9 in 10 retailers anticipate major challenges as consumer spending dips

• After a nationwide drop in non-discretionary spending, 50% of retailers fear a sales decline 
• Small businesses brace for biggest hit, with 97% expecting no increase in sales revenue
• Close to 40% of all retailers anticipate cashflow concerns this year

As discretionary consumer spending took a 0.2 per cent dip[1] in the year-over-year to January 2024 and labour costs swelled, new research has revealed 50 per cent of retailers expect a slump in sales revenue and an eyewatering 91 per cent of the nation’s online retailers fear a raft of business challenges are set to strike.

The findings were derived from a survey of an independent panel of 200 Aussie retailers commissioned by Australia’s fastest-growing franchised parcel delivery service, CouriersPlease. The survey identifies the challenges facing retailers after inflation and rising interest rates infringed consumer spending, with CouriersPlease surveying owners and senior decision makers from micro retailers (1-15 employees) to large businesses with staff of more than 200. The full survey results are available here.

From the survey, CouriersPlease found that, with a drop in consumer spending, 50 per cent of retailers expect a drop in sales revenue, and 40 per cent expect their sales to stagnate. Just 10 per cent expect an increase in sales.

By business size, the data showed that small retailers are the most concerned about inflation and rising interest rates having a financial knock-on effect, with 57 per cent expecting a drop in sales. Medium-sized businesses are the least concerned, with 42 per cent saying the same. 

Just 10 per cent of micro retailers expect a jump in sales revenue this year, and only 3 per cent of small businesses forecasting the same. Large businesses are the most confident about clocking a sales revenue jump, at 18 per cent of respondents. 

CouriersPlease also explored further impacts to retailers that a drop in consumer spending will bring. Across all businesses, the report found cash flow availability ranks as the biggest concern among retailers, with almost 4 out of 10 (36%) of online retailers saying a drop in customer spending would exacerbate this challenge. Just over a third (33%) expect to face customer retention challenges, while 1 in 3 (29%) anticipate overhead cost struggles.

CouriersPlease CEO, Richard Thame, says: “Our research highlights some of the major pain points plaguing retailers, particularly smaller retailers. It comes after recent data confirmed inflation declined in the December quarter by slightly more than had been expected[2] which was largely due to the slight dip in non-discretionary spending – a dip that might steepen over the coming year.”

While goods price inflation was indeed weaker than expected, Richard pointed to a non-discretionary spend jump of 6.9 per cent in the year leading up to January, which was driven largely by transport, food and health spending[3]. Additional data shows online shopping continues to attract consumers with 9.52 million households (which equates to 81% of Aussie households) receiving a parcel last year – a figure that was up 1.4 per cent year on year[4].

He says: “That 10 per cent of all retailers surveyed don’t expect an increase in sales this year tells us that Aussie businesses are indeed bracing for impact; we know that appetite for online shopping remains strong and there are tools businesses can embrace to ease that strain. 

“While small businesses naturally fear being hit the hardest, our research shows they in fact have a unique opportunity to more than just survive the economic rollercoaster, but thrive with the help of AI technology and a better understanding of evolving shopper habits.”

CourierPlease CEO Richard Thame’s top 5 tips for online retailers looking to fuel E-Commerce success amid economic headwinds

Richard says social media and tech will be key to retaining consumers and boosting cashflow in the coming financial year, and encourages micro and small businesses to embrace social platforms.

1.         Know who is shopping and when - and what those buyers want. Australian online shopping reports show people are buying more during the day than ever before, with most online shoppers purchasing from 2-5pm and Aussies now spending an average of four hours online shopping a week[5]. Shoppers also value sustainable retailers and Gen Y customers (aged 27-43) spend the most. By boosting sustainable practices, offering click and collect options, easier returns and shorter waiting times, you’ll immediately deliver what most shoppers want in 2024.
2.         Strategically time your sales with the help of AI. It’s more important than ever to leverage data analytics to find the best time to run a promotion and tailor the deals to your audience to maximise relevance and engagement. And this can be done quickly and cost-effectively with AI sales tools. For small businesses with limited manpower and budgets, AI for content marketing is a game-changer with many options now available for writing copy, creating images, scheduling time and more.
3.        Boost customer retention with loyalty programs. Don’t have a loyalty program? Then get one. Figures released this year show that 95 per cent of Aussies are members of one or more loyalty program, with 18 per cent reporting increased usage over the past year. Another 45 per cent say loyalty programs make them visit retailers more[6]. He adds that loyalty program software is a great way to implement this cheaply and easily. Small businesses could offer rewards for members who make fewer returns, for example.
4.        Get an omnichannel presence through pop-ups. Social media is king for E-Commerce retailers with Australians shopping through social media channels more than ever.[7] But a pop-up store can help businesses get a physical presence without the immense overheads. They’re also a great way to test potential new markets, market stalls are an inexpensive solution and said creating a unique point of difference – such as a freebies or even Insta-friendly pic opportunities – could build brand recognition.
5.        Use final sales as a cost-saving strategy. Buyers love a bargain, and final sales are a great way to help savvy shoppers nab a deal and for businesses to clear inventory. Industry data shows only a third of businesses utilise this tactic but it’s important not to throw sustainability out the window. A lot of businesses have a ‘no returns’ policy with final sales but this adds stress to customers and can mean a jump in landfill for unwanted items. Consider bringing back a customer and environmentally friendly refund policy and consider even offering rewards to customers who trade in pre-loved items.