Australian traditional retailers face strong competition and weak demand - ANZ

Traditional retailers of Australia face strong competition and weak demand. This shows the higher prices for non-discretionary items now facing households, being countered by savings in discretionary spending. Also, households are spending more on experiences and less on ‘stuff’. Taking a closer look shows that this shift is not what it appears, noted ANZ in a research report.

Growth has decelerated at a rapid pace for nominal consumption of discretionary goods than for discretionary services; however, this greatly reflects subdued retail price inflation and that traditional retailers’ have restricted pricing power at present. In terms of volume, consumption of discretionary goods is rising faster than for discretionary services.

Consumers are purchasing more goods at a cheaper price and fewer services at higher prices. This might reflect preferences for higher quality services; however, it also reflects greater pricing power. According to ANZ, technology might place more pricing power on service provides.

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