Consumer spending starts to pick up

Consumers are tentatively starting to spend again, with only two out of 20 industry sectors recording weaker sales in February, according to new data.

The Commonwealth BSI, which is obtained by tracking the value of credit and debit card transactions through CBA merchant facilities, covers spending on automobiles, personal services and airlines in addition to retail.

The latest BSI shows retail stores, representing the largest industry category, rose 0.9% in February – marking the sector’s sixth straight gain – while the only sectors to record weaker spending were automobiles and vehicles, and mail order and telephone order providers.

The strongest lift in spending was in repair services, up 2.2%, followed by amusement and entertainment, up 1.6%.

None of the states and territories recorded weaker sales in February, although Queensland recorded a flat result due to the floods and Cyclone Yasi.

Victoria recorded the strongest result with a 0.7% rise, followed by South Australia and Tasmania – both up 0.6% – the ACT, NSW, WA and the Northern Territory.

The news should come as a relief to retailers, particularly department store Myer, which says the retail environment remains “challenging” after posting a first half net profit of $106.76 million.

The company now expects a lower net profit for the full financial year. It says total sales in the half year to January 29 were $1.73 billion, down 3.5% when compared to last year’s first half result.

Myer chief executive Bernie Brookes said heavily discounted electrical goods accounted for about 2% of the decline in sales.

He admitted the company’s performance over the past decade showed limited sales growth, particularly in light of the global financial crisis when the business ran into “enormous headwinds”.

Brookes says the company is well placed to benefit from any increase in consumer confidence and discretionary spending when retail conditions improve.

Meanwhile, a new global report by IBM reveals the factors currently influencing consumers and the ways in which retailers must change in order to relate to consumers and maintain loyal customer relationships.

IBM surveyed more than 30,624 consumers in 13, including more than 2,200 consumers in Australia.

Not surprisingly, technology is changing the way consumers interact with brands, obtain information and make purchases, with 45% of Australian respondents willing to use two or more technologies to shop; a 14% increase since April 2010.

Consumers also expect discounts, trial offers and access to exclusive content, and they want them delivered in a way that’s “fun, fast and interactive”.

“The role that mobile smart phones and devices play in the shopping experience is also growing, with 12% of Australian shoppers willing to use their mobile devices during the shopping process,” the report states.

“This is a 71% increase in willingness in just six months. In fact, 40% of people surveyed want to be able to check product prices wherever they are and get promotions based on the items they scan.”

The survey shows that even though the majority of Australian respondents are optimistic about their financial future, they are not returning to pre-recessionary spending behaviour.

When Australian respondents were asked about their attitude towards shopping and spending, 29% said they will only buy what they need while 23% will search for sale items and 18% will wait longer to purchase.

Importantly, personalised promotions were rated the number one influence in increasing consumers’ spending, determining where to shop, and the area where retailers need to improve the most.

IBM’s Ian Wong says the results reveal that smarter consumers want to be known and served, not sold to.

“With the rise of social media, consumers are engaging in a constant and instant dialogue with each other,” he says.

“They want to be heard and they want a personalised shopping experience. It’s important for retailers to listen and partake in these online conversations so they can better understand and communicate with their customers.”