Modest Christmas return expected

http://www.dreamstime.com/royalty-free-stock-image-shopping-bags-three-bright-gift-image51209236Australian retailers forecast a modest profit margin rise this Christmas with sales expected to marginally exceed those achieved in 2014, according to findings in the latest Deloitte Retailers’ Christmas Survey.

“A key concern is the impact of the falling Australian dollar,” said partner and national leader of Deloitte’s retail, wholesale and distribution group, David White. 18 per cent expect sales growth in excess of five per cent, compared to no retailers in 2014, and 35 per cent are expecting 2-5 per cent growth this Christmas. “Whilst currency hedges have helped shelter the effect of higher import prices to some extent earlier in the year, there is concern higher product costs will no longer be avoidable come Christmas.  As competition intensifies, businesses face having to absorb some or all of these cost increases for fear of losing customers.”

Six per cent of retailers envisage margins to grow by greater than two per cent compared to the 2014 festive period. Over a quarter expect margins to decline, 12 per cent more than last year. “So, whilst on the surface the numbers look good, dig just below and there’s a question mark over profitability,” said White.

The roll out of new stores (31 per cent), the introduction of new products (31 per cent), online offerings (12 per cent) and price increases (12 per cent) have been identified by retailers as the key sources of sales growth in 2016.

59 per cent anticipate discounting their products this Christmas  with 27 per cent planning to begin discounting in early December, the highest since the survey began four years ago. 20 per cent of retailers are still undecided on when to discount and by how much.

In 2011, two thirds of retailers were expecting their online sales over Christmas to be two per cent or less of their total Christmas sales. 50 per cent of retailers now expect their online sales to make up 6 per cent or more of their total sales this Christmas, compared to 18 per cent of retailers in 2012 and 21 per cent last year.

“The key for retailers is to understand how customers are using digital devices, such as smartphones, tablets and laptops, to make decisions and shop,” said White.  “The recent Deloitte report ‘Navigating the New Digital Divide’ showed 40 per cent of in-store visits in Australia are influenced by digital – higher than the UK, Netherlands and Germany – with 65 per cent of customers using a digital device before their shopping trip and nearly 31 per cent while shopping.

This story first appeared on Inside FMCG’s sister site, Inside Retail.

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