Australia / Spotlight Reports
Economic Update: Retail Trade, August 2020

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by Matthew Barry
Aug 10 2020

The Retail Trade division has faced significant revenue volatility due to the COVID-19 pandemic. The most recent release of the ABS retail trade data shows that total retail turnover rose by 2.7% in June, following a 16.9% rise in May and a 17.7% fall in April. In June, demand conditions stabilised with all retail trade subdivisions returning to pre-COVID-19 levels, except for cafes, restaurants and takeaway food services subdivision, which has been restricted by social distancing measures and venue capacities. Consumers inability to spend on services, such as travel and beauty, has shifted household expenditure towards consumer goods, supporting the recovery in retail demand. However, IBISWorld expects consumer expenditure to strongly swing away from retail trade once service industries are fully operational.

The sharp decline in turnover in April was due to Federal Government’s social distancing measures and restrictions on non-essential services, which saw many non-essential retailers temporarily close. Furthermore, a fall in consumer sentiment and a rise in unemployment in April limited household’s discretionary retail expenditure. Clothing, footwear and personal accessory retailing, and cafes, restaurants and takeaway food services subdivisions declined the most by 53.6% and 35.4% respectively. In May, demand for retail trade recovered as the Federal Government loosened restrictions on non-essential services, allowing shopping centres and retail stores to reopen under a COVIDSafe plan. Most notably, clothing, footwear and personal accessory retailing and department stores turnover rose by 129.2% and 44.4% respectively. However, the recovery in total retail trade is expected to be short lived as a second wave of infections in Victoria have led to the reintroduction of restrictions on non-essential services for the past two months through August. Victoria made up approximately 25.9% share of total retail turnover in Australia in 2019-20, and the reintroduction of restrictions on retail trade in Victoria is likely to cause turnover to decline to similar levels as shown in April. JB Hi-Fi Ltd, a major domestic appliance and electronics retailer, has already announced the temporary closure of 46 JB Hi-Fi stores and 21 The Good Guys stores located in metropolitan Melbourne. Similarly, Myer Holdings Ltd, a major player in the Department Stores industry, has announced the closure of 11 department stores located in metropolitan Melbourne.

Ongoing concerns of the COVID-19 pandemic coupled with government restrictions over the past six months, have caused a shift in consumer buying behaviour. Consumers have become more accepting of online shopping, while physical stores have been temporarily closed. In June 2020, online sales remained elevated, accounting for 9.7% of total retail sales, up from 6.1% in June 2019.