Majority of retailers anticipate big challenges amidst spending dip

retailers challenges spending dip
Small retailers are concerned about consumer spending. (Source: insidesmallbusiness)

As discretionary consumer spending took a 0.2 per cent dip in the year-over-year to January 2024 and labour costs swelled, new data from a survey conducted by parcel delivery service CouriersPlease reveals that 50 per cent of retailers expect a slump in sales revenue and an overwhelming 91 per cent of Australia’s online retailers fear a raft of business challenges are set to strike.

CouriersPlease also found that with a drop in consumer spending, 40 per cent expect their sales to stagnate and only 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.

When it comes to revenue expectations, only 10 per cent of micro retailers expect a jump in sales revenue this year, and only three per cent of small businesses forecast the same. Large businesses are the most confident about clocking a sales revenue jump, at 18 per cent of respondents.

Cashflow the biggest concern

CouriersPlease also looked at further impacts to retailers that a drop in consumer spending will bring. Across all businesses, the report found cashflow availability as the biggest concern among retailers, with 36 per cent of online retailers saying a drop in customer spending would exacerbate this challenge. 33 per cent expect to face customer retention challenges, while 29 per cent anticipate overhead cost struggles.

“Our research highlights some of the major pain points plaguing retailers, particularly smaller retailers,” CouriersPlease CEO, Richard Thame, said. “It comes after recent data confirmed inflation declined in the December quarter by slightly more than had been expected 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 weaker than expected, Thame pointed to a non-discretionary spending jump of 6.9 per cent in the year leading up to January, driven largely by transport, food and health spending. Additional data found that online shopping continues to attract consumers with 9.52 million households (which equates to 81 per cent of Aussie households) receiving a parcel last year – a figure that was up 1.4 per cent year on year..

Boosting cashflow

“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,” Thame said. “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.”

Thame added that social media and tech will be key to retaining consumers and boosting cashflow in the coming financial year, and has encouraged micro and small businesses to embrace social platforms.

This article was first published on Inside Small Business.