Deloitte

<html><body>
EXPERT OBSERVER
It’s clearly been a tough year for many retailers, with 47% of our survey respondents [in Deloitte's Retailers' Christmas Survey 2019] telling us they’ve experienced flat or negative sales growth over the past 12 months.
So it’s probably no surprise many are also approaching this Christmas with a little less cheer, certainly compared to last year.
Just over 60% are expecting to increase their sales this Christmas, compared to 80% in 2018, and nearly 40% are also expecting to see a decrease in seasonal margins. This is, unfortunately, the most pessimistic we’ve seen retailers since 2013.
Many have pinned their hopes on federal government tax cuts, but the latest trading data suggests consumers have chosen to keep any windfall in their pockets. Retailers are no doubt hoping they’ve been saving up for Christmas.
As always, when to discount and by how much remains a critical decision for retailers over the holiday period. Last year they told us they were intent on holding strong. But with difficult trading conditions 12 months later, this will be challenging, with 39% of retailers planning to discount before Christmas compared to 31% last year, and 30% in early December. 
And with the proliferation of sales campaigns such as next week’s Black Friday leading into December, many are concerned this could bring forward Christmas trading at discounted prices.
Getting personal
The cautious consumer has brought good old customer service back to the fore, as retailers can no longer rely on buoyant spending to drive in-store trade.
Over a quarter of respondents highlighted customer service as the most important driver of sales this Christmas, just behind digital and omni-channel offerings.
These two strategies aren’t mutually exclusive. Forming a strong digital connection with the consumer is critical to building trust in the brand, regardless of where the customer spends, and this connection to the customer flows through to loyalty. 
Over 90% of respondents consider their customer loyalty as good or strong, but brand loyalty is also hard won and easily lost. In the era of cancel culture, retailers need to understand the reasons when things go wrong, and how dealing with a poor customer experience via exceptional customer service can protect, and even enhance, brand reputation and the value this can deliver.
Looking for green shoots in 2020
There are signs of more optimism amongst retailers for their prospects in 2020.
They’re still hoping for the best, with some 72% expecting to bounce back and grow their top line. But with most not forecasting growth in excess of 5%, it still looks like another challenging year ahead.  
New products and online will remain key to growth prospects, and only 11% of retailers are expecting to grow through new store openings, down from a peak of 43% in 2017. 
Rising input costs following the depreciation of the Australian dollar are also expected to bite when it comes to margins, and respondents continue to look to the likes of property costs as levers to reduce bottom line impacts.
It’s certainly critical that within the retail ecosystem, retailers, suppliers and landlords work together, rather than against each other. 
Ultimately, uncertainty kills confidence, and global economic turbulence certainly isn’t helping. Australian retailers will be waiting for a recovery in wage and jobs growth to provide a boost where interest rates and government tax cuts fail to provide the stimulus needed.
Profit AND purpose: big room for improvement
The survey report also looks at Australian retailer views on social impact their operations.
Consumers, employees and other stakeholders are increasingly expecting companies to operate in a responsible manner, from ethical sourcing, using sustainable materials and packaging, and reducing carbon emissions to the fair treatment of employees on pay and conditions and making a meaningful contribution to communities and society more broadly.
In a real concern, 42% of respondents believe social, ethical and environmental responsibility isn’t important to their brand.
Yet in the same breath, 91% believe they enjoy good or strong customer brand loyalty. There’s a concerning perception gap here. If Australian retailers don’t quickly grasp the reality of increasing stakeholder expectations, and respond in a considered, meaningful and, importantly, authentic way, consumers may vote with their wallets, and employees with their feet.
David White is the national leader of Deloitte’s Retail, Wholesale &amp; Distribution Group.
Deloitte's Retailers' Christmas Survey 2019 survey findings include:
<ul>
<li>Only 62% of retailers expect to see higher sales this Christmas compared to last year, down from 80% last year</li>
<li>Just under 40% are expecting to see some form of Christmas period margin decrease</li>
<li>39% will be discounting pre-Christmas to help drive sales</li>
<li>Digital continues to be a standout, with 58% expecting to see growth of 10% or more in online Christmas sales</li>
<li>72% expect to see positive sales growth in calendar year 2020, down from more than 90% for 2019. </li>
</ul>
 
</body></html>

jrobinson-rf4aSBido9

Positive retail sentiment is down as important Christmas trading period approaches: Deloitte

