Australian Retail Appears to Have Had a Good Christmas

Australian consumers apparently felt pretty good this year about the economy and reportedly racked up $29 billion in credit card debt after Christmas.

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While official retail sales numbers for Australia won’t be released until February, early indications are that pre-season predictions of holiday sales of around $50 billion (or an increase of 2.8 YoY) are within reach.

“Although there have been various disruptions to the Australian retail market throughout the year, we look forward to seeing our pre-Christmas and post-Christmas predictions come to fruition when the retail trade figures are released in the new year.”

Russell Zimmerman, Executive Director of the ARA (Australian Retailers Association)

A recent rise in consumer confidence by 4.7 percent achieved a new high in Australia not seen since November 2013.

The combination of high consumer confidence and an increase in credit card debt is usually a good indicator that sales increased as well.

“The increase this year is stronger than the 3.6 per cent average lift in confidence for the past nine ‘annual turns’, indicating that the gain in confidence is more than just seasonal.”

David Plank, ANZ’s head of Australian economics

Online Sales

The ARA pre-holiday season estimates put online sales at about 7 percent of all retail sales. But this could be a low number as Australia Post recorded a record December.

The carrier revealed it delivered more than 37 million parcels in December, making it the busiest month in the organization’s 209-year history.

“We made more than 37 million parcel deliveries in the four weeks leading up to Christmas, that is almost 20 percent more deliveries per day compared to last year, making 2017 our biggest festive season ever.”

Bob Black, Chief Operations Officer and Executive General Manager, Australia Post

It appears Australian eCommerce is growing as rapidly as anywhere else in the world and that is without any help from Amazon! (yet)

But the threat for Australian retailers may not only be from Amazon, but may come from a slow adaption of new retail technologies to provide better service and inventory for shoppers.

John Stine, Global Director Retail Sales at Intel Corporation, recently visited Australia and warned Australian retail managers ahead of NRF Retail’s BIG Show in New York City, retail is in a state of “Accelerated Darwinian Evolution.”

In other words, brick-and-mortar retailers must meet the same convenience and service that consumers now expect and receive from eCommerce.

The Amazon Factor

Unlike the U.S., Amazon is still a non-factor in Australia as the online retail giant just entered the market with product sales in early December.

With Amazon now in its initial operational phase in Australia, eCommerce realizing huge gains as witnessed by the large increase in parcel deliveries this year, Stine’s one line statement of “The normative benchmark for retailing is Amazon” should be taken very seriously by brick-and-mortar retailers in Australia.

Amazon Australia only has one fulfillment warehouse in the Melbourne area. And Prime Membership benefits such as 1 or 2-day free shipping are not available yet to Australian consumers.

The product assortment is still lacking the depth of U.S., UK, and other Amazon markets. So, the company is operating at a very primitive level in comparison to its U.S., UK, or European operations.

But despite all these launch phase blues, Alana Mitchelson of The New Daily states in an article about Amazon’s start-up in Australia; “Sellers have flocked to Amazon Australia at a faster rate than any other Amazon marketplace…”

Further, she points out that Amazon passed the 5,000 seller mark today (January 16), only 42 days after its launch date. That is pretty remarkable!

While the initial growth in sellers may be attributable to existing eCommerce companies expanding their operations to Amazon’s marketplace, in time, Amazon will gain new entrants to eCommerce on its platform.

By the time the 2018 holiday season rolls around, Australian eCommerce may reach closer to 10 percent of all retail sales. Amazon’s coat tails can be long as entrepreneurs see opportunities on the platform to reach a large audience with superior service, and Amazon makes the barrier of entry fairly easy.

Brick-and-Mortar retailers in Australia should take their profits from this holiday season and reinvest it into technology to improve customer experiences. Otherwise, they may find themselves on the wrong side of the “Accelerated Darwinian Evolution” in retail.

We love to hear your thoughts on the Australian retail business and the entry of Amazon. Drop us a line in the comments section below.