More than half of Australian small retailers are performing below their financial expectations, the Australian Retailers Association (ARA) and American Express Small Retail Index found.

The research showed that 51 per cent of small retailers are trading below forecasts while 49 per cent are meeting or surpassing their financial outlook.

The businesses cited consumer spending as the top concern over the next six to 12 months, followed by wage costs, costs of goods and services, and cash flow management.

About 89 per cent of the participants said they incurred higher costs in the past 12 months, with 51 per cent admitting they resorted to passing the costs to consumers, while 37 per cent turned to reducing their workforce.

“We need urgent action to ensure Australia’s $420 billion retail economy not only survives but thrives,” said Paul Zahra, ARA CEO.

“This research demonstrates resilience amongst the small business cohort despite tough times. Unfortunately, many are struggling to cope with rising inflation, steep interest rates and the cost-of-doing-business crunch.”