The Australian retail sector is the nation’s second largest employer after healthcare. In August 2019, there were over 1.2 million Australians employed in retail[1], with more working as owner operators in micro or small businesses.

For many working in this sector, the COVID-19 pandemic and subsequent lock-down has been devastating. For others, however, there have been opportunities.

The last three months have, in general, been a rollercoaster for the retail sector, with those showing the greatest flexibility coming out on top.  

There have been three distinct month-by-month swings:

1: Lock-down panic buying of food:

Australian retail figures at the beginning of the pandemic in March showed an upswing in trade due to panic-buying and people stocking up on non-perishable foods and goods (such as toilet paper) for a lock-down.

2: Lock-down no-buy period:  

As the entire nation entered lock-down in April the streets emptied and stores were forced to close, with people staying at home to adhere to social distancing measures. This resulted in a -17.9% point fall in retail trade, the largest seasonally adjusted monthly drop in the history of the Australian Bureau of Statistics (ABS) retail sales records 

3: Celebratory buying on feel-good products:  

The April drop was followed by a remarkable rebound, up 16.9% in some cases, with many retail outlets experiencing a Christmas-like season from May to June. 

The biggest increases in retail trade were in discretionary products such as clothing, footware and personal accessories, which were up 129% in seasonally adjusted terms

This has coincided with the easing of restrictions across Australia, and it will be interesting to see how Victoria’s June lock down affects buying habits in the coming months 

The food retailing industry, which includes supermarket, grocery stores, liquor shops and other specialised food retailing all recorded increases in demand between February and March 2020. The industry saw a 23.5% increase ($2,710.4m) in March, with supermarket and grocery store subgroup rising 22.4% ($2,180.8m).[2]

This has been boosted by online sales, lock-down shopping and home delivery services, with 10% of April’s retail buying undertaken online, with much of this concentrated in the large online supermarkets – Woolworths, Coles, and IGA chains. Meat and Livestock Australia reported a staggering 65% increase in online grocery sales since mid-June from the end of February, with some of these gains seen by the smaller butchers as well as the larger grocery chains.

Wesfarmers Group also reported large gains from sales in their specialist office supplies and hardware stores, particularly home office equipment and gardening goods, with these stores now establishing online sales channels and home-delivery services. [3]

Retail turnover, current prices, seasonally adjusted, percentage change

Source: Australian Bureau of Statistics (ABS) Cat. 8501.0.55.008 – Retail Trade, Australia, Preliminary, May 2020

Many smaller retailers have also managed to pivot to online sales through e-commerce Website-builders such as Shopify.

Shopify has seen unprecedented demand from small businesses around the world including Australia[1] ,as everyone from hairdressers to bars-turned-bottleshops rushed to put their inventories online and stay trading during the lock-down period.

Australia Post, which is responsible for many of the parcel deliveries of online bought goods, has reported a whopping 80% year-on-year growth in online sales in the eight weeks to May.

Data also suggests that as the lockdown period progressed, buying habits changed. Initially online purchases were supermarket goods and personal care products, not fashion or clothes, but this changed around events such as Mother’s Day and Easter.[2],[3]

Australia Post also found that as the lockdown wore on through April, people adjusted to buying online and sought out not only gifts but also loungewear, DIY products, and entertainment.  

Lock-downs ease leads to consumers celebrating by buying the things they deprived themselves of 

The remarkable rebound for seen in retail figures for May, especially in food, clothing, and personal accessories, shows a celebratory reaction to lockdown easing, but it may also mask the extent of change in the shopping habits from being primarily in-person to being far more online.  

Data from Australia Post shows that year-on-year sales for online buying was at record levels in April 2020 – with an all-time high of 5.2 million Australian shopping online during that month

Australia Post’s 2020 eCommerce Industry Report also suggests that although the data for May shows a return to a ‘normalisation’ of our retail habits, all categories of eCommerce were still up significantly, and therefore we may be seeing ‘new normal’ emerging.  

People buying online however were concerned about the sustainability of packaging, added costs of delivery and taxes and returns policies.  

How long will the change in consumer behaviour last?

