Retailers Turn To Discounting To Entice Aussies To Spend

As Australians continue to spend less on discretionary purchases, retailers have turned to discounting products, which was reflected in a recent Deloitte analysis finding that overall sales volume is down 1.7% and real retail sales growth (in per capita terms) is also down 3.6 % compared to last year to September.

The move to increase discounting, however, has supported the RBA to make a choice to return inflation to its target band of 2-3% by 2025 end.

In the September quarter, sales were found to decline for department stores by 0.2% while household goods outlets declined by 0.4%, which equates to goods are getting less costly.

“While discounting was front of mind for many retailers in September, it’s playing an even more important role this December quarter,” David Rumbens, the Deloitte Access Economics partner and principal report author, had wrote.

“Retail price growth is expected to slow even further with big discounts over Black Friday.”

Reports show that Australians shopped till they dropped spending roughly $6.3 billion from Friday and Cyber Monday.

However, buyers are steering clear of discretionary spending, leaving a large gap between food and non-food retail sales growth with food sales having increased by 0.6%, while non-food retail sales have dropped by 4.2% equalling 6.1% per capita basis once effects are audited.

According to Rumbens, the business cycle should begin to get better in 2024.

“We can expect to see a moderation of inflation in 2024 that will see a return of real wage growth, which was observed in the September data, following three long years of real wage decline,” he said.

“Positive real wage growth will make consumers less hesitant towards discretionary spending – a welcome change from the tight spending environment retailers have faced in 2023.”

Additionally, amplified retail activity should be buoyed by population growth and maybe an ending to RBA cash rate increases in 2024.

“As a result, we expect a steady rise in real retail sales growth through the upcoming year. We forecast a decline of 0.9 per cent in 2023 to 1.4 per cent in 2024, and then on to 2.2 per cent growth in 2025,” Rumbens said.

For now, Australian Bureau of Statistics data reported household expenditures have gone up by 2.7% in the last year from October. The Bureau added this was because of a 7% spending rise on services.