ent in retail stores in December, while spending with mail order and telephone order vendors fell by 3.2 per cent. Both the National Retailers Association (NRA) and the Australian Retailers Association (ARA) have claimed that pre-Christmas trading continued an improved growth trend in October and November and indicated Boxing Day sales were very good. Citibank analyst, Craig Woolford, has also been bullish about sales for the holiday period and named JB Hi-Fi and Myer as star performers. Online sales may well have pared back some of the growth in retail stores in what was apparently a less robust December than had been expected by most retailers after promising November results and few have been crowing to IRW about January sales. If nothing else, retail sales for Christmas 2016 and the holiday season have not provided a cause for great celebration for all retailers and have proven tough going for many specialty chains and independent retailers. Cautious consumers Consumers still seem to be cautious about spending, a fact that may be evidenced by an analysis of consumer spending patterns that showed more transactions were made on debit cards than credit cards in November 2016. MWE Consulting drew on Reserve Bank figures to determine that 45 per cent of consumer purchases in November were made using debit cards compared to 44.8 per cent on credit cards. RBA figures indicate high historic levels of household debt, a factor which weighs heavily on interest rate decisions but it appears many consumers are trying to wean themselves off credit cards with a CommSec analysis reporting average card balances are $3,070, the lowest level in nine years. The banking industry reports growth for both credit and debit cards, but a preference of younger consumers to use debit cards appears to be a key factor in their stronger growth. The continued cautionary spending patterns by consumers could also be evident in The Westpac-Melbourne Institute’s latest monthly survey that indicates households are expecting the economic outlook in Australia to be more difficult in the coming 12 months. There was a sharp fall in the December confidence levels measured by the Westpac-Melbourne Institute survey that coincided with subdued trading for the month reported by a number of retailers. The pessimism has continued in the January survey and suggests that consumers are concerned about economic prospects for Australia this year and over a five-year horizon. This sentiment corresponds with other research that shows a large majority of households believe the financial position of their family has deteriorated in the past 12 months with rising costs in uncontrollable expenditure categories such as health, education and utilities and the impact of unemployment and underemployment. The underlying concern for the RBA and the Federal Government, which is counting on a consumer-led recovery to shave its budget deficits, is that consumers have benefited from low mortgage interest rates, low inflation rates and decelerated prices across many retail categories. Show me the money The key areas where consumers seem to have shown a willingness to spend has been in major household goods and technology. These categories have underpinned the growth in sales enjoyed by retailers such as JB Hi-Fi, Harvey Norman and Kogan.com, retailers which have also been able to soak up the sales the failed Dick Smith chain previously captured. The ARA claims that spending on clothing, footwear, personal accessories and takeaway food have also been showing good growth. However, most of the growth is the result of new store openings with like-for-like sales generally flat or in negative territory. Certainly, the creditors of Payless Shoes would not believe footwear is a strongly performing retail category of late, while the ARA itself noted in December that clothing sales were dragging. The ARA’s change of tune may have something to do with reports that international retailers Uniqlo, Zara and H&M are now approaching $600 million in annual sales. The trio has certainly lifted revenue levels as a result of expanding their store networks, but comparable store results have been less spectacular with the novelty seemingly wearing off a little for Zara and Uniqlo. Uniqlo doubled its number of stores in its full financial year to August 2016, boosting sales to $174.5 million but the establishment costs for the chain resulted in a loss of $5.8 million for the year, up from $3.04 million in 2015. In a bid to lift flagging sales growth in fashion and to counter the drift of sales to H&M, Zara, Uniqlo and other international brands, Myer has introduced the British brand John Lewis to its business, while Harris Scarfe has struck a licensing deal with Debenhams. Solomon Lew, executive chairman of Premier Retail, which trades under Just Jeans, Portmans, Jacqui E, Jay Jays, Dotti and Peter Alexander, describes the past five years as the toughest he has seen in his long retail career and is not confident of any quick rebound in consumer confidence and spending. Christmas and new year sales are critical to most retailers and recent weeks could have important ramifications for many chains, including Target and Big W, the discount department store brands struggling for a turnaround in their fortunes. There have been several trading updates from ASX-listed retailers listed in recent weeks that have underscored the volatility in the retail market leading into Christmas. Adairs, The Shaver Shop and Oroton have all advised investors that sales have fallen short of expectations. Oroton revealed last week like-for-like sales for the first half of the 2017 financial year are down 10 per cent and that stores did not enjoy a boost from Boxing Day sales and earnings for the half will now be between $4.5 million and $5 million, well short of the previously forecast $8.9 million. While retail bricks and mortar store sales are struggling for growth, most chains are reporting solid transaction and revenue increases from their online retail platforms. A report by data trend analysis firm, Quantium Solutions Australia, indicates growth in small online retail spending is tracking an estimated 22.2 per cent higher than a year ago and that small online retailers captured 37 per cent of total online retail sales over the past 12 months. Quantium said most of the small retailers gaining traction online are primarily based in the personal and recreational, homewares and appliances and fashion categories, which represent 85 per cent of all online sales for small retailers. Accordingly, most growth over the past year was attributed to these categories, in particular homewares and appliances, which represent 29.2 per cent of spend but 37.9 per cent of growth. A category breakdown In a breakdown of shoppers on the internet, Quantium claims 35-44 year olds account for 24.2 per cent of spending, despite only being 17.2per cent of the adult population. Quantium indicates the next largest online shopper cohort is the 25-34 year old group with approximately 22 per cent of online spend. The 65 years and over category predictably has a disproportionately lower share of online spending at 8.9 per cent relative to their 19 per cent share of population. The data analysed by Quantium indicates the 45-64 years cohort has the highest share of spending on homewares and appliance products, while 18-34 year olds have the biggest spend on fashion, with 35-44 year olds and over-65 years consumers the predominant online buyers of groceries and liquor. Some good news The NRA estimated consumers spent $2.28 billion in the Boxing Day sales, up from $2.19b in 2015 with increased spending across all states. The NRA claims there is good reason to expect that there will be a lift in “broader base spending beyond the all-important Christmas and Boxing Day period” based on the figures it has obtained. The ARA also believes the Boxing Day sales generated close to $2.3 billion with high traffic levels in stores and shopping centres, as well as a sharp increase in consumer activity online. ARA CEO Russell Zimmerman said the association and Roy Morgan Research were expecting shoppers to spend around $17.2 billion between 26 December and 15 January, although the highest growth category for consumer spending was anticipated to be hospitality, with a forecast 6.8 per cent boost for cafes and bars. Zimmerman said apparel sales were expected to post at a three per cent increase in the sales and, based on recent retail spending trends, New South Was favoured to be the best performed state. Whether or not retailers realised the promised sales boost following what was for many an indifferent and disappointing December, will be evident in the next two months, as the official Australian Bureau of Statistics figures and retailer and shopping centre sales results are released. Zimmerman expects the ABS figures will confirm spending of around $45 billion in the six week lead up to Christmas, which would represent only a modest gain on 2015, but potentially better revenue gains in the post Christmas sales. Zimmerman’s forecast of a likely sales growth of three per cent in apparel sales would be welcomed by many retailers who have found the clothing and footwear categories soft in the past year, albeit much of the available sales growth is likely to have been siphoned off by retailers who have been expanding store networks and online retailers patronised by younger consumers. Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week.