Where retail is at

A little more than half way through the year and we now have a clear view of where the retail industry is at as we run up towards the peak Christmas pre-sell period. We can also have a stab at where the Christmas 2010 and New Year sales 2011 will head.

Around the globe Australia tends to be seen as a top 10 revenue market for most companies, but a top three profit market as margins are very healthy. Two years of consistent and positive immigration growth into our overall marketplace is now flowing through into our retail space. Importantly we are seen as a growth market with the positive high income immigration continuing to feed that growth. Profitable growth markets allow companies to more patiently invest in growth over a longer time.

So at the start of August 2010 on the positive side of the ledger we have lower shelf prices, steady CPI assisted by lower shelf prices, more competition with more retailers and new manufacturers entering all parts of our shopping world.

New clothing brands, new car brands, new TV brands and new beer brands as companies around the world focus on Australia as a growth market. We have a significant number of new Asian-based companies with significant scale in their home markets setting up business here for the long-term. Pharmacy companies like Dr Reddy’s out of India, Hyosung motor cycles out of Korea and Great Wall cars out of China to name but a few. Aldi has scale, GAP has opened, Costco and Smiggle are expanding and IGA is breathing new life into Franklins.

On the negative side of the ledger we have had rising interest rates designed to cool our housing market, eating into disposable income that could’ve been spent in retail. That cycle has now thankfully ended. The flow-on effects are pretty flat retail sales, again due partly to lower shelf prices, flat or declining share prices in the retail sector of the ASX and postponed floats for retail shares.

So on to Christmas and the New Year. Well, every manufacturer in Europe, the US and Australia has finished their last financial year and have committed more funds to Christmas 2010. It’ll be our first Christmas without the shadow of the GFC cast over some parts of the retail sales mix, whether job uncertainty, actual redundancies, economic stimulus, receivership stock or clearance sales. Now we just need to get through August 21 with a government that can govern. Following the UK and the Netherlands, we may end up with a hung Parliament, but that is infinitely better than not knowing.

Now everybody wants and needs to have a “normal” – whatever normal looks like – Christmas trading period.

Already we are seeing higher advertising spend, more media bookings, high prices paid for media companies and bigger activity rumoured among several large retailers and manufactures for Christmas 2010.

It all bodes well for the balance of the year, and this far out a 4% higher year than 2009 looks achievable.

In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.