<html><body>
Storm clouds are gathering over Australia’s housing market as NSW and Victoria's price growth boom was borrowed from the future and they will have to pay back some of it, according to a recent Del­oitte Access Economics’ report.
Home building will likely shrink further amid “increasing evidence that gravity may soon start to catch up with stupidity in housing markets,” noted Chris Richardson of Deloitte Access Economics in its quarterly outlook.
The report, while summarising the state of the world economy and its impact on Australia, said “the jump from a China boom to a housing price boom sent the nation’s money and momentum from its north and west towards its south and east”. 
The outlook from Deloitte is the latest in a series of warnings about the risks to Australia's economy from the housing market. Earlier, Citi had said property prices could fall by as much as 7 percent as the housing boom unwinds by 2018.
The report picked NSW and Victoria as having “clay feet”, saying a house price boom borrows growth from the future, and both states will have to pay back some of that in the years ahead “as today’s housing prices gradually reconnect with reality”.
It noted that NSW benefited from the shift to lower interest and exchange rates since 2012. 
“But storm clouds are building, as the housing price boom has artificially supported retail and home building. There’ll be an eventual butcher’s bill to pay as those supports reverse,” Richardson noted.
Victoria has benefited as key cyclical drivers – exchange and interest rates – moved in a ‘Victoria- friendly’ direction in recent years. And though Victoria is experiencing its strongest population gains for many a decade but its population and housing cycles may be near their peaks, it said.
In Queensland, Cyclone Debbie and slowing housing construction are current negatives, but Debbie’s impact will be temporary and gas exports are lifting, it said.
The report warned that the “gargantuan Chinese credit surge is finally easing back”, suggesting that “the global economy won’t be doing Australia quite as many favours from 2018 onwards”. 
Amid all the grim warnings of the risks from the housing market, the report said those were the only caveats  on an otherwise solid outlook. 
“Relative to the rest of the rich world, Australia’s economic outlook may not be quite as impressive as it once was, but we are still kicking goals,” it said.
</body></html>

