Nov 25 2020
Retailers are likely to benefit from a surge in consumer spending during the upcoming Black Friday sales, following a rebound in consumer sentiment to the most optimistic outlook since November 2013. In 2020-21, the consumer sentiment index is expected to average at 99.5 index points, up from 93.2 points in 2019-20.
‘The dramatic rise in social assistance payments, the projected elimination of COVID-19 in Victoria and a positive outlook for COVID-19 vaccinations have culminated in a stunning improvement in the consumer sentiment index, to 107.5 points this month,’ said IBISWorld Senior Industry Analyst Arthur Kyriakopoulos.
Industries to watch
Several industries are set to benefit from this trend. Revenue for the Online Consumer Electronics Sales industry is expected to surge by 12.2% in 2020-21, to $2.9 billion. Profit across the industry is expected to rise to 6.4% of revenue, an increase from 5.5% in 2018-19. Last year, Black Friday sales increased by 0.9% to a record $27.9 billion, and an even stronger result may be expected this year.
‘The rising prominence of Black Friday and Cyber Monday are expected to provide a further boost to large electronics retailers. As most consumers have been unable to spend on travel or hospitality for most of 2020, they are likely to spend some of their savings on retail during Black Friday,’ said Mr Kyriakopoulos.
Additionally, lockdown measures across Victoria throughout July, August and September have spurred growth in online sales industries for the 2020-21 financial year. Online retail sales more than doubled in year-on-year terms in Victoria for August and September, and fell just short in July. Businesses are encouraging these shifting habits by increasingly offering contactless click and collect and discounted or free delivery.
However, retailers will need to be wary of a downturn in retail expenditure in 2021. Consumers have had additional capacity to spend on retail goods following the curtailment of service-based industries, such as the Pubs, Bars and Nightclubs industry.
‘As service industries return to normal operating conditions, consumers are likely to channel much of their spending towards services and away from goods, hindering the performance of retail industries,’ said Mr Kyriakopoulos.
Other industries to watch include the Online Video Game Sales industry, which is expected to grow by 8.9% in 2020-21, and the Online Women’s Clothing Sales industry, which is expected to grow by 8.1% in 2020-21. Revenue across the overall Online Shopping industry is expected to rise by 6.3% in 2020-21, to $34.5 billion.
‘Online retailers were disrupted earlier in the year by supply chain breakdowns caused by the COVID-19 outbreak, while consumer demand surged. In the December quarter of 2020, these supply chain bottlenecks have generally been resolved, while demand from consumers has continued to remain strong. Overall, this Christmas season is shaping up to be a surprisingly favourable environment for online retailers,’ said Mr Kyriakopoulos.
Revenue for the Online Toy Sales industry is expected to rise by 6.3% in 2020-21, while spending on luxury items in the Online Jewellery and Watch Sales industry is expected to grow at a lower rate of 3.7%.
‘Cash-conscious consumers that have become more acquainted with online shopping through the course of COVID-19 are forecast to place greater effort on seeking out bargains on Black Friday, likely spurring a stronger surge in revenue relative to prior years,’ said Mr Kyriakopoulos.
Storm clouds on the horizon
While retailers can be confident of a strong consumer turnout for the 2020 Black Friday sales, the outlook for 2021 is concerning. The winding back of JobKeeper and JobSeeker assistance measures, coupled with a weak labour market, is forecast to cause consumer sentiment volatility over the second half of 2020-21, constraining the overall rise in household consumption expenditure during the current year.
‘Fiscal stimulus has masked the true effect of COVID-19, and as that stimulus is removed next year the economy will once again need to stand on its own feet. However, relative to the rest of the world, Australia’s success at containing the COVID-19 outbreak is likely to spur a faster recovery in retail spending,’ said Mr Kyriakopoulos.
Additionally, growth in online shopping industries is set to slow over the next five years, relative to the previous five years. Revenue for the Online Consumer Electronics Sales industry is expected to grow by an annualised 15.2% over the five years through 2020-21. However, growth is projected to slow to 6.9% over the five years through 2025-26. Similar trends are forecast for the Online Video Games Sales industry and the overall Online Shopping industry in Australia.
‘The COVID-19 pandemic has fast-tracked many consumers’ use of online shopping platforms, as they have been forced to use these platforms during lockdown. While these habits are projected to be sustained over the next five years, growth is projected to slow. People have shifted to online platforms earlier than expected, reducing the number of potential new consumers in the future,’ said Mr Kyriakopoulos.
IBISWorld reports used to develop this release:
- Online Consumer Electronics Sales in Australia
- Pubs, Bars and Nightclubs in Australia
- Online Video Game Sales in Australia
- Online Women’s Clothing Sales in Australia
- Online Shopping in Australia
- Online Toy Sales in Australia
- Online Jewellery and Watch Sales in Australia
For more information, to obtain industry reports or to arrange an interview with an analyst, please contact:
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647