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Economic drivers and emerging retail trends
PCA Retail Forum
15 May 2015
Tony Dimasi
Managing Director
T 03 9600 0500
M 0409 216 450
tdimasi@macroplan.com.au
2
Key points
Economic drivers
1. Population growth
2. Key economic variables and their impacts on retail expenditure
3. Retail sector’s share of the household wallet
Emerging retail trends
1. Generational shifting; ageing population
2. Globalisation of retailing
3. The role of food vs fashion
4. Shopping centre scale and design
2
Key points
Economic drivers
1. Population growth
2. Key economic variables and their impacts on retail expenditure
3. Retail sector’s share of the household wallet
Emerging retail trends
1. Generational shifting; ageing population
2. Globalisation of retailing
3. The role of food vs fashion
4. Shopping centre scale and design
2
Key points
Economic drivers
1. Population growth
2. Key economic variables and their impacts on retail expenditure
3. Retail sector’s share of the household wallet
Emerging retail trends
1. Generational shifting; ageing population
2. Globalisation of retailing
3. The role of food vs fashion
4. Shopping centre scale and design
2
Key points
Economic drivers
1. Population growth
2. Key economic variables and their impacts on retail expenditure
3. Retail sector’s share of the household wallet
Emerging retail trends
1. Generational shifting; ageing population
2. Globalisation of retailing
3. The role of food vs fashion
4. Shopping centre scale and design
2
Key points
Economic drivers
1. Population growth
2. Key economic variables and their impacts on retail expenditure
3. Retail sector’s share of the household wallet
Emerging retail trends
1. Generational shifting; ageing population
2. Globalisation of retailing
3. The role of food vs fashion
4. Shopping centre scale and design
2
Key points
Economic drivers
1. Population growth
2. Key economic variables and their impacts on retail expenditure
3. Retail sector’s share of the household wallet
Emerging retail trends
1. Generational shifting; ageing population
2. Globalisation of retailing
3. The role of food vs fashion
4. Shopping centre scale and design
8
Population growth – YOY change
Source: ABS Population Projections cat. 3332.0
9
Key economic variables, and implications for retail exp.
• House prices – nexus appearing to break down.
• Wages growth has fallen away over the past 2 years
• Deflation in key (non-food) retail categories
• Non-retail essentials gobbling up the household budget (education, health,
housing)
10
House prices and confidence to spend
Source: ABS Consumer Price Index cat. 6401.0; REIA Median House Price Index
11
Wages growth falling away
Source: ABS Wage Price Index cat. 6345.0
12
“Essentials” vs. Retail goods inflation
Source: ABS Consumer Price Index Cat. 6401.0
0
20
40
60
80
100
120
140
160
180
200
220
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Food and non-alcoholic beverages Alcohol and tobacco
Clothing and footwear Furnishings, household equipment and services
Housing Health
Education Transport
Consumer price index (by group - FY2000-FY2014)
Retail/ tradeables
= low inflation
Non-retail/non-tradeables
= high inflation
FY
13
Retail sector’s share of the household wallet
Source: ABS House and Expenditure Survey and Survey of Income and Housing cat.6503
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1984 1988–89 1993–94 1998–99 2003–04 2009–10 2020?
Household furnishings and
equipment
Clothing and footwear
Personal care
Alcoholic beverages
Food and non-alcoholic beverages
Tobacco products
Miscellaneous goods and services
Household services and operation
Medical care and health expenses
Recreation
Transport
Domestic fuel and power
Current housing costs (selected
dwelling)
RetailNon-retail
Retail
RetailNon-retail
Non-
Retail
14
What will happen to retail expenditure growth?
• Food spending will continue to grow strongly.
• Non-food spending growth should improve, but remain below long-term trend.
• Overall, retail spend will have to fight hard to maintain share of household
budget.
15
Emerging retail trends
16
Ageing population
Source: ABS Cat 3222.0 (2013)
Australian Population forecasts – up to 2051
17
Retail expenditure profile by age of household head
18
Generational shifting – well underway
• Baby boomers : born 1946 – 64: Defined by their careers.
• Gen X : b. 1965 – 79: Seeking more “balance” in their lives.
• Gen Y : b. 1980 – 94: Millenials; KIPPERS.
• Gen Z : b. 1995 – 2009: Digital natives; Social media junkies; marketing savvy.
