And none more so than department stores, fashion and electronics. Whereas, food and entertainment remain the only bright spots.
Even with the two interest rate cuts and recent government handouts, the expected bounce in sales is yet to materialise for traditional retailers.
And they have lowered their expectations going forward — with much concern being voiced about the impact of online retailing.
While shoppers seem to be shunning “bricks-and-mortar” stores, many consumers are still spending. To the point where online sales have leapt 20% over the past few years.
But you need to keep this figure in perspective: Online retailing is only worth about 5% (or $11 billion) of traditional retail turnover.
Nonetheless, it’s a growing trend that clearly has mainstream retailing concerned.
According to the NAB, 75% of this online spending is going to Australian businesses. And yet, tens of thousands of businesses (64% according to MYOB) have no web presence.
So, there is plenty of scope for traditional retailers to restructure, and join the party.
Need for Change
Gone are the consumer boom years, where household debt peaked at 150% of disposable income. And clearly, there is now a need for retailers to adjust.
In fact, household savings have been growing since the early 2000s. But the GFC, plus a fall in value of their superannuation and property wealth, have left people feeling poorer.
Hence, their sudden urge to save even more … where households currently have 25.9% of their financial assets in cash — well above the long-term average of 19.5%.
Bottom Line: As soon as things stabilise globally, and they begin “feeling wealthy” once again … consumers will resume spending AND respond with new-found vigour — much like most creatures do, after emerging from a long hibernation.
It is during this “catch up” period that you can expect Retail property to regain its position, as a sought-after investment once more. And this renaissance should commence towards the end of next year.