At first glance, Australian retail looks resilient. Turnover keeps rising, the population keeps growing and spending holds up. But the headlines flatter the reality: According to the ABS, household spending rose 6.3 per cent in the year to March 2026, yet volumes grew just 2.8 per cent once inflation is stripped out.
With the population expanding at around 1.5 per cent, consumption per person is barely moving. Australians are spending more and buying scarcely more. Retail growth is therefore a price story rather than a demand one.
That underlying softness sits within a harder global truth. Over recent months, OC&C has interviewed retail CEOs around the world and shared those findings with the industry at the World Retail Congress in Berlin. Three in four executives told us their operating model is not fit for the future. As our colleague James George, a partner in OC&C’s global Retail & Leisure practice, puts it: “Retail leaders have stopped waiting for normal to return. The winners won’t be the ones who survive this market; they’ll be the ones who get fitter, move faster and make their own weather.”
In Australia, the pressure is compounded further by domestic economic settings. The RBA has lifted rates three times this year and maintains a tightening bias; the budget’s meaningful tax relief lands mostly from 2027-28; and a 4.75 per cent minimum wage rise took effect on July 1, flowing straight into retail’s cost base. Nobody is coming to save the P&L.
Two structural realities sharpen the challenge. First, Australia has no adjacent market: Growth must be taken, not found. The notable exceptions like Lovisa, Cotton On and Kmart’s Anko earned offshore growth precisely by building something differentiated enough to export. Second, China cuts both ways: Australia is more dependent on Chinese sourcing than most Western peers, and the same ecosystem now ships directly to Australian consumers through Temu, Shein and social commerce, resetting value expectations faster here than in markets with more diverse supply chains.
When volumes per head are flat, the market carries no one. Growth means taking share, and the market is separating sharply – rewarding genuinely distinctive propositions and punishing the rest. The dividing line runs visibly through department stores. Facing identical structural pressures, Kmart has thrived through relentless everyday low prices and by building Anko into a private label so distinctive that it draws shoppers in on its own.
David Jones and Myer, two of the country’s oldest names, have broadened their propositions to the point of eroding the distinctiveness that once defined them. Customer perception data tells the same story: OC&C’s Retail Proposition Index rates Kmart among Australia’s strongest brands, while both department store veterans have stagnated over the past five years.
The same dynamic is playing out across other categories. In fashion, global players – Zara, H&M and Uniqlo – have captured growth with faster, trendier and lower-cost models that local incumbents could not match. This has led to a long succession of Australian brands shutting their doors over the past two decades, including Jeanswest, Bardot and Dion Lee. Grocery is showing early signs of the same trend, albeit from a different direction. As Coles and Woolworths converge on near-identical strategies, they leave room for more focused propositions that are peeling away share: Aldi on value, Costco and Amazon on scale and convenience, Harris Farm on localised premium products, IGA on convenience and the neighbourhood mission.
The strongest retailers win on one or more of a few things customers genuinely value: Distinctive quality product; consistent value delivered through a hyper-efficient operating model; service built on solutions and advice; fulfilment that keeps its promises; and relationships that earn advocacy. AI is now an accelerant – leaders told us it has cut campaign production cycles from two weeks to two days – but it sharpens these advantages rather than substituting for them.
What counts as an advantage differs by category and erodes quickly. Later this year, OC&C – a global strategy consultancy that has advised some of the world’s leading retailers – will publish its latest Retail Proposition Index (RPI) on where Australian retailers have built genuine advantage, what has become table stakes and who is falling behind. Readers can register for early access to the findings here.
Retail CEOs have two simultaneous priorities shaping their agenda: Get fit for the fight and be distinctive enough to be chosen by customers. In a market only growing through price, winning every point of share is the whole game.
