Australian retailers ride COVID wave

After growing at a remarkable 13% during November, retailers again cashed in during December with total sales up 9.4% compared to the previous year. Post-COVID trading conditions improved just in time for Christmas trading through November/December, with the Household Goods sector leading the way with 27% growth. Food retailing continued its run of six months of double-digit growth, whilst Footwear & Accessories (+18%) and Department stores (+15%) rebounded strongly after several months of COVID-driven negative growth.

The continued surge in online retail was an important driver, but a strong return of customer traffic to shopping centres was also crucial. Desperate for an in-person retail fix after months of lockdown, Melbourne shoppers flocked to centres like Chadstone, Southland and Highpoint. The Black Friday shopping weekend was bigger than ever, and is now challenging Christmas as the shopping peak in some categories. Super Retail Group reported half-year sales up 23% against last year, with online sales growing at 87%. JB Hifi exhibited similar sales growth with online sales up a staggering 161%.

Retailers have the various Australian governments to thank for creating strong trading conditions leading into Christmas. The Federal Government’s JobKeeper policy was warmly received and allowed retailers to remain viable through multiple lockdowns and forced closures. And despite a major hiccup in Victoria, the hotel quarantine processes have allowed Australians to return to an almost-normal which seems light years away for North America, the UK and Europe. With international travel off the agenda, Australian consumers are instead spending anew on home improvements and household goods.

In glaring contrast, international retail trading conditions have been crushed by the pandemic. In the UK, all non-essential retail remains closed and people can only leave home for work, essential shopping, exercise or medical appointments. Social pressures have led to large retailer John Lewis halting click-and-collect to “help the national effort” to stem the spread of coronavirus “by removing reasons for non-essential travel”. In Germany, schools and businesses remain closed, with mask mandates and curfews expected to be introduced this week.

The political turmoil in the USA has hampered efforts to curtail the spread of the virus, even as the early vaccines are being rolled out. Disparate lockdown measures have led to three consecutive months of negative retail growth, with major job losses and store closures. Even online sales fell in December against the prior month.

Australia (and New Zealand) have become an island of retail sunshine in an international sea of pandemic-inspired turmoil. But the sugar hit won’t last forever. JobKeeper is being wound back, and international travel will eventually resume as vaccines are distributed across the world. Importantly, the retail sales growth is disproportionately driven by online, so many retailers will have to rebalance their store networks whilst investing further in digital operations.