More retailers looking to do targeted promotions and discounting ahead of the holiday season

sales, bargains

Protecting customer data privacy and security, reshaping retail with generative AI as well as mandatory sustainability and climate disclosures are the key themes found in the 2023 edition of Deloitte’s annual Retailers’ Holiday Report, which looked at retailer sentiment towards the approaching holiday trading period, and identifies key trends, expectations and priorities for Australian retailers for Christmas 2023 and beyond.

The report highlighted that 62 per cent of retailers believe macroeconomic factors are the greatest risk to their businesses. However, 10 per cent expect consumer confidence to improve. In fact, 14 per cent still expect sales growth of five per cent or more over the period, while 57 per cent are expecting at least some growth in sales.

Meanwhile, 71 per cent expect levels of discounting to increase as a means to clear stock, while 52 per cent expect a decline in margins. And 39 per cent also expect an increase in online sales this year, with 38 per cent of retailers focusing on personalising the retail in-store experience to strengthen relationships with customers.

“In 2021 and 2022, retailers thrived as economic conditions favoured them,” Deloitte’s National Leader, Retail, Wholesale and Distribution, Melissa Dean, said. “With easily accessible funds and consumers tapping into their pandemic savings, it was a period of opportunity for the retail sector. But as interest rates have risen and inflation remains uncomfortably high, we’ve hit a retail recession.

“Retailers are navigating some of the toughest economic conditions in over a decade. Consumer confidence has taken a hit, retail customers are taking a more measured approach to their discretionary spending, and retail businesses are also managing higher costs, including increases to the minimum wage, superannuation guarantee, and payroll tax,” Dean added.

According to the Deloitte Global State of the Consumer Tracker, Australians are the second most anxious about their financial well-being, with 74 per cent expressing concern that prices for everyday products will go up, and 47 per cent believing their financial situation worsened over the last year.

“This is a huge change in pace for retailers: it’s the first time Australia has seen three consecutive falls in real retail growth since 2008,” Dean said. “Against this less-than-ideal backdrop, retailers have already survived the worst of the retail recession. It’s encouraging to see that more retailers than not remain confident they will see sales growth these holidays compared to last year.”

Deloitte noted that discounting and promotional activity will be the key to enticing customers for the coming holiday season, alongside doubling down on omnichannel strategies such as online, delivery options, click-and-collect, and enhanced in-store experiences.

“With so many retailers focused on November and December to deliver overall profitability, getting the strategy right remains critical for sales and margins, and that includes optimising supply chains and using technology to meet customer demand more efficiently,” Dean said. “Inflation will likely be taking a bite out of profits for many, and with ‘perma-discounting’ clear and present, cost-efficient ways to engage sales and offer value will be so important. Doing the simple things well will be critical in cutting through the noise and engaging customers and influencing their purchasing decisions.

“Today’s retail challenges won’t last forever as retailers become more strategic and focus on experience, innovation and effortless experiences no matter how customers engage,” Dean continued. “Cost control is rightly a strong focus for most retailers now, which could put growth strategies on the backburner. This may leave retailers in a difficult position when sales likely pick up in 2024. By the end of 2023, we could be back to positive real retail growth. The coming recovery phase may be closer than we think.”