Chris Percy, Managing Director, Consumer Group, Pacific
Australia’s resilience in the midst of global economic uncertainty is envied by many of the world’s developed nations. Nonetheless, Australian consumers are increasingly apprehensive about the impact of the world financial situation on their own economy and personal finances. With consumer confidence sliding in the most recent quarter to its lowest level since the global financial crisis of 2009 to an interim index of 97 in August, shoppers are changing the way they spend their money, what they spend it on and where they make their purchases.
The legacy of the global financial crisis has provided many lessons for Australian consumers, and the change in consumer shopping behavior is shaping a rapidly evolving retail landscape.
State of the Nation
Australia is one of the few countries that emerged from the 2008-2009 recession relatively unscathed. With nearly full employment, one might expect Australian consumers to be confident in comparison to other nations. But there are a number of factors darkening Australians’ outlook: some analysts expect higher unemployment, which increased in July. In that same month, inflation went up 0.3 percent to 3.6 percent, causing the prices of basic necessities to increase. Likewise, utility rates are higher, there is uncertainty about the carbon tax and its likely effects on the average household, and massive market fluctuations caused by economic jitters in the U.S. and Europe have made investors nervous. Finally, natural disasters in neighboring New Zealand and Japan have taken their toll. These factors have Australian consumers acting with an almost recessionary mindset, exhibited by a renewed desire to save for the long term and to cut household budgets.
These conditions have resulted in a number of new shopping trends:
What’s a retailer to do?
Private label is one area where retailers can differentiate themselves. Nearly two-thirds (64%) of Australian households already think that private label products are as good as name brands, and the overall spend on private label goods accounts for nearly a quarter (24.6%) of the total money spent at grocery stores in the most recent quarter—up from 23.1 percent in the same period a year ago. This growth has been driven by lower prices and improved, consistent quality, resulting in volume growth from all shopper demographic groups.
Nielsen’s latest Retail Barometer survey indicates that the success of a retailer in volatile economic periods is not just measured on the best product and price offerings, but the extent to which retailers can leverage their existing trading relationships with suppliers, and how well they can execute their strategies in driving efficiencies and balancing promotions, leading to increased footfall and profits.
Despite a constantly shifting retail landscape, one thing is certain: retailers and suppliers must adapt to the changing habits of Australian shoppers who are becoming increasingly skittish about their country’s economy. According to Nielsen’s latest quarterly global consumer confidence survey, Aussies have indicated that even when economic conditions do improve they will continue to be frugal. This means that getting the right value proposition is of paramount importance – those retailers and suppliers that understand how consumers are feeling and adjust their strategies accordingly should be well positioned to capitalize on these trends.