Falling consumer sentiment and rising retail insolvencies are painting the picture of a continually weakening sector, according to KPMG’s latest Retail Health Index report.

The report tracks areas such as spending, sentiment, turnover, pricing and business performance in the three months ending June 2026. These factors, joined with wider data points, form KPMG’s own health index score, which has declined from the previous quarter.

This score now stands at a negative 1.07; the previous quarter’s score was a negative 0.37. KPMG said that household spending and producer prices increased, but consumer sentiment fell by 11.4 per cent in just one quarter.

“Australian retailers continue to operate in a highly demanding environment, but the challenge is no longer simply about getting customers to spend,” KPMG said.

“Customers are still spending, but they are shopping differently. Across the market, consumers are becoming more deliberate, value-focused and promotion-driven, with many actively timing purchases around EOFY sales and other major retail events.”

Employers in the industry have also started to feel the effects. KPMG found there were 254 retail insolvencies in the quarter, while job vacancies fell by 15.3 per cent to 26,000.

However, the authors expect some recovery in the near future.

“Online and omnichannel shopping continue to gain importance, customers expect greater value and convenience, and AI-driven personalisation is rapidly becoming a competitive advantage rather than an innovation project,” it said.

Consumer sentiment is expected to rise while supply chain disruptions ease. KPMG said this will sit alongside a growing population as areas of support for retailers. 

“The focus for retail leaders will be on protecting margins, deepening customer loyalty and executing flawlessly during increasingly important promotional periods such as Black Friday, Cyber Monday and EOFY,” it ended.