Part I: As COVID-19 restrictions begin to lift, businesses must prepare for a new set of challenges by reflecting on the changes wrought by the pandemic. ARABELLA RODEN reports.
|BY THE NUMBERS
Australian unemployment rate in May 2020
Source: Australian Bureau of Statistics
Australians shopped online for the first time in April 2020
Source: Australia Post
of the population – Gen Z and Millennials – has been significantly financially affected by the pandemic
Source: McKinsey &Co
the Australian Retailers Association’s proposed end date for JobKeeper assistance to select retailers
increase in pedestrians recorded at Bourke Street Mall North on 20 June, compared with four-week average
Source: City of Melbourne Pedeistrian Counting System
For the retail sector, the impact of the COVID-19 pandemic was felt instantly. As fear and panic gripped the nation, consumers rushed to stockpile essentials, while discretionary spending dived to levels unseen in decades.
Many retailers – particularly in regional areas – watched helplessly as their hopes for a swift recovery from last summer’s horror bushfire season were extinguished.
Without explicitly banning non-essential retail, government lockdowns effectively prevented bricks-and-mortar businesses from trading by confining Australians to their homes. At the same time, swathes of the population were furloughed, made redundant, or had contracts cancelled.
These new dynamics created – or accelerated – a number of trends that will continue to affect the Australian retail landscape in the months and years to come, altering consumer behaviour as well as the practicalities and logistics of retail sales.
Speaking on the podcast of retail futurist and Jeweller contributor Steven Van Belleghem, Jon Bird, CEO of marketing and communications agency VMLY&R (Australia and New Zealand), said the pandemic had “an extraordinary effect on retail”.
“A lot of change has been compressed into an extraordinary amount of time – a lot of change, from a behaviour point of view, which has been influenced of course by COVID-19 and the fact that people have been locked down in their homes, remote working, having to pick up on digital technologies, forced to change,” he explained.
Bird defined the changes to retail in three categories – ‘hands’, ‘head’, and ‘heart’: “The hands point of view is how physical retail will be different, particularly around touch; from a heads perspective, how the digital ‘smarts’ around retail are rapidly changing; and from a hearts perspective, how the emotions around consumption and shopping are shifting.”
Over the course of the lockdown period, these changes have not been ignored by retailers; rather, many business owners have been forced to re-evaluate their approach and make efforts to adapt to a new reality, shaped by forces beyond
According to the Australian Bureau of Statistics (ABS), retail turnover figures saw their largest fall on record in April 2020. However, preliminary figures for May surged 16.3 per cent, the largest rise in the 38 years of the survey.
Yet Andrew Hanlan, senior economist Westpac, noted that the “wild ride” still resulted in retail sales 0.4 per cent below their pre-COVID level, adding that “weak income growth and fragile [consumer] confidence” would continue to weigh down retail in the coming months.
Indeed, all Australian states and territories recorded rising unemployment in May 2020, with the largest losses recorded in Victoria, New South Wales, and Western Australia; the national unemployment rate stood at 7.1 per cent, an increase of 2 per cent from February 2020.
The combined impacts of the pandemic have led Australia into a recession for the first time in 29 years, and experts have cautioned against the retail sector relying on the ‘sugar hit’ of the Federal Government’s JobKeeper and