Australia earned its reputation as “the lucky country” in 2009. The Government stimulus package buoyed consumer spending, low interest rates and petrol prices meant many Australians were spared the worst of the global financial crisis and, technically, the country avoided a recession. Australian consumer confidence is now on the rise.
But experts say it is too soon to start popping the champagne just yet. Growth in employment is still relatively subdued and underlying income growth remains soft. The “stimulus effect” is wearing off
and the Reserve Bank has raised interest rates two months in row.
So how are retail marketers positioning themselves to steer out of the downturn and grab share as the market recovers. And just how strong is the retail market looking for 2010?
According to Nielsen’s Global Consumer Confidence, Concerns & Spending report, released in November, Australian consumer confidence rose 11 points in the third quarter. Of the 54 markets in the survey, Australia’s confidence score was 20 points above the global average, ranking it the seventh most confident country in the world. The report also found Asia Pacific ad spend, a key indicator of business confidence, rebounded much faster than expected by many analysts, with a year-on-year increase of 9%.
At time of writing, Roy Morgan’s consumer confidence survey had consumer confidence sitting
at 124.8. In November 2008, it was in the mid-90s.
Roy Morgan chief executive Michele Levine says: “Our confidence now is very much like two years ago, before the global financial crisis.”
She adds that 53% of Australians say now is a good time to buy major household items – well up on this time last year, when it sat at about 30% – and slightly up even on November 2007.
However, Levine cautions: “Our consumer confidence is a little more fragile now. We’ve come out of a year of really worrying times. We’re really nervous.” Rising interest rates, or even the discussion of the possibility, will impact on consumer spending, she adds.
According to Access Economics director David Rumbens: “The tide is turning towards a more sustainable recovery.” He cites jobs growth, improving business investment, and strengthening house prices as factors. The strong Aussie dollar could also mean retailers pass on savings to consumers, meaning “good news for shoppers”.
However, Rumbens warns that jobs growth is still “not strong”, interest rates are on the rise and the stimulus effect is disappearing, all of which “still suggest slow growth for retailers”.
Consumers are also more concerned with paying off debt than spending. “Often when confidence is strong, you also see consumer borrowing very strong,” he says, adding that that is not the case right now.
The Nielsen Company managing director media Pacific Peter Cornelius says major retail marketers
are responding to the significant shifts in consumer shopping habits and attitudes formed by the downturn. Nielsen’s global consumer study found people are now prepared to shop around for value, and are heavily reliant on price discounting and promotions. “They don’t mind being frugal,” he says. “They have experienced a bad economy, and it’s no longer uncool to look for bargains.”
Major retailers are responding by ramping up their focus on customer loyalty programs and customer retention, says Cornelius, citing recent efforts in this arena by Woolworths – including Everyday Rewards and its Qantas Frequent Flyer link-up – and Myer.
Harvey Holdings and Bing Lee have also been very active of late, having “picked up on the fact that people are cashed up”. Retailers have been helped by the marketing activity of Free TV and Commercial Radio Australia to promote digital devices.
If retailers have a strong pre and post-Christmas period, says Cornelius, “they will spend money where there is money to be had”. Conversely, if sales are not strong, retailers “may well pull back” on their marketing spend.
“There’s probably cautious optimism,” he summarises. “The smart ones seem to be spending. History says, if they feel it’s not going to improve, they won’t spend. That to me says they’re spending because
either they know the market’s improving, or they’ve got a pretty good sense the market’s improving.”
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at email@example.com