Michael Pascoe wrote an article in The Sydney Morning Herald this week (http://www.smh.com.au/business/comment-and-analysis/retail-sales-not-the-guide-they-used-to-be-20131104-2wwf4.html) which identified why retail sales figures are no longer a good guide to Australian consumer spending. And the reason is quite frightening.
Retail sales used to represent 55-60% of household consumption expenditure. Now it is only around 30% as Australians spend more of their income on services. In 1960, food, clothing, furnishings and household equipment represented 38% of household consumption. Now they make up 18%. And food hasn’t escaped the decline. Food represented 18% of expenditure in 1960 and now it is 10%. So what is taking all our money? Rent, education, communication (mobiles), recreational and cultural services took 10% of our spending in 1960, but now it is 18%. The Australian Bureau of Statistics is actually thinking about re-classifying energy expenditure as retail which will adjust the balance but that is just playing with figures.
The point is that Australians are forced to spend more on things like energy and choosing to spend on lots of other things as well. All this results in a change in buying patterns. Holidays, cars, mobiles, energy and rent/mortgages are taking a larger slice of the pie. It would seem that this is part of a trend that started slowly many years ago and then a little thing called the GFC created a huge acceleration which clarified the change in consumer buying patterns.
We have some traders at QVM who have responded well to the new trends. Those who set up phone accessory stalls are taking advantage of the huge spend on mobiles. Maybe there are trading opportunities in products related to the holiday industry or energy saving. In the meantime traders are competing with every other retailer in the industry and we can do something about that by adopting a standard of excellence that makes us more attractive to customers. But what about the new choices that customers have embraced outside traditional retailing. Will the tide turn back to buying “things” rather than services? Who knows? I sell model ships and boats at the QVM. Can I convince my customer to buy a model yacht instead of taking an overseas trip? Unlikely. Should I be selling yacht cruises up in the Whitsundays? Maybe.
So much to think about. Maybe I’ll just take a holiday - for business purposes of course.