• Gen Alpha : b. 2010 - : Will live to 90+
19
Generational shifting
20
Generational shifting
21
Transition of (spending) power
• Baby boomers have largely driven the Australian retail market to this point
• They have given retailers loyalty and consistency, once won over
• But their influence will wane measurably over the next twenty years
• Gen Y’s and Gen Z’s combined influence will increase enormously
• Both these cohorts are much less conformist, more demanding, less loyal to “brand”
• Both are generally harder to keep as regular customers
• They are very comfortable with online shopping, but at the same time looking for more
“experiential”, more social interaction – i.e. equally open to the right bricks and mortar
offer
22
23
Globalisation of retailing
• Potentially, the recent arrivals could open in the order of 100 – 120 stores.
• These stores could attract sales of $1.5 - $2 billion, generally out of the Apparel category,
which is worth about $30 billion.
• The category has been hit hard post-GFC, compounded by a combination of consumer
disinterest and long term deflation; the new globals have added a much needed element
of excitement.
• The discount department stores in particular have suffered as a consequence of these
factors, but stand to be further hit by the new entrants.
• Not all new internationals will succeed – we have seen international failures before in
Australia.
24
Foreign invasion – how much more?
Key questions
• Which of the recent arrivals will make a big impact – and last the distance ?
• History has shown patchy results for many previous entrants.
• What happens if some of the recent (key) entrants fall over ?
Possible upside
• What about more Asian retailers, given proximity, growth of Asian economies, and
increasing proportions of Asian origin population in Australia.
• Can the recent entrants exceed expectations, and will they roll out more stores ?
• Can the recent entrants expand the category e.g. fashion, winning back household
budget share ?
Generally, though, I expect to see more and more global retailers in this country.
25
26
The role of food – retail sales Australia
Source: ABS Retail Trade Cat. 8501.0
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Mar-85 Mar-95 Mar-05 Mar-15
Food (take-home) Catered food (cafés, restaurants, take-away food)
Household goods Clothing, footwear, personal accessories
Department stores Other
$ (millions)
Food (take-
home): 41%
of total retail
turnover
Food (take-
home): 36%
of total retail
turnover
27
The role of food – regional shopping centres
3
Economic drivers
3
Economic drivers
3
Economic drivers
3
Economic drivers

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Property Council Retail Forum | May 2015

  • 1. 1 Economic drivers and emerging retail trends PCA Retail Forum 15 May 2015 Tony Dimasi Managing Director T 03 9600 0500 M 0409 216 450 tdimasi@macroplan.com.au
  • 2. 2 Key points Economic drivers 1. Population growth 2. Key economic variables and their impacts on retail expenditure 3. Retail sector’s share of the household wallet Emerging retail trends 1. Generational shifting; ageing population 2. Globalisation of retailing 3. The role of food vs fashion 4. Shopping centre scale and design
  • 3. 2 Key points Economic drivers 1. Population growth 2. Key economic variables and their impacts on retail expenditure 3. Retail sector’s share of the household wallet Emerging retail trends 1. Generational shifting; ageing population 2. Globalisation of retailing 3. The role of food vs fashion 4. Shopping centre scale and design
  • 4. 2 Key points Economic drivers 1. Population growth 2. Key economic variables and their impacts on retail expenditure 3. Retail sector’s share of the household wallet Emerging retail trends 1. Generational shifting; ageing population 2. Globalisation of retailing 3. The role of food vs fashion 4. Shopping centre scale and design
  • 5. 2 Key points Economic drivers 1. Population growth 2. Key economic variables and their impacts on retail expenditure 3. Retail sector’s share of the household wallet Emerging retail trends 1. Generational shifting; ageing population 2. Globalisation of retailing 3. The role of food vs fashion 4. Shopping centre scale and design
  • 6. 2 Key points Economic drivers 1. Population growth 2. Key economic variables and their impacts on retail expenditure 3. Retail sector’s share of the household wallet Emerging retail trends 1. Generational shifting; ageing population 2. Globalisation of retailing 3. The role of food vs fashion 4. Shopping centre scale and design
  • 7. 2 Key points Economic drivers 1. Population growth 2. Key economic variables and their impacts on retail expenditure 3. Retail sector’s share of the household wallet Emerging retail trends 1. Generational shifting; ageing population 2. Globalisation of retailing 3. The role of food vs fashion 4. Shopping centre scale and design
