“Low wage growth, high personal debt levels and a weakening housing market – particularly in Sydney and Melbourne – have made consumers reluctant to spend on non-essentials,” said Mr Oster.
“Furthermore, consumer preferences continue to trend towards experiences at the expense of traditional consumer goods.”
Retail foot traffic fell 3.8 per cent in calendar 2018 and ANZ general manager for ShopperTrak Adam Ioakim expects a similar decline this year as consumers do more browsing and buying online.
“Consumers are changing – historically you’d have people going into a store to browse before they buy,” Mr Ioakim said.
“Now a lot of that browsing, that pre-purchasing, is happening online on a mobile device or laptop before they go in stores. So, it’s natural that bricks-and-mortar traffic is down.
“I think there may be some peaks and troughs (this year), there may be some significantly poor months and some significantly good months (traffic rose in February, April and August last year but fell every other month), but overall the long-term trend is for low-single-digit declines in retail traffic.”
The only positive news for retailers is that conversion rates – the proportion of visitors who make a purchase – have been fairly stable and online sales growth is helping to offset declining sales in physical stores.
“Despite not as many visitors instore [retailers] are transacting with the same amount of people – people are well-rehearsed about what they want to buy before they enter a store,” Mr Ioakim said.
The ShopperTrak data has a close correlation with discretionary spending but the company does not count traffic in supermarkets and food stores or shopping malls, so it excludes food and grocery sales. ShopperTrak has traffic-counting cameras in about 3000 discretionary retail stores including apparel, cosmetics, jewellery, toys and hardware.
Tough time for retailers
Mr Ioakim said the “horrendous” double-digit declines in December had prompted retailers to review rosters, ranging, marketing, discounting and in-store experience.
For example, sports apparel chain JD Sports and sneaker chain Platypus are using disc jockeys to give customers new reasons to shop in-store.
“We’re having a lot of conversations with our retail customers around is this the new normal … and what can we do about that,” he said.
“The retailers that are using the data to drive change are the ones that will succeed.”
Several retail chains have collapsed in the past six months, including Ed Harry, Roger David and Laura Ashley, and Crabtree & Evelyn is closing its 12 Australian stores. Others, including Kmart, Kathmandu and PAS Group, have issued profit warnings or downgraded forecasts after weak Christmas sales while David Jones revealed that sales tanked in the lead-up to Christmas.
Mr Ioakim said the fall in retail foot traffic was not necessarily leading to cheaper rents for retailers in shopping malls, as shopping centres claim to be attracting more traffic by adding coffee shops, cafes, high-end restaurants and even cinemas.
“People are more inclined to head to a centre for an experience rather than make a purchase,” he said.
“In the minds of the landlord, they are doing a great job because they’re bringing traffic to the centre, whether or not it’s being correlated to discretionary spend.”
Overdose Digital managing director Robert Cain believes more retailers are likely to go under following the poor December foot-traffic figures, but the shift to online shopping should not be blamed.
“December has always been your make-or-break month,” said Mr Cain, a former David Jones, Katies and Woolworths executive who now helps retailers improve their e-commerce capabilities.
“It’s the [month] that will kill you – if you’re going to die as a brand that’s the one – and I think there will be some deaths out of December.
“But I don’t think that’s because of online. It’s because they haven’t engaged their customer,” he said, pointing to the fact that online accounts for only 7 per cent of retail spending.
Retailers needed to use their online sites to lure customers into stores, he said.
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