The challenges ahead

We’ve had three retail sales indications this week, in three closely linked markets in terms of shopper psyche, brands and language, if not geography – Australia, the US and the UK. And while the top line isn’t too bad, margins are hurting everywhere, irrespective of how strong your currency is or how much online retailing you’re doing.

In Australia, the Australian Bureau of Statistics reported that retail spending had increased 0.4% in January. Not a surge, but a comfortable single month headline number for retail sales, pointing to cautious shoppers visiting stores post-Christmas and New Year.

In the US the Federal Reserve reported in its “beige book”, the pre-reading for Federal Reserve board members prior to their policy meetings that through 2011 retail sales increased in most parts of the US and manufacturing also grew solidly. Retail sales just like in Australia, a huge driver of the US economy. Again, as in Australia, cautious shoppers are visiting stores but happy to spend.

In the UK, Primark, the very low cost retailer of women’s fashion, reported retail sales in the first three months of the financial year as “strong”, with overall store sales 11% ahead of last year. Same store sales are always the key number and these were lower, with stores open for a year or more up only 3% in the first three months of the year. Again cautious shoppers, even hit by the increase in VAT, are happy to visit stores and spend some money.

However, across all three countries, buying and selling in many different currencies, from British pounds, Aussie and US dollars, Chinese yuan, Thai baht to euros, operating margins are all lower than last year.

In food retailing it’s due to higher commodity pricing, in clothing it’s due to higher cotton prices and all transport and freight costs are reflecting the increases in oil prices. Add to that most governments are raising as many small indirect taxes as they can The result is higher input costs and cautious shoppers with a gently shrinking buying power. This equals thinner margins.

So 2011 is shaping up to be a quietly challenging time as all three parties in the mix – retailers, manufactures and shoppers – pick our way through how we maximise our income and, more importantly, how and where we spend it.

In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.