Boosted by the Black Friday and Cyber Monday sales, November has overtaken December for retail sales for the past three years. November 2021 seems likely to again be crucial to Christmas trading results for retailers with consumers having been urged to shop early to avoid possible product shortages. Emerging from lockdowns and restrictions, retailers are juggling increased costs for imported goods and transport as well as supply chain challenges when they most need a boost in sales and profitabi
fitability.
While economists and politicians are trumpeting a rebound in the national economy, retailers are taking a more cautious outlook about the immediate future and are sweating on November results.
Retail sales lifted nationally in September by 1.3 percent seasonally adjusted, the first monthly rise since May 2021, and October provided further impetus with a 4.9 per cent jump.
The improvement in retail sales across September and October was encouraging but not necessarily as robust as some economists and politicians were claiming.
Early indications are positive
Realistically, it is impossible to assess the performance of the retail sector on a month-by-month basis now with lockdowns and restrictions skewing results.
The turnaround in September was predictable but modest while the momentum in October reflected the re-opening of stores in New South Wales, Victoria and the Australian Capital Territory.
However, October retail sales turnover did not reach the level of May 2021, the month before the Delta variant prompted government lockdowns and restrictions.
November 2021 sales are chasing a 7.1 per cent post-lockdown release in 2020 and are relying on windfall gains from the Black Friday and Cyber Monday promotional events.
Early indications are positive with retail associations expecting the event to generate more than $5 billion in sales nationally, although there was arguably a little less hype and not quite as deep price discounting.
November certainly seems on track to beat December for sales turnover, with the Black Friday event now eclipsing the traditional Boxing Day sales.
Too soon to relax
Talk of a rebound in retail sales and of the retail industry leading an economic resurgence is somewhat premature without a comparison of the combined November and December trading results and possibly even January revenues as well.
A key factor influencing the Christmas and New Year trading period could prove to be the fact that consumers have been urged to shop early to avoid disappointments resulting from supply chain problems.
There is certainly the relief factor from the lockdowns and a yearning for celebration after the past two years, but also the shadow of reports of yet another contagious variant of the Covid-19 virus.
There is a government and economist view that consumers are cashed up but household debt is actually rising, while government and business support packages have ended or been significantly reduced.
It is worth noting reports that buy now, pay later purchases showed a marked increase in Black Friday spending and have certainly been trending higher each month of this year.
Retailers are also missing the spending of tourists with fewer interstate, let alone international visitors, boosting sales.
Higher interest rates ahead
Despite previous assurances of the Reserve Bank of Australia of no increase in interest rates until 2024, the central bank is retreating on its forecasts and the retail banks are already lifting rates.
The prospect of higher interest rates is likely to make consumers more cautious in their spending and debt management.
It is interesting to see reports that a high percentage of workers are thinking about finding a new job. Factors in that thinking include reflection about work-life balance following the Covid-19 experience and dissatisfaction with the work arrangements they have had or are now expected to meet.
Also in the mix is low wage growth and the need to increase income to meet higher living costs and to cope with higher debt and interest levels.
On the positive side, the high level of vaccinations should ensure less disruption to business in the months ahead and hopefully some certainty in the relaxation of borders, while the federal election could provide more pump priming for the economy.
The September to November retail trading results are heartening but not yet evidence of a strong recovery in sales let alone profitability.