The consumer goods retail subdivision has struggled with tough retail conditions over the past five years, with consumer goods retailers posting mixed results.According to IbisWorld, the household savings ratio reached record highs, indicating that consumers have been exercising greater caution with their spending. Consequently, subdivision revenue is estimated to decline by an annualised 0.3 per cent over the five years through 2013-14, to total $121.1 billion.
IbisWorld industry analyst, Lauren Magner, says weak economic growth and plummeting consumer sentiment following the global financial crisis has led to a tense time for subdivision operators, as households scale back expenditure on non-essential goods, preferring to save rather than spend.
Due to widespread economic uncertainty and instability in financial markets over the period, many households postponed housing construction activities and renovation plans, leading to a fall in demand for furniture, housewares, appliances, textile goods, hardware, garden tools and building supplies.
Furthermore, as consumers have become more informed about purchases and the value of the products they buy, there has been a growing trend towards bargain hunting. “Price has become an important basis of competition in many industries as value-conscious consumers adopt more prudent spending habits,” says Magner.
Subdivision revenue is expected to increase by only 0.9 per cent in 2013-14, despite an improvement in overall economic conditions, as consumers remain frugal. The subdivision exhibits a low level of market share concentration, with Wesfarmers the only dominant player.
Subdivision operators have been subject to intensifying competition from online retailers as consumers have become increasingly accepting and comfortable with electronic transactions. Online stores generally have lower overhead costs and are therefore able to offer consumers more competitive prices.
The low prices and diverse product range available online makes it difficult for traditional retailers to compete, particularly as tech-savvy consumers are increasingly searching for the best value by comparing prices offered instore with those online.
The retailers most affected by the flood of online stores include the clothing, footwear, accessories, cosmetics, entertainment media, and printed material industries.
The consumer goods retail subdivision’s performance is forecast to improve slowly over the next five years. Sales will be aided by an increase in disposable incomes and a rise in household formation. Consumer goods retailers will continue to face strong competition from online players that stock similar items at low prices.
For more information, visit IbisWorld’s Consumer Goods Retaill report.