Australians seem eager to return to retail stores with reports of crowds flocking to shopping malls as an outing on the first weekend of eased locked restrictions on 9 May 2020.[4]

The pandemic is far from over, however, and is likely to reduce and restrict street and mall shopping habits for many months to come, and a proportion of the market may never go back to their old habits.

Ernst and Young (EY) predict that some consumer behaviour will be changed after the lockdown ceases – with 45% of consumers believing how they shop will be changed permanently. [5]

EY surveys found that since the lock-down people are more willing to shop and share data online, but as the Australia Post data also suggests, they would like to shop more ethically, be less wasteful and to shop more locally.

What are some options for retailers to adapt?

With many people suffering from reduced income over the coming years the retail sector is not likely to escape the pain of the general economy, despite the sudden surge in buying as lockdowns ease. Those retailers who are able to run an online store to complement their brick-and-mortar outlet may continue to be agile enough to trade through both the lockdowns and times of greater physical freedom.

There are a number of scenarios for the retail sector at the end of the pandemic. All of them build on existing trends of diversifying retail channels, increased value-based consumption, increased sales via platforms and payment methods, and the need to diversify both physical and online income streams.

The scenarios would depend upon the degree of permanency of behavioural change in consumers at the end of the lockdown, and the rate of digital technology advances that progressively exploit people’s online time and the use of social and retail platforms.

The first scenario will see consumers go back to their old habits after the pandemic is over – shopping in person in supermarkets and local stores to the same degree as before the lockdowns. This scenario sees very little permanent change in shopping habits. The other scenarios see the COVID-19 pandemic accelerate the existing trend to online shopping channels for all retailers – big and small.

Australian retail insights post-COVID

Photo: Aramia Goding, Open House Collective West End. Photo used with permission

Many will also need to develop new strategies to entice people back into physical shops and encourage new brand loyalty. Data analytics, AI and micro-targeting – or hyper personalisation – through social media platforms will be increasingly important in keeping local custom as well as expanding markets through the borders.

New crypto currencies will also soon link shopping from social media networks such as Facebook[1] and may create greater transaction efficiency in international trade.

 This may see social media platforms increase their hold on retail marketing budgets.   Social media has also been instrumental in community campaigns that increase value-based shopping – such as the recent #buyfromthebush and #buyregional campaigns to assist local producers and retailers in non-metropolitan areas 

Supplementing physical retail spaces with local events and an experiential element (such as celebrity visits, book signings, fashion shows or talks) are also likely to become increasingly common as profits shift for smaller outlets, and many integrate retail with people’s need to get out and socialise after such a long time in hibernation.

In one of the better scenarios the online habits formed by Australians during the pandemic may mean less time doing the shopping we don’t really enjoy – such as standing in supermarket aisles and checkout queues, leaving us more time to socialise, indulge our interests with family and friends at markets and events and within cafés and restaurants.

The Insights Team at Data61 analyse emerging trends, drivers and scenarios, and apply modelling approaches to generate insights and inform future strategy and policy decisions. This clients span across the private, not-for-profit and public sectors, offering independent, impartial research and advisory services for clients and stakeholders. The team focus on translating research to solve real-world problems for business and policy, and help decision makers better prepare for future challenges and opportunities. Learn more about their capabilities and how they can enable your organisation here

 

 

 

[1] De, N (2020) Libra’s long road from a Facebook Lab to the Global Stage: A timeline. CoinDesk, 22 April

[1] GoogleTrends (2020) Shopify searches

[2] Australia Post (2020) Inside Australian Online Shopping: eCommerce market insights 15 May

[3] Murphy, P (2020) Australia’s online retail consumption trends in March and April, AdNews 23 April.

[4] Main, L., Sullivan, R., Vadnjal, L., Rudra, N., and Moore, T (2020) Crowds flock to shops, too early to hug Mum, Australian Financial Review 9 May

[5] Rogers, K., Cosgrove, A. (2020) Future Consumer Index: How COVID-19 is change consumer behaviours Ernst and Young

[1] ABS (2019) Cat. 6333.0 – Characteristics of Employment, Australia, August 2019

[2] ABS (2020) ABS Cat. 8501.0.55.008 – Retail Trade, Australia, Preliminary, April 2020

[3] Wesfarmers (2020) COVID-19 Update 28 April