jonathanchancellor-7SQnKwU6yx

Gravity catching up with stupidity in housing markets: Deloitte report

<html><body>
Australia’s tourism sector remains a shining light for the nation’s economy, with strong growth in both international and domestic visitor numbers, according to Deloitte Access Economics’ latest Tourism and Hotel Market Outlook report.
International tourism
While strong macroeconomic tailwinds eased marginally as the Australian dollar edged up, international visitor arrivals continued to grow at record pace, after accelerating over 2016.
The growth Australia is experiencing is the fastest in a generation and is seeing it outpace both global performance and travel across the Asia Pacific.
In fact, international visitation to Australia is growing at nearly three times the rate of global travel.
As Deloitte Access Economics’ Bryon Merzeo observes: “Against any reference point, the performance of the Australian tourism industry is remarkable – the fastest growth and faster than our global competitors are achieving.”
“What is especially encouraging about the growth we’re witnessing in international travel is its broad-based nature.
Although emerging Asia continued to underwrite much of Australian tourism’s strength, Asian travellers only accounted for 50 percent growth in visitor arrivals in 2016, compared to 70% the year prior.”
While markets such as China, India, South Korea and Vietnam continued their double digit growth, many of Australia’s oldest legacy markets also performed strongly, with Japan defying a sluggish local economy to post growth of 23 percent and the US shaking off economic and political uncertainty to record arrivals growth of 18 percent.
Domestic tourism
On the domestic front, the good news continues, with leisure travel sustaining its momentum to grow by 8.2 percent over the year to September.  
As Merzeo notes: “Our report confirms that, for the sixth consecutive year, more Australians are travelling at home, and they’re travelling to Australia’s leisure favourites.
Successful promotional campaigns on food, wine and coastal tourism have contributed to a 6 percent increase in domestic guests at Cairns and Hobart airports, and double digit visitor night growth for both Western Australia and Southern Australia.”
Domestic corporate travel growth, however, slowed considerably to 2.3 percent as the weaker economic performance observed over the latter part of 2016 weighed on business travel, although the strength of the domestic leisure segment was sufficient to keep overall domestic travel growth at above trend.
Hotel performance
Despite the sustained strength of Australia’s tourism sector, performance of the hotel sector was restrained over the latter half of last year.
A significant contributor to this was growth in supply. At around 4,900 new rooms, the nationwide additional supply in 2016 was almost double the 15 year average.
However, performance was also affected by variable demand side conditions.
Merzeo explains: “The weaker demand observed across many markets partly reflects the softening of corporate travel, which accounts for one in three capital city hotel nights on average and considerably more for some individual properties.
However, it also suggests that leisure travellers are increasingly looking beyond traditional options for their holiday accommodation.
“They are clearly enjoying the choice and variety of accommodation offered by the likes of Airbnb.
Leisure travellers’ use of non-traditional accommodation increased by 11.5 percent in 2016, contributing to 8.7 percent growth in use of this form of accommodation overall.
Despite this, it was Australia’s leisure destinations leading the way in terms of hotel market performance:
Tasmania tourism continues to go from strength to strength, with Hobart overtaking Perth to assume third place in the occupancy rankings
Gold Coast and Tropical North Queensland maintained strong hotel performance growth over the second half of 2016
The mantle of the nation’s highest occupancies remained with Sydney (89 percent) and Melbourne (88 percent), while strong supply growth weighed on performance in Perth and Brisbane.
Tourism outlook
Merzeo said: “The outlook for the chief macroeconomic drivers of travel and tourism remains conducive to the super growth sector continuing to re-write the record books.
“Despite increased global political uncertainty, the economic growth prospects across key source markets remain sound.”
Deloitte Access Economics forecasts international visitor trips to grow by 6.3 percent p.a. and visitor nights by 6.2 percent p.a. on average over the next three years – a marginally stronger outlook.
The growth will be led by India at 13 percent, closely followed by Indonesia and China at 10 percent.
“On current forecasts, we expect by 2020 that the value of inbound tourism from China will exceed the entire inbound international tourism market as it stood in 2000,” Merzeo said.
For domestic tourism, the story remains one of resurgent leisure travel, coupled with a transitioning economy and a corporate travel profile slowly re-orientating to the nation’s south-east.
With economic conditions expected to strengthen over the next two years, this points to a solid outlook for domestic travel with domestic trips forecast to grow by 3.3% p.a. and visitor nights to grow by 3.2% p.a. on average over the next three years.
Hotel outlook
A number of demand-side factors, including shifting corporate travel trends, historically high international arrivals growth and the increasing use of non-traditional accommodation options, are bearing heavily on the outlook for hotel markets.
However, the single biggest influence on the performance outlook is supply.
Merzeo said: “After years of record occupancies and rising room rates, investors and developers have finally responded.
The sizeable development pipeline which has emerged in Perth and Brisbane and which saw large additions to inventories in 2016 is being replicated in markets such as Sydney, Hobart and Melbourne, albeit to a lesser degree.”
Over the next two years, another 12,800 rooms are expected to come online, resulting in the nation’s hotel supply growing 2.5 times faster than its long term average rate.
In aggregate, Australian stocks are expected to expand by 122 properties and 15,800 rooms to December 2019.
The total pipeline of tourism-related investment stands at $29 billion, up from $17 billion three years ago.
Two-thirds of the investment pipeline is accommodation.
As Merzeo notes: “Yes, demand growth will still outpace growth in supply nationally.
But the gap between the two has narrowed markedly over recent years and the number of markets where supply growth is outpacing demand has increased.”
Room rates are expected to grow at an average of 2.5 percent p.a. for the next three years to $170 per night, chasing the 10 year historical average growth rate of 2.6%, while revenue per available room (RevPAR) is expected to grow by 3.1% to a national average of $123 by 2019.
Markets enjoying recent buoyant performance such as Hobart, Melbourne and, to an extent, Adelaide, have now established a solid pipeline of hotel developments, which will alter the demand/supply dynamics over the medium term.
“In a clear demonstration of the economics of hotel development at work, investors have clearly responded to the commercial opportunities in these markets,” says Merzeo.
Perth and Brisbane hoteliers will continue to feel the double-pinch of increased competition from new entrants, along with moderate demand growth compared to the mining boom peaks of five years ago.
</body></html>

j.ballantyne1990-6AQqhLzZaK

Tourism growth a shining light as hotel development pipeline finally responds to record occupancies

<html><body>
The home specialty storage retailer Howards Storage World has appointed Deloitte as voluntary administrators, with the view of selling the popular business.
With the company pledging to keep trading, the business has 59 stores across Australia, 29 of which are in the hands of Deloitte partners Vaughan Strawbridge and David Lombe.
The company has a loyalty program with 600,000 members.
The Australian reported company’s 2012 accounts were the last filed with the corporate regulator ASIC showing a then breach of foreign funds financial covenants though making a $396,401 profit. There was $39 million annual revenue.
The company started as Stack and Store in Northbridge in the early 1970s.
It moved into franchising in the late 1990s.
The Australian Financial Review advised its co-founders were Leslie and Edda Howard who formed a partnership with Dirk Spence in 1997.
According to documents filed with the corporate regulator Dirk Spence and Pauline Donald are directors.
Leslie Howard stepped down as a director in September.
</body></html>

Deloitte

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Deloitte

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News