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Australian retailers have a reason to be cheerful this Christmas

An unexpected increase in Australian retail sales figures is a year-end bonus

Australia’s September retail figures released earlier this month revealed that sales increased by 1.2%, rather than the market prediction of 0.4%.

While the ABS (Australian Bureau of Statistics) believed that the iPhone 6 release was partly responsible, results in other retail sectors indicated growth.

This can’t yet be called a trend, however it does jusitify a certain optimism within certain retail sectors.

So what factors caused the increase, which retail sectors have done well and what opportunities are there for potential small businesses owners? 

Figures behind the boom

Earlier this month, the ABS provided figures showing that retail sales rose by 1.2% to $23.63 billion. The rise was the highest since February 2013, and was not only in the electrical and electronic goods sector ( which experienced an ineveitable boost due to the new iPhone).

JP Morgan economist Tom Kennedy agreed. He told Business Insider Australia: ‘The rise was evident across all components, with household retailing very strong, electronics very strong - all in all it looks like a pretty solid release.’

Kennedy also regarded the increase rather cautiously, believing that the momentum of retail sales increases would need to carry on for another few months to provide any definitive links between ‘asset price inflation and retail spending.’

However, it is still possible to define reasons for the increase in certain sectors, and the potential for SMEs in the market.

Potential opportunities in retail sectors

Rising property prices have meant that home-owners feel wealthier, which is said to have contributed to the retail sales increase. Since September last year there has been a 6% sales upsurge – almost twice as much as the usual year-to-year gains during the past five years.

In line with the increase in house prices, data from the ABS showed that spending on household goods rose by 4.1%, second place to the electronic goods retailing at a 9.2% increase.

The café, restaurant and takeaway sector sales rose by 2%, while food retailing increased by 0.3% and clothing, footwear and personal accessory retailing by 0.2%.

A connection can be made between the simultaneous increase of house prices and household goods sales; people are spending more on homes, so are inclined to spend more on the furnishing them.

Household goods range from appliances to non-essential soft furnishings, and with cheap, flat-pack meccas like IKEA on the scene, the market is incredibly competitive. Increased spending in this sector is telling: people have more disposable income.

Small businesses specialising in homewares are notoriously hard hit when the economy goes into a downturn, yet those that do manage to survive can prosper in a much less crowded industry within a growing economy.

With the industry showing hints of recovery, now might be a good time to enter this sector.

Cafes, restaurants, and (to some extent) takeaway businesses are also known to struggle in a challeging economic climate –  people chose to stay and eat at home to save money.

Yet, with an improving market, if you get it right you can really thrive in the service industry.

Owning a restaurant or café is a dream for many, with a romantic notion of the lifestyle often being the driving force. It's important not to underestimate the hard graft and long hours it takes to make a success of such an enterprise but putting in the effort can be well worth it.

While a large proportion of thefood retailing sector will cover supermarkets, there is still room for smaller businesses selling specialised food. A recent IBISWorld report which focused the Australian delicatessen industry predicts growth in the next five years.

According to the research, many delis have changed tactic to compete with big supermarket chains through targeting the high-end, premium market. Consumers, therefore, may go to supermarkets for everyday food items, however visit delis for specialities that they’ll relish.

This ‘premiumisation’ is an encouraging trend for potential deli and cafe owners.

Weakening of the Australian dollar – a foothold for small businesses?

At the same time as the retail sales increases was announced, it was found that the weakening of the Australian dollar had caused international web sales to dip substantially.

Since 2011, sales from international websites have taken many customers away from national stores. This has been mainly due to the value of the Australian dollar against the US dollar being at a three-decade high.

According to Quantium (a data firm analysing credit card transactions at National Australia Bank) and the Wall Street Journal, the 19% decrease from the currency’s peak last year has prompted a wane in international web sales.

As a result, local retailers are enjoying a boost,  and international online sales are lower than domestic in-store for the first time in three years.

With less competition from overseas, smaller businesses will be able to compete at reasonable prices.

As long as the target market and it's financial disposition is well researched within any chosen retail sector, there are certainly opportunities to be had in the current climate.

As the Christmas spirit begins to invigorate Aussie highstreets, so will this optimistic last-quarter, promising  a brighter year fore sales in 2015.

 

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