Is retail through the worst of the pandemic pain?

Woman shops retail clothing with mask on during pandemic

This article appeared first on Inside Retail Australia.
Read the original article here: Is retail through the worst of the pandemic pain?

As Melburnians emerged from 110 days of lockdown, pent-up demand saw retailers in the state get a welcome boost. Reportedly, about 10,000 shoppers passed through the doors of Kmart’s late-night Melbourne stores in just six hours.

It was a relief and an encouraging sign that there was light at the end of the recession tunnel. But does this mean the pain is over? Or are there still challenging times to come?

According to data from Westpac, consumer confidence in October was not only up on recent months, but it also exceeded the confidence levels recorded in October 2019 and 2018.

And looking at figures from some states, you’d be forgiven for thinking the pandemic never happened. For example, analysis by Citibank found Western Australian retail sales have been up 20 per cent year-on-year for the past couple of months.

However, despite signs things are on the improve, we also saw the Reserve Bank of Australia (RBA) cut interest rates to the historically low 0.1 per cent. And this was after the same organisation forecast a positive September quarter and made the bold claim the recession in Australia was (technically) over.

The thing about consumer-confidence measures is that, for the most part, they come from looking in the rear-view mirror: the relief customers feel comes from a sense that things aren’t as bad as they could have been. Customer confidence may be up, but that’s not a reliable indicator of what’s to come in the next six to 12 months.

It is likely the analysts at the RBA have a similar view of consumer confidence indicators. They certainly have a better handle than on the longer-term structural issues and headwinds the Australian economy is facing than the average person might. It has advised that the 0.1 per cent interest rate is unlikely to change in the next three years, and said it would inject $100 billion of new money into the economy. That’s hardly a ringing endorsement that consumer confidence improvements can pull us through. I certainly wouldn’t be busting out the party poppers just yet.
Clearly, the RBA is saying we are in for a long, hard journey.

For retailers, this means there’s still plenty of work to be done, especially once we see off the traditionally busy Christmas summer sale period.

And, as we head into Christmas, be aware attitudes have shifted. Not surprisingly, some customers are remaining subdued. According to research by Pure Profile, the number of Australians who don’t wish to receive gifts this year has increased by 17 per cent compared to 2019. While 39 per cent of Aussies wanted to receive clothing and shoes last year, only 27 per cent do in 2020. And 68 per cent of us will spend less than $500 on gifts. Last year, people budgeted for more spending.

Emerging from Covid is going to be a marathon, not a sprint. If you haven’t already, start thinking about what 2021 will look like for your business. And 2022.

Bear in mind people are going to be staying at home until they feel more confident about the health risks, which will continue to impact purchase behaviour.

Research conducted by Spinach has found Australians are being more cautious when it comes to spending money as they put off big-ticket purchases. The research also found Aussies expect to spend more on clothing in the coming months as well as skincare and homewares. They plan to spend more on groceries than any other category.

From a marketing perspective, the best approach to this challenge is one that combines long-term brand building and short-term activation. Marketing effectiveness experts Peter Field and Les Binet reckon brands need to have a 60/40 split, with 60 per cent of spend going to long-term brand work. But for retailers, the duo recommends skewing a bit higher for brand building. Try 70/30, monitor it and be prepared to tweak accordingly.

As part of this strategy, you also want to be thinking about personalisation. For lower-funnel activity when you’re pushing consumers to the point of action, more data-informed personalised offers and recommendations have unbeatable conversion power.

I’d like to tell you it’s all smooth sailing from here, but the signs point to rough seas ahead. But like all good captains, there are steps you can take to weather the storm.

_ _ _

Note: Original article appears in the Professional section behind the paywall at

Craig Flanders

A passionate advocate for the strength of full integration shaped by 25 years in advertising where he’s held a number of senior management roles, Craig oversees all aspects of our integrated offer.