Retailers urged to respond to “technology-induced recession”

Australia’s battered retail sector is in a “technology-induced recession”, according to a new report by the Commonwealth Bank, but experts say this should prompt start-ups to innovate.

According to the report, which is based on the bank’s debit and credit card data, online sales were up by an estimated 36.5% in the year ending October 31, reaching $12.3 billion.

However, approximately $5.4 billion, or 44% of online sales, was siphoned off by offshore sites.

Furthermore, CBA estimates sales made through domestic stores fell by about $200 million in the year to October, painting an already-gloomy picture for bricks-and-mortar retailers.

“Traditional discretionary retail is in a technology-induced recession,” the report said.

Retail expert Michael Baker, principal of Baker Consulting, says all segments of the online market continue to grow, but the fastest-growing categories are apparel and deals/group-buying.

“The apparel category is particularly significant because it accounts for such a large proportion of traditional retail space on main streets and in shopping centres,” Baker says.

Baker says the report “doesn’t mince words” when it claims relative pricing in Australia favours international retailers.

The report also claims domestic retailers have “left themselves exposed through a frightfully insular view of multichannel retailing”.

Despite these claims, Baker says there is an upside for mainstream retailers, providing they make amendments within their operations.

“The CBA report suggests that the rot need not continue so long as domestic store-based retailers get their act together. It’s too late for them to lead consumers to multichannel retail but it’s not too late to follow them,” he says.

While apparel may be a major growth area, the latest research from the Australian Retailers Association identifies books, gift cards and gadgets as the most popular gifts this Christmas.

According to ARA’s Christmas Consumer Survey for 2011, books are in the top five gifts for all age groups, while 73% plan on giving gift vouchers.

“Electronic gifts were also popular ideas, depending on the recipient,” ARA executive director Russell Zimmerman says.

“Teenagers, for example, were set to enjoy their new ‘iThings’ on Christmas day, with 25% of respondents planning on buying iPods, iPhones, iPads and iTunes vouchers for adolescents.”

“iPads and other electronics were high on the list for men this Christmas, but [most respondents are] going for gifts like alcohol, chocolates, clothes and tools.”

“Moving away from electronics, mums can expect more personal gifts with perfume (26%), jewellery (17%) and cosmetics (8%).”

“Boys and girls will find presents such as Lego, bikes, toys, dolls and clothes… For those splashing out and buying big ticket items over $2,000, 41% said a holiday was on the cards.”