Australian retailers predict modest increased margins as product choice and service are expected to boost sales

80% of Australia’s retailers expect 2015 Christmas sales to exceed those achieved in 2014, according to r.ecent findings in the Deloitte Retailers’ Christmas Survey, with 18% expecting sales growth of more than 5% and 35% expecting 2-5% of growth.

However, the survey revealed that retailers are less optimistic about their profit margins with 43% of respondents expecting a modest increase in margins, with more than 25% of respondents expecting margins to decline.

Deloitte Retail partner and national leader, David White explained, “A key concern is the impact of the falling Australian dollar. Whilst currency hedges have helped shelter the effect of higher import prices to some extent earlier in the year, there is concern higher product costs will no longer be avoidable come Christmas.

“As competition intensifies, businesses face having to absorb some or all of these cost increases for fear of losing customers. So, whilst on the surface the numbers look good, dig just below and there is a question mark over profitability.”

However, retail optimism will extend throughout 2016 as 41% predict sales growth of 5% or more in earnings. The roll out of new stores has been identified as the key source of sales growth, followed by the introduction of new products, online offerings and price increases.

Discounting

Consumers can expect discounts ahead of the Christmas season to come early with 27% planning to begin discounting in early December, the highest since the survey began four years ago. However, 20% of retailers are undecided on when to discount and by how much.

“With one in five yet to decide if and when they will start discounting, it could be the case of who will blink first,” said White.

“This may be both indicative of uncertainty around the strength of consumer sentiment, but also the greater levels of sophistication of retailers. Increasingly, ‘real time’ pricing decisions give retailers the ability to change prices at short notice across specific products in specific locations at specific times of the day.,” he added.

Customer service and product choice

A third of retailers cite product choice and 23% highlight customer service as the top two key focus areas to boost sales this Christmas.

“Getting the product range and mix right is always front of mind for retailers, but never more so than at Christmas.  Coupled with customer service, it’s critical for all retailers to be asking what their different customers want and deliver services and products that genuinely meet their expectations,” White commented.

Retailers invest online

Close to 50% of retailers expect their online sales to make up 6% or more of their total sales this Christmas, compared to just 18% of retailers in 2012 and 21% last year. Whilst this is still low compared to the US and UK, Australian retailers are starting to invest in online in response to an ever more demanding consumer.

“The key for retailers is to understand how customers are using digital devices, such as smartphones, tablets and laptops, to make decisions and shop,” said White.

A recent Deloitte report, labelled ‘Navigating the New Digital Divide’ showed 40% of in-store visits in Australia are influenced by digital with 65% of customers using a digital device before their shopping trip and nearly 31% while shopping.

“Australian consumers are highly connected when it comes to the use of digital whether it is for researching a product, comparing prices and checking availability or purchasing with click and collect. Australian retailers are potentially underestimating the appetite of consumers for digital engagement through the end-to-end shopping journey,” White said.

This story first appeared in Appliance Retailer.