  • 8. 8 Population growth – YOY change Source: ABS Population Projections cat. 3332.0
  • 9. 9 Key economic variables, and implications for retail exp. • House prices – nexus appearing to break down. • Wages growth has fallen away over the past 2 years • Deflation in key (non-food) retail categories • Non-retail essentials gobbling up the household budget (education, health, housing)
  • 10. 10 House prices and confidence to spend Source: ABS Consumer Price Index cat. 6401.0; REIA Median House Price Index
  • 11. 11 Wages growth falling away Source: ABS Wage Price Index cat. 6345.0
  • 12. 12 “Essentials” vs. Retail goods inflation Source: ABS Consumer Price Index Cat. 6401.0 0 20 40 60 80 100 120 140 160 180 200 220 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Food and non-alcoholic beverages Alcohol and tobacco Clothing and footwear Furnishings, household equipment and services Housing Health Education Transport Consumer price index (by group - FY2000-FY2014) Retail/ tradeables = low inflation Non-retail/non-tradeables = high inflation FY
  • 13. 13 Retail sector’s share of the household wallet Source: ABS House and Expenditure Survey and Survey of Income and Housing cat.6503 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1984 1988–89 1993–94 1998–99 2003–04 2009–10 2020? Household furnishings and equipment Clothing and footwear Personal care Alcoholic beverages Food and non-alcoholic beverages Tobacco products Miscellaneous goods and services Household services and operation Medical care and health expenses Recreation Transport Domestic fuel and power Current housing costs (selected dwelling) RetailNon-retail Retail RetailNon-retail Non- Retail
  • 14. 14 What will happen to retail expenditure growth? • Food spending will continue to grow strongly. • Non-food spending growth should improve, but remain below long-term trend. • Overall, retail spend will have to fight hard to maintain share of household budget.
  • 16. 16 Ageing population Source: ABS Cat 3222.0 (2013) Australian Population forecasts – up to 2051
  • 17. 17 Retail expenditure profile by age of household head
  • 18. 18 Generational shifting – well underway • Baby boomers : born 1946 – 64: Defined by their careers. • Gen X : b. 1965 – 79: Seeking more “balance” in their lives. • Gen Y : b. 1980 – 94: Millenials; KIPPERS. • Gen Z : b. 1995 – 2009: Digital natives; Social media junkies; marketing savvy. • Gen Alpha : b. 2010 - : Will live to 90+
  • 21. 21 Transition of (spending) power • Baby boomers have largely driven the Australian retail market to this point • They have given retailers loyalty and consistency, once won over • But their influence will wane measurably over the next twenty years • Gen Y’s and Gen Z’s combined influence will increase enormously • Both these cohorts are much less conformist, more demanding, less loyal to “brand” • Both are generally harder to keep as regular customers • They are very comfortable with online shopping, but at the same time looking for more “experiential”, more social interaction – i.e. equally open to the right bricks and mortar offer
  • 22. 22
  • 23. 23 Globalisation of retailing • Potentially, the recent arrivals could open in the order of 100 – 120 stores. • These stores could attract sales of $1.5 - $2 billion, generally out of the Apparel category, which is worth about $30 billion. • The category has been hit hard post-GFC, compounded by a combination of consumer disinterest and long term deflation; the new globals have added a much needed element of excitement. • The discount department stores in particular have suffered as a consequence of these factors, but stand to be further hit by the new entrants. • Not all new internationals will succeed – we have seen international failures before in Australia.
  • 24. 24 Foreign invasion – how much more? Key questions • Which of the recent arrivals will make a big impact – and last the distance ? • History has shown patchy results for many previous entrants. • What happens if some of the recent (key) entrants fall over ? Possible upside • What about more Asian retailers, given proximity, growth of Asian economies, and increasing proportions of Asian origin population in Australia. • Can the recent entrants exceed expectations, and will they roll out more stores ? • Can the recent entrants expand the category e.g. fashion, winning back household budget share ? Generally, though, I expect to see more and more global retailers in this country.
  • 25. 25
  • 26. 26 The role of food – retail sales Australia Source: ABS Retail Trade Cat. 8501.0 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 Mar-85 Mar-95 Mar-05 Mar-15 Food (take-home) Catered food (cafés, restaurants, take-away food) Household goods Clothing, footwear, personal accessories Department stores Other $ (millions) Food (take- home): 41% of total retail turnover Food (take- home): 36% of total retail turnover
  • 27. 27 The role of food – regional shopping centres