 2.4% in 2009.
“Over CY10 online retail accounted for 21% of total synthetic retail sales growth,” a figure that combines data on online sales from Forrester research, with Australian Bureau of Statistics figures on bricks and mortar sales.
Clearly then, online retail is on the increase, but Blythe was quick to note that this was not the sole reason for the recent slump in the retail market.
“The amount of commentary about online retail sales seems to have created an impression online sales growth is responsible for poor retail trade!” he said.
“Online retail is not new” he added, reporting that well-known clicks and mortar stores such as JB Hi-Fi have been maintaining an online presence since 2006. Other stores such as Bing Lee, Dick Smith and The Good Guys are also attempting to reach a broader market and expand distribution by being online.
According to Blythe, the cause for the slow-down can also be explained by “the housing sector, with lower household formation rates and a consumption hangover – whereby consumers simply have ‘too much stuff’!”
In addition, compared to previous years marked by consumption, Australians are now saving more than ever. “Australia witnessed an extended period of consumption growth over the period 2004–2008,” said Blythe.
“This period of excess consumption growth was funded by income growth, an explosion in household credit growth (approximately +15%) and a rundown in cash savings rates. However, this whole cycle started to reverse over the 2010 financial year, with households now saving circa $45 billion per annum compared to a long-run average of circa $30 billion.
“The period 1986–2004 was dominated by strong housing and population growth. Retail volume growth (as measured by the ABS) averaged 4.2% per annum compound. Since then...retail volume growth rates, whilst positive, have continued to decline.”