This year will be a big one for the Australian retail sector with the launch of TiVo, the arrival of Costco and the growth of supermarket chain Aldi all likely to have a significant impact on the retail landscape.
IBISWorld general manager (Australia), Jason Baker, predicts retail sales will increase by a further four per cent in 2008, driven by a few newcomers to the market.
“We can expect to see up to five Costco stores open by the end of 2008 and the breadth of products they’ll supply will have a marked effect on a number of local retailers including department and specialist stores, supermarkets and jewellers,” says Baker.
“Electronics outlets such as Dick Smith and Harvey Norman will also feel the heat and we believe the Australian debut of so-called ‘megastores’ will truly change the retail scene in this country over the next decade.”
Costco is a US-based ‘warehouse club’, which sells products at high volume, and low prices, with goods typically bulk packaged and marketed to families and businesses. To shop there buyers purchase an annual membership, which is likely to be around $100 a year. The retail giant currently has 523 locations, 489 in the Americas, 19 in the UK, six in Japan and five in South Korea.
It plans to open its first Australian outlet in Melbourne next year, and Baker says the response will be interesting to watch, since other attempts at ‘superstores’ in Australia have failed miserably.
“We’ll have to wait and see exactly what Costco in Australia will stock, but overseas they’ve gradually expanded their ranges to include produce, meat, dairy, baked goods, seafood, clothing, flowers, books, software, art, spa baths, furniture and home electronics, with some also hosting tyre garages, pharmacies, optometrists, photo processing labs and petrol stations.
Baker says that in the US the Costco model has been successful because it is a ‘one-stop shop’ that doesn’t carry multiple brands or varieties of items, which are essentially the same, allowing it to achieve high volume sales from single vendors, reducing marketing costs and encouraging price reductions. And since customers bring their own bags to carry out their goods, Costco saves significant sums on packaging materials.
Aldi is another name to watch in 2008, according to IBISWorld, with its private label products becoming increasingly popular with Australian households. Baker says that as higher interest rates continue to affect lower-income households, more and more people may begin shopping at Aldi. And given the chain’s expansion plans, IBISWorld expects revenue to increase at a double-digit rate this financial year.
TiVo is a popular digital video recorder service that lets consumers fast forward advertisements, record programs from any free-to-air digital channel, pause live high-definition TV, and access broadband content such as video-on-demand. It’s likely to cost around $400, plus a monthly subscription fee of $10.
“Later on this year TiVo will be the name on everyone’s lips as we’re expecting its launch before the end of the year. It has been phenomenally successful in the US and we anticipate a similar level of take up in Australia. It will be next year’s Christmas must-have item for grown ups.”
IBISWorld believes digital radio will be another hot product for the future because of its improved sound quality, although initial demand will probably lag behind manufacturers’ expectations in a repeat of the situation with the introduction of digital TV.
However, Baker says that if manufacturers can price digital radio in an appealing way it could be the hot product for 2009.