Ferrier Hodgson in the AFR: Online shopping means November is now bigger than Christmas
The shifting retail calendar is adding to pressure on retailers as November overtakes December as the biggest shopping month of the year, thanks to promotions such as Singles Day and Black Friday.
In the past, December was by far the biggest month of the year for food and discretionary retailers, most of whom started their Christmas planning six to nine months earlier to capitalise on the surge in consumer spending.
However, retail spending in November overtook sales in December for the first time in 2016 and the trend gathered pace in 2017, with seasonally adjusted retail sales rising 1.3 per cent to $26.39 billion – the strongest monthly growth for the year – while December sales fell 0.6 per cent to $26.25 billion.
Retail experts say events such as Black Friday, Cyber Monday, Singles Day and Click Frenzy – where retailers offer deep discounts online and increasingly in-store – are cannibalising full-price sales in December.
The trend is likely to accelerate this year as more consumers shop online and more retailers – both pure-plays and bricks and mortar operators – come under pressure to participate in the promotions for fear of missing out.
Amazon will also join the fray this year after launching its new offer in Australia last December and its Prime subscription-based free delivery service in July.
Amazon Australia country manager Rocco Braeuniger said the online retailer would offer customers deals on tens of thousands of products in its first ever Australian Black Friday event.
Shift in spending
Retail experts say the shift in spending is placing even more pressure on retailers in an already challenging environment, where increased competition from global retailers coupled with subdued consumer confidence, low wages growth, rising petrol and energy costs, and falling house prices, are dampening spending.
Several big retailers including The Reject Shop, Nick Scali, PAS Group, Lovisa and Michael Hill have reported a soft start to the new fiscal year, with same store sales falling or flat in the September quarter.
"We are starting to see a shift in when Australian consumers spend in the critical Christmas quarter," said Ferrier Hodgson's managing partner and retail leader James Stewart.
"Traditionally retail sales would steadily increase month-on-month in the lead up to Christmas and Boxing Day," he said. "However, there has been movement in consumer spending in the last few years coinciding with the rise of global online retail events."
These online events are capturing consumers who are channel agnostic – happy to shop online or instore – and tech savvy.
The cyber sales are a double-edged sword – boosting sales in November but potentially crimping sales, cashflows and margins in December.
Impact on gross margins
Last year retailers who participated in online sales in November said the increase in sales volumes was not necessarily strong enough to offset the impact on gross margins when prices were cut by between 30 and 50 per cent.
And while some retailers used the November sales to clear slow-moving or old stock, many retailers came under pressure to stock fresh products in December to differentiate their offer from their Christmas and Boxing Day specials.
Several big retailers confirmed plans to participate in the cyber sales again this year.
"Woolworths is always looking to provide great value and specials to our customers whether they shop in-store or online," a Woolworths spokesman said.
"We know that days like Click Frenzy and Black Friday continue to grow in popularity and customers can look forward to great specials from Woolworths online on those days once again."
A Myer spokesman also confirmed the department store would hold promotions again in November, without giving details. Last November, Myer held a Super-Cyber Weekend promotion in-store and online, offering discounts between 20 per cent and 40 per cent.
Online retail sales increased about 28 per cent in August, year on year, according to ABS data, and research by retail platform company Neto showed online clothing sales grew 57 per cent year on year, homewares by 55 per cent, motor parts 49 per cent, health and beauty products 37 per cent, pet care 35 per cent and sporting goods 28 per cent.
This article was first published in The Australian Financial Review on 1 November 2018.