A decade ago, the advertising and marketing sector was taken to task by Peter Field and Les Binet. In 2013, the duo, who have come to be known as the godfathers of effectiveness, published their book The Long and Short of It which called out brands for being too focused on short-term metrics. The pair argued that by neglecting to consider long-term data, brands were doomed from the start. At the time of publication, many brands were prioritising short-term metrics and missing out on
ut on the results of advertising campaigns which research showed develop over time. The book sent shockwaves through the industry. But 10 years later, advertisers are falling back into old habits ditching long-term brand-building efforts to purely focus on activation campaigns that deliver sales in the short term. It’s an important lesson for us all. Short-term data alone doesn’t tell the full story. And that applies equally to retail sales data. It’s all too easy to get stuck dissecting the monthly ABS retail data. But to truly understand what is happening in the category, it pays to consider the bigger picture. Granted, a quick glance at the December ABS retail data paints a pretty miserable picture of the sector with a drop of 2.7 per cent month-on-month far from ideal. On the surface, it looks like the Black Friday and Cyber Monday bump in November amplified the December drop. But digging a little deeper reveals that food retailing – perhaps not that closely aligned with BF/CM – contributed 50 per cent of total sector growth year-on-year for November. As the biggest category by spend, food can impact the numbers more than any other part of the retail economy. That’s why it pays to look at the data over the longer term. It puts context and understanding around the trends playing out across the sector and its categories. And it gives perspective to the reactive nature of the short-term rollercoaster of monthly data. The long-term picture Looking long term, year-on-year total turnover (seasonally adjusted) across retail is up 3.3 per cent in 2023 (versus 2022), a figure that hasn’t been widely recognised. And there is only one category that has seen a decline in turnover: household goods retailing which is down 3.7 per cent. The Godfrey’s announcement is a visceral sign of the pressure being felt in that corner of the industry. Elsewhere, the data shows year-on-year spend across the board is up; cafes, restaurants and takeaway are up 10.3 per cent, department stores up 3.6 per cent, clothing, footwear and personal accessories up 2.9 per cent while other retail was up 0.9 per cent. And, as mentioned, food is up a decent 4.9 per cent. Given the spotlight on increasing supermarket profits and suggestions of price gouging by Coles and Woolworths, that figure is particularly intriguing and potential fodder for the government’s senate enquiry. But, and this is a big but, hidden behind the headline numbers is a more nuanced story: the radical slowdown from the first half of 2023 to the July to December period. The balance of the total retail category spend was still (only just) weighted to the back half of the year at 50.2 per cent. The prevailing growth trend radically changed direction in the back half. This insight speaks to bigger challenges in the retail economy. Essential categories like food continue to ride the inflationary thermals benefiting both Coles and Woolworths, who posted $1.1 billion and $1.6 billion in profits respectively in their most recent financial year results. Those results, both up more than 4 per cent year-on-year, stand in stark contrast to consumer sentiment and customers reeling from sky-high grocery prices. Breaking down the demos At a demographic level, with the prospect of homeownership waning, Gen Z and Millennials are reverting to the YOLO (You Only Live Once) lifestyle. Despite an overall decrease in spending by 5.1 per cent for this group, According to Commbank IQ Data from November, spend on entertainment increased by 13 per cent, with discretionary spend shifting from clothes and homeware to cinema, concerts and sporting events. Census data tells us that roughly 30 per cent of Australians don’t have a mortgage and Commbank data suggests this cohort, heavily weighted to the over 50s and Boomers, has increased spending on travel by 17 per cent and upped dining out expenses by 11 per cent. These are the broad strokes and the earnings reports for retailers over the next few weeks will colour in the details. The trading update provided by the South African parent of Country Road Group – owner of Country Road, Mimco, Witchery, Trenery and Politix – certainly supports this narrative. The Group announced a drop in sales of 5 per cent in the lead-up to Christmas with only a 1.3 per cent sales bump in the final weeks of the December half. The Group pointed the finger at low consumer sentiment and a weak household savings rate. Factoring in ad spend To get a better understanding of the state of the wider sector, there is another data set worth a look. Nielsen reports on advertising expenditure across all categories in Australia and a review of retail ad spend gives some further insight. For example, total advertising spend in the supermarket sector increased 4 per cent from 2022 to 2023 but across the December quarter declined by 3.5 per cent. This means the increase in turnover was delivered with less media investment, essentially achieving a double dip benefit – less investment for greater return. Nielsen data shows the household goods advertising category increased spend across 2023 by 7 per cent as businesses chased sales in a declining market. As household goods saw an accelerated decline as the year progressed, this conversely drove more ad spend. Meanwhile, ad spend in the appliances category fell by 12 per cent year-on-year. In the second half that decline accelerated to 23 per cent as companies started to batten down the hatches. Department stores and shopping centres also saw a radical drop in spend, back 14 per cent year-on-year. The fall was driven by the January quarter where combined ad spend was reduced by 38 per cent. Ultimately the data illustrates different narratives by sector and can be cut to show different insights over various timeframes which is why, as a retailer, you can’t afford to cherry-pick just one statistic. Yes, we live in the here and now, but being too focused on short-term data means you could be missing a trick. And as 2024 gets underway, you’re going to need every trick in the book.