- Coronavirus-driven lockdown restrictions shook up the Australian retail sector to its core.
- However, an uptick in the online retail trends is providing some sort of cushion to the battered retail sector.
- ABS noted a growth of 7% in online retail sales in August following a surge of 6.3% in July.
- National Australia Bank Limited’s (ASX:NAB) online retail sales index also grew by 4.2% in August, supported by exceptionally strong sales in Victoria.
- Retailers like Wesfarmers Limited (ASX:WES), Woolworths Group Limited (ASX:WOW) and Super Retail Group Limited (ASX:SUL) reaped the rewards of e-commerce shift.
- While e-commerce transition has been aiding the retail sector’s recovery from the virus crisis, the recently unveiled federal budget is likely to stimulate the pace of revival.
- A recovery in the in-store consumer footfall seems essential for the industry to recoup to the pre-pandemic level.
Triggering widespread closure of brick-and-mortar stores across Australia, coronavirus-driven lockdown restrictions shook up the nation’s retail sector to its core. While the retail industry is not out of the woods yet, the uptick in the online retail segment is providing some sort of cushion to the battered sector.
The Australian retail sector was once considered a laggard in adopting digital transformation. However, the industry has significantly strengthened its digital presence during the pandemic to meet the burgeoning demand of online retail.
The coronavirus-induced risks and new social distancing norms have been encouraging consumers to switch to e-commerce and online retail. This transition has been driving online retail sales in Australia over the last few months. The retailers are embracing digital channels amidst a secular shift in consumer behaviour.
Online Retail Sales Gathering Momentum
While lockdown restrictions in Victoria plummeted Australia’s total retail turnover in August 2020, online retail sales reaped the benefits of these limitations.
According to the ABS, online retail sales grew by 7% in August following a surge of 6.3% in July. Australia experienced Stage 3 and Stage 4 coronavirus restrictions in Victoria during August, which led to the closure of retail stores. Consequently, the online sales improved.
The online sales contributed 11% to the total retail turnover, which plunged by 4% in August following a rise of 3.2% in July.
Interestingly, National Australia Bank Limited’s (ASX:NAB) online retail sales index also grew by 4.2% in August, supported by exceptionally strong sales in Victoria. In Y-o-Y terms, online retail sales increased by 126% in metro Victoria and 73.8% in regional Victoria during the month. While other states like South Australia, Australian Capital Territory and New South Wales also recorded an uptick in online sales, albeit at a moderate pace.
NAB’s online retail data suggests that online sales considerably picked up in Victoria, which resorted to e-commerce channels amidst second COVID-19 lockdown. However, online sales tumbled in states where brick-and-mortar stores continued to operate on relaxed coronavirus restrictions.
E-Commerce Turns Saviour for ASX-Listed Retailers
Several ASX-listed retailers have actively cuddled the shift to online retail segment to stay competitive in the new environment. From introducing grocery pickup and delivery services to rolling out e-commerce platforms, these retailers left no stone unturned to remain operational during the pandemic.
With that said, let us scroll through some popular ASX-listed retailers which reaped the rewards of e-commerce shift amidst pandemic:
Wesfarmers Limited (ASX:WES)
Australian conglomerate, Wesfarmers Limited (ASX:WES) effectively adapted and evolved to changes in markets and customer demand in the COVID-19 era. Accelerating the development of its digital offerings, the Company completed the Australian rollout of Click and Deliver and launched the New Zealand e-commerce platform. The Company also developed the innovative Drive and Collect offering during COVID-19 period.
With more customers shopping online, the Company recorded a surge of 60% in e-commerce sales to over A$2 billion in FY20. Moreover, physical distancing measures and an upsurge in online shopping stimulated significant growth in online sales : 136% for Kmart and 116% for Target in 2H FY20.
Woolworths Group Limited (ASX:WOW)
Despite initial COVID-19-driven capacity issues, ASX-retailer Woolworths Group Limited (WOW) observed robust digital and online sales growth across X businesses in FY20. The Group’s online sales soared by 41.8% to A$3.5 billion, while its online penetration reached 5.5% in FY20.
Online sales were robust across the Group in Q4 FY20 with online penetration of 7.1% and sales growth of 71.9% on a normalised basis.
To hold up with the demand from consumers seeking convenient and safe ways to meet their shopping needs, the Group doubled the capacity of its online businesses during COVID-19. These solid online results exhibit consumers’ continued demand for convenient shopping solutions, which was intensified as the coronavirus crisis escalated and delivery services became necessary.
Super Retail Group Limited (ASX:SUL)
Australian retailer, Super Retail Group Limited (ASX:SUL) also marked a remarkable shift to online segment in 2020 amidst coronavirus-driven restrictions. The Group’s online sales bolstered by 44% to A$291 million in FY20, which represented 10% of its total sales.
In response to COVID-19 restrictions, the Group successfully reallocated its store-based resources towards the online business segment. Besides, it rapidly launched contact-free Click & Collect offer across all its four brands and swapped its catalogue campaigns with digital advertising. Significantly, over one million consumers made their first online purchase with Super Retail Group during FY20.
Federal Budget to Boost Retail Sector’s Recovery
While e-commerce transition has been aiding the retail sector’s recovery from the virus crisis, the recently unveiled federal budget is likely to stimulate the pace of revival. As per the Australian Retailers Association or ARA, the federal budget appears to be a turning point for companies and consumer confidence on the road to the retail sector’s recovery.
The 2020-21 federal budget incorporates several stimulus measures that can foster consumer spending and reduce red tape, thereby enabling the businesses to operate more efficiently. The real showstopper of the federal budget is the reduction in personal income taxes, which is expected to benefit over 11 million Australians.
To support households, the Government has decided to reduce taxes by more than A$50 billion over the forward estimates, including ~A$9 billion in 2020–21 and further A$32 billion in 2021–22.
The personal income tax reductions announced in the federal budget are anticipated to bolster the immediate spending power of consumers, potentially stimulating retail sales.
No doubt, innovative digital offerings and online platforms have been providing a firm nudge to the Australian retail sector in rebounding from COVID-19 crisis. However, a recovery in in-store consumer footfall seems essential for the industry to recoup to the pre-pandemic level.
With Victoria on the verge of easing the lockdown rules, retail therapy is expected to induce consumer footfall in Victorian retail stores, encouraging retail turnover. Nevertheless, some parts of retail (like apparel) are anticipated to take longer time than others (such as supermarkets) to rebound from the virus crisis.
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