Good value doesn’t mean cheap

One of the many graphs in the Productivity Commission’s report on retail productivity showed that when it comes to our pay cheques, we are spending less of it each year on “stuff” at retail. “Stuff” refers to everything we buy through retail, and we’ve been spending less of our pay cheque on “stuff” every year for over a quarter of a century. Yep, from 1983 to 2011.

The graph entitled “Retail expenditure as a proportion of household final consumption expenditure” showed that in 1983 when you, or more likely your Mum or Dad, signed for their little brown paper envelope full of its dollars and cents on a Thursday afternoon, by the time the next Thursday had rolled around, 36% of its contents had been spent in shops. The rest went on the rent or mortgage, insurance, utilities and school fees.

In 2011, by the time your monthly EFT payment is due to hit your account again mid month, you will have spent only 29% on “stuff” via retail and online stores.

But in that time, the number and choice of stores – things to buy, their quality, when we can buy them and how frequently we consume them – have all increased exponentially.

What the statistics are saying is that we now get much, much, much more for our dollar of salary than we ever did. And every year it just gets better.

And in 2011 it’s about to buy even more.

The average selling price of items in Kmart stores has dropped by 30%. So for each individual item bought we spent 30% less than the last time we bought it. But overall sales at Kmart are up 2%. So we are spending about the same amount of money for our basket or trolley of goods, but putting much more into our basket or trolley of goods.

Now Kmart has done an outstanding job of hitting great full dollar price points for good quality items. Zara and Primark have done the same thing in fashion clothing and Coles, Woolworths and every other grocery chain in the world has lowered the price, and raised the quality of the food we buy.

The reason we can now afford to live in larger and better homes, drive better quality and safer cars and travel overseas is because manufacturers and retailers have constantly driven productivity improvements over the years.

2011 and 2012 though? Well we’re going to see big drops in prices of everything, not just milk and bread.

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.