10 good reasons: Why retailers are doing it tough

The retail sector is in dire shape. Kaufland has walked away from Australia, David Jones has shut its store in Fortitude Valley, Bardot and Jeans West are closing stores and it all means jobs for an industry that was once a powerhouse for employment. The Australian Retailers Association chief executive Russell Zimmerman gives 10 reasons why things are going wrong.

John McCarthy

Feb 17, 2020, updated Feb 17, 2020

Landlords have continued to increase rent and that would be alright if business was booming but it’s not. If you are running at growth of 2.5 to 3 per cent and your landlord insists on a year on year rent increases above that you have a problem.
Retailers not moving quickly enough with the times and not getting involved on-line in the right way. The engagement with a customer has to be at a social media level. It has to be great service at the counter and you have almost got to the point now that you have to know who that customer is as they walk in the door. It is possible these days.
A lot are not targeting customers. There is a term “spray and pray” where they send out a mass email and it might be about children’s shoes but goes to mature aged customers. They will just bin it and probably bin the next one the comes as well. It’s getting the target market right. It’s an area a lot of retailers don’t get right.
Undercapitalisation is an issue, more in small to medium outlets. There is an increasing business on-line that is not translating into sales at the bricks and mortar.
Consumer confidence is also about what governments doing. NSW and Tasmania are good examples where they were doing it tough and the governments put a real focus around infrastructure and training. Because they built a lot of infrastructure we saw a good return to confidence at a state level. You need it at both a state and federal level and we are probably not seeing it across the board in both. In Queensland they are trying to do a lot of work on infrastructure but then came along and increased the public holiday loadings on Christmas Eve, which created uncertainty and stress in the retail industry.
One area relevant to Queensland is that because of things like the fires, drought and now with the virus that creates uncertainty and that means sales won’t be coming through the door. Consumers see a lack of confidence. People are supporting those affected by the fires and droughts, which is the right thing to do, but it takes away spending power.
A huge problem for restaurants is the Uber effect. An enormous part of the money spent by the customer goes to Uber driver. If you are doing a $25 meal and 30 per cent goes to Uber tell me how you make a profit? It’s a race to the bottom.
Discounting in the fashion sector is over the top. If you discount 10 per cent you have to sell something like 30 per cent more product.
The way it could recover is the spending in the recovery. Essentially, there is a possibility that out of all the bad there could be a lot of good because there will be spending and more people employed in the recovery and the clean-up. That will help the economy to some degree.
Interest rates are very low and there is a certain view out there that people are sitting back and thinking that we must be in a horrible mess but when you look at it we are doing very well. All the right things are there to fire along but it isn’t. The RBA continually reducing interest rates doesn’t seem to be helping.