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Is there more downturn to the retail sector?

Team Veye | 06 Jul 2020

Is there more downturn to the retail sector?

Australia is one of the most urbanized societies in the world, with about 90% of the population living in the urban areas of Sydney, Melbourne, Adelaide, Brisbane, and Perth, as well as in smaller cities and towns within 100 miles of the ocean.

In the pre-COVID period, the Australian retail sector had been witnessing positive growth, despite significantly low increase in wages and rising household debt. It was impacted by strong growth registered in the housing market, supported by low interest rates and an increase in household credit. 

Dynamics of the retail industry are different from other sectors. Although it involves millions of employees and produces trillions of dollars in revenue every year, Retail does not create a product. Instead, retailers purchase products from manufacturers in bulk. Those products are then sold to consumers at a markup.

That Covid-19 has been a very big disruptor of life and businesses is an understatement. The online and multi-channel impacts were vastly being seen across the world on physical retails including malls. The corona scare might change the way to do retail business across the world. 

Retail sales in Australia had surged 16.9 percent month-over-month in May 2020, rebounding from a 17.7 percent plunge in the previous month and beating market expectations of a 16.3 percent gain. It was the largest rise in retail trade on record, as a wide-scale easing in COVID-19 lockdowns allowed entire sectors to reopen. Sales increased for all categories: clothing, footwear and personal accessory retailing (129.2 percent vs -53.6 percent in April), cafes, restaurants and takeaway food services (30.3 percent vs -35.4 percent), food (7.2 percent vs -17.4 percent), household goods (16.6 percent vs -0.1 percent), department stores (44.4 percent vs -14.9 percent) and other retailing (9.4 percent vs -14.4 percent). Retailers reported themes of continued spend on home improvements and high demand for recreational goods. (Source: Trading Economics.com, Australian Bureau of Statistics)

Retail sector is most commonly impacted by consumer spending patterns. Unless there is a hit to shopper sentiment due to wage cuts or job losses, we probably do not foresee any dramatic downturn to the retail sector.

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