Retail 2016 tipped to be rosy

Australian retail sales lifted again in FY15, despite some high-profile losses, as the sector gets ready to leverage ideal consumer conditions in 2016 by increasing marketing investment.

BDO’s 2015 Spend Trend report provides an annual health check for Australia’s $292 billion retail sector by analysing key 2014-15 financial ratios and indicators for 18 ASX-listed retailers, including Wesfarmers (WES) and Woolworths (WLW), as well as 13 US and UK-based retailers.

According to BDO partner and retail specialist, John Bresolin, this year’s report revealed some positive signs for Australian retailers and shareholders, as this month’s hold on interest rates and the lower Australian dollar combine to make shopping locally more attractive to consumers.

“Australian specialty retailers increased sales revenue by 5.3 percent (approximately $1 billion) from 2014-15, however, this is in contrast to a 9.4 percent increase by the international retailers,” Mr Bresolin said.

“To help increase their marketshare and leverage consumer confidence, Australian retailers boosted their marketing spend by 35.7 percent in relative terms, including investment in digital marketing to coincide with an increasingly mobile marketplace.

“Many retailers now employ dedicated social media staff or have appointed a digital marketing department to coordinate these efforts, with tools like Facebook, Instagram, and YouTube being used heavily in key sales periods such as the lead up to Christmas.”

Lush Cosmetics Brand Communications Manager, Natasha Ritz, said the company uses social media to drive engagement, provide fantastic customer care, discuss topical issues, drive brand loyalty and build trust.

“We are moving towards a more omni-channel approach by connecting messaging digitally and in stores, and we are always looking at opportunities to use technology to better serve our customers in whichever way they’d like to engage with us as a brand,” Ms Ritz said.

“Social media allows Lusg to tell our story, share content and encourage conversation, not just about our brand or products but topical issues and deeper messages, to help build trust and relationships with our customers.”

Mr Bresolin said this social media surge among Australian retailers coincides with encouraging growth in online sales, with many recording significant double digit growth in relative terms.

Crucial business KPI’s such as sales revenue, net profit margin, gross margin and gearing have improved or remained stable, despite uncertain economic conditions and increased competition from large international retailers entering Australian shores for the first time.

Despite these promising results, the larger international retailers are still outperforming Australian companies in key areas of revenue growth and net profit margin.

The full Spend Trend 2015 report is available for download at http://www.bdo.com.au/resources/publications/retail/spend-trend-2015 and includes interviews with Lush Cosmetics and Ikea Australia.

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