We have become frugal and this, together with growing online purchasing overseas, is hammering the local retail industry.   

DESPITE record low prices for many electrical goods and gadgets, despite falling grocery prices, despite reasonably strong wage growth and strong employment, we've stopped spending. Big time.   

David Jones has a clearance sale beginning this week, Myer has a winter sale that finishes today, walk down the high street in any town and you will see discounts - a sign of an industry in distress.

The major retailers launch sale after sale but it has little impact on our cautious stance. We want absolute bargains, or we are not spending at all.


In addition, the surge in the $A is taking more of what money we are prepared to spend offshore as we get more confident shopping online and are growing to like it and the flexibility it offers. After all, why shouldn't we benefit from our surging currency?

While statistics show we still prefer to spend online with local companies, this is rapidly changing as more of us check out overseas bargains and are successful in the online transaction. Plus, offshore online retailers such as Amazon are offering free shipping to Australia once you spend over certain levels, or free shipping regardless.

Retail sales figures for April are due out this week and may show a small lift after a fall in March, economists say, but overall retail spending is running at around a 2.5 per cent annual growth rate, pretty much the same as inflation. That's unheard of in an industry used to sales growth three times that rate.

Margy Osmond, chief executive of the Australian National Retailers Association (ANRA), says local retailers are under siege.   

"Things are grim," she says. "The definition of confidence has changed - it used to mean that people were happy to spend, but now, if they are feeling fairly chipper and they've got a job, they still sit on the money. We've got a historically cautious shopper - frugal is the new black, saving is the fashionable thing to do and being a bargain hunter is almost a badge of honour."

Brian Redican, senior economist at Macquarie Bank, says consumer spending patterns have changed.

"The baby boomers, who are the ones with the capacity to spend, are rebuilding their savings and nest eggs ahead of retirement after getting scared following the impact of the global financial crisis, while the younger generations have been hit by rising electricity bills, rising water bills, rising housing costs - they are under the pump."

But Mr Redican says that even if consumers change their stance, the Reserve Bank will cut them off at the pass and aggressively lift interest rates to stop them spending anyway. "By hook or by crook it will be a tough year for the retail sector," he says.

Deutsche Bank senior economist Phil O'Donaghoe agrees. "Household savings are running at a 9.8 per cent rate; you have to go back to the 1980s to get a comparable rate.

"While I think this savings rate is as high as it will get, as soon as the household sector starts to spend, the Reserve Bank will stop it by lifting interest rates. Business investment, driven by the miners, is a long way above normal and if the household sector joins that, we will have a significant threat to inflation."

On this basis, the retail sector will struggle while the mining boom continues, says Mr O'Donaghoe. "There's a very simple two speed economy right there."

The retail stocks are showing it too. Myer hit a record low of $2.77 last Tuesday well off its float price of $4.10 of 18 months ago. Former stockmarket favourite JB Hi-Fi hit a 12-month low of $16.33 last week too, and David Jones and Harvey Norman are near similar levels.

Then we had news early last week that James Packer was part of a consortium spending $80 million for a 40 per cent stake in online daily deals websites 'Catch of the Day' and 'Scoopon', his second major online retailing investment in as many months. There are signs of big changes there.

ANRA's Ms Osmond says online retailing, while not huge yet in Australia, is starting to impact the High St retailers. "It's got legs and heading in an upward trend," she says.

But she has a warning: "Remember if you are buying online from overseas, it's difficult to return goods, and the consumer protection that everyone is used to here, doesn't apply to overseas retailers. I expect we will soon see some stories emerge of less-than-happy experiences in that space."

Imcrook are you available for children's parties?


You don't half have a healthy, happy go lucky outlook on life mate.

adelcrow wrote on May 29^th, 2011 at 10:52am:



Bet it cost you more there than it would here.

People are feeling insecure, so they're hanging onto their money.....and we're all shopped out, we've been compulsively buying sh1t we don't need for decades, it's just not fun anymore. It's becoming more fun to see what you don't buy.
Shop 'til you drop.....is dead and buried.

Ex Dame Pansi wrote on May 29^th, 2011 at 11:19am:



Pansi, with the greatest respect, I am not sure if you give out advice on economic outlook that you're the best example to follow.

You'd be the same age, give or take as my parents, certainly same generation.
Why is it they are retired and sit on assets and savings that allow them to play golf and go on cruises whereas you still need to work in a low-skill, low wage job?

I mean, you took a wrong turn somewhere in comparison to them.

Is that not fair?

I just had visions of my mother working on a check-out counter 

I have just returned from the US (my wifes birthday, so we went to Hawaii for a week) and while there we purchased goods and clothing that were around one third to half the price we would pay in Australia. What especially annoyed me was the price of books. A paperback that would retail for around $21 in Australia cost US$7.99.

A reasonable mark up is one thing, but 100-150% is something else again.

Andrei.Hicks wrote on May 29^th, 2011 at 11:36am:



Andrei- there is nothing much we can do about the thieves
selling stuff in shops except to buy online.

WORKERS verses CONSUMERS.

Australia: Workers will always win out.
America: Consumers will always win out.

...if you don't like it - F-Off!
Or learn to Bargain hard in Australia.
Or earn that Tip in America.

So in Australia, make sure you are working for the right Company like the Victorian Desal Plant for example, where 'Workers' have just recieved a 57% pay increase plus extras, thanks to their Union. Expect all Consumers to pay towards that Pay Increase with higher Water Rates.
In Sydney Workers went on strike for more pay with driving Buses. 3 months later there was a rise of 30c for Consumers to pay ...towards the pay rise.
So, as a Consumer - guess you can either just deal with it and find yourself a good job that covers the high consumer costs or cry like mad "I'm as mad as hell and I'm not gonna take it anymore"  and go belt those Workers and their Union up for ripping you off.


Workers v Consumers.
In Australia, the Consumer is never right.