Michael Baker
May 7, 2013
Retail sales results for March, released yesterday by the Australian Bureau of Statistics, indicate independent retailers have benefited little from more positive consumer trends during the first quarter of the year.
According to the ‘sample’ component of the ABS retail measurement, meaning the part of retail activity that is not attributable to retail chains, independents have experienced two successive months of negative year-over-year growth: -0.7 per cent in March on top of -0.4 per cent in February. For the first quarter of the year sales were up by a razor-thin 0.8%, meaning that in real terms they have fallen.
Meanwhile, sales for retail chains have risen by 3.7 per cent for the quarter, lifted by 4.2 per cent growth in the month of March.
There are a number of advantages to looking at the level of business activity on a year-over-year basis rather than on the seasonally adjusted month-to-month basis used by economists and cited widely in the media.
The first one is that year-over-year comparisons smooth out all of the volatility that occurs from week to week and month to month. A retailer can get a clear view of whether the industry has improved or declined, free of short-term influences such as weather disturbances or shifts in the timing of big sales and promotions.
Seasonal adjustment typically fails to account for these constant one-off events, resulting in see-sawing data where sales tick up sharply in one month and plunge just as sharply the next. Beneath the surface nothing much is really changing in terms of consumer fundamentals but it looks for all the world like something momentous is going on. It’s great for the business ecomomists because it gives them something to talk about, but from a small business standpoint it’s better if you tune out and focus on the long view, which means looking at year-over-year figures.
The long view at the moment is decidedly mixed. Independent retailers in the food business have had a decent first quarter with sales growth of 3.8 per cent.
Small clothing, footwear and accessories retailers enjoyed a 4.0 per cent gain according to the ABS data. However, the improvement for clothiers needs to be taken in an even longer-term perspective than one year.
Mid-2008 through to the end of the first quarter of 2012 was a disastrous time for the business with many small apparel retailers exiting the industry and the survivors often just hanging on. The carnage was so severe that even by the end of 2012, nine months into the recovery, annual sales for small apparel retailers still had not managed to rise back to the level of 2003.
Other independent retail categories have had an indifferent start to 2013. The catch-all ‘other’ category that includes a range of discretionary merchandise saw sales drop by 1.2 per cent in the March quarter.
Cafes, restaurants and takeaway food services has been one of the bright spots for independent retail in recent years but even here sales only managed a 0.2 per cent gain in the first quarter.
One of the characteristics of a true durable retail recovery in the past has been the recovery in the independent retail sector, small businesses that line the nation’s suburban retail strips and sometimes even show up in the odd shopping centre. When only the retail chains have shown improved results its been a sign that the recovery isn’t solid and probably won’t last.
Advertisement
Although the ABS data on independent retail is imperfect it is still a rough pointer to what is going on. At this point it’s mostly only the food retailers in the independent sector who are really looking game – in the next few months some of that cheer needs to get spread around a bit.
Michael Baker is principal of Baker Consulting and can be reached at michael@mbaker-retail.com and www.mbaker-retail.com.
Subscribe to our free mailing list and always be the first to receive the latest news and updates.