Consumers might be being more careful with their cash as the cost of living crisis bites, but one payments expert predicts the upcoming Black Friday Cyber Monday season promises a bonanza for savvy Australian retailers.
Luke Latham, who is GM of Airwallex ANZ, describes Australians’ approach to shopping in the new economic era as “educated spending”.
“The pattern that we see in consumer behaviour for Australians is less that they aren’t spending at all, it’s that they’re spending more thoughtfully. It’s not about meaningless discretionary spending, it’s about educated spending and targeted spending with a real need,” he told Inside Retail.
That bodes well for retailers over BFCM – to be held over November 24-27 this year – with Latham predicting a lot of Australians are waiting to see the deals on offer to find out how far they can stretch their cash this season.
“Australian consumers are pretty savvy. They will be holding out for market-leading deals and really attractive prices that we generally associate with these peak events. So while overall economic sentiment has been a little bit pessimistic there is reason to believe that the upcoming peak season will be energising for the economy and for retail.”
Airwallex is a technology-driven B2B platform that enables businesses to receive funds from consumers and manages currency conversion, treasury management, payments and other financial services for retailers. The company partners with more than 100,000 businesses worldwide including some leading names in Australian retailing.
Latham sees two big drivers in spending this year – as has traditionally been the case, BFCM is a time when consumers shop early to save money on gifts for the festive season and this time around he expects they’ll be joined by shoppers who have been deferring purchases of discretionary items during challenging economic conditions.
“People who have been eyeing that new set of headphones or a new TV are waiting for really attractive deals to emerge. As we’ve seen with the growing popularity of big retail events in Australia over the past few years, there are incredibly attractive promotions that come around at this time of year. So, hopefully, those individuals who’ve been holding out waiting for the right deal and the right product will be pouncing come the click frenzy of Black Friday Cyber Monday – and all the way through to Boxing Day.”
Latham expects this year’s BFCM season will be dominated by online channels – but brick-and-mortar stores will still play a role.
“One of the enduring aspects of our life post-Covid is the continued penetration of digital retail. Obviously, physical retail still has a place in the hearts and minds of consumers, but we have not seen a slowdown in online retail, despite the fact people are out there in the world again and moving around.”
So how should retailers prepare for this?
“Pricing is incredibly important,” stresses Latham. “It is a tough, inflationary, interest rate-driven environment right now and the Reserve Bank is predicting that the Consumer Price Index won’t return to normal until mid-2025. So I believe pricing will stay top of mind for consumers for some time.”
Latham says retailers should look at ways to address price through different aspects of the customer experience, including costs relating to shipping and e-commerce transactions.
“Most importantly, how that impacts the retailer’s cost structure is an important consideration as well – not only in terms of how they’re presenting prices to customers but also on their bottom line.”
Latham also advises retailers to look closely at cross-border transactional charges and traditional bank charges on currency conversions and payments. Fees charged on returns and associated refunds can stretch to between 5 and 7 per cent, but Airwallex restricts that to an average of 1.2 per cent plus a fee of 30 cents per transaction.
Retailers also need “a really robust plan” regarding the customer journey and experience offered to those who shop online.
“Customers want products fast, they want them shipped reliably and they want a really acceptable level of recourse in the event that the experience hasn’t quite lived up to what they wanted,” Latham explains.
“We are in a very price-conscious environment right now. But those e-commerce fundamentals are still going to be front of mind for consumers and they are often a really big factor when consumers are deciding which retailer they spend with.
“Having a degree of focus on efficiency, cost-effectiveness and versatility in your payment products is certainly going to help both the consumer experience and the bottom line for a retailer,” Latham concludes.
Find out more about Airwallex’s insights ahead of peak sales season using our Peak Sales Season Hub.
