2023 Retail Holiday Report: Resilient Retailers

Australian retailers are navigating some of the most challenging economic conditions in over a decade. The landscape has shifted significantly with a substantial downturn in consumer spending driven by severe cost of living pressures.

Despite the difficult environment, Deloitte’s 2023 Retail Holiday Report shows that some retailers are cautiously optimistic about holiday season growth, with 14% of respondents expecting sales to increase by 5% or more over the period (a notable uptick from 6% last year). Unsurprisingly however, overall top-line sales confidence has fallen – only 57% of respondents expect Christmas sales to exceed the previous Christmas period (down from 67% last year).

Chart: Do you expect Christmas sales to exceed the previous Christmas trading period?

Source: Deloitte Retail Holiday Report.

Overall, 71% of respondents expect the levels of discounting to increase over the holiday period, and 52% of respondents expect a decline in margins. Retailers are reporting that discounting and promotional activity will be the key to enticing customers as well as doubling down on omnichannel strategies such as online, delivery options, click-and-collect, and enhanced in-store experiences.

Importantly, while this upcoming holiday period brings challenges, it could be the precursor to a stronger retail environment in 2024. Strong population growth (driven by a return of international students) is supporting economic growth and spending, something retailers sorely need as domestic spending remains cautious.

Inflationary pressures are also expected to ease substantially next year, and Australia’s labour market has been impressively resilient. Combined, this means we’ll soon see real wage growth go back to positive. Retailers have likely already survived the worst of the retail recession.

So how do we navigate the next twelve months, when economic uncertainty remains high and consumer spending starts to return? Retailers should keep the following three points in mind while they gear up for 2024:

1. Retailers have been through this before – adaptability was key in 2020 and remains important today. Retailers need to be aware of shifting consumer preferences and spending habits (like the shift from discretionary to essential spending or growing expectations around sustainability) and adapt their business strategies as needed.
2. Not all consumers are slowing down – Retailers should aim to identify their customer base first, and then consider how to best target particular cohorts such as outright home-owners – whether through communications, product changes or other strategies.
3. While cost control is important, so are growth strategies – leaving growth strategies on the backburner will leave retailers in a difficult position when sales pick up in 2024. Keeping up momentum on productivity growth is crucial, so retailers need to keep implementing and planning for efficiency gains in 2024 and beyond.

Read the full 2023 Retail Holiday Report here.

This newsletter was distributed on 21^sth September 2023.  For any questions/comments on this week's newsletter, please contact our authors:

This blog was co-authored by Michelle Shi, Economist at Deloitte Access Economics.

Click on the links below to read our previous Weekly Economic Briefings: 

• Population changes and forecasts (14 Sep)
• Generation AI: Ready or not, here we come! (6 Sep)
• Employment Forecasts: here comes the market slowdown (31 Aug)
• How to ‘nudge’ Australians to use less water (25 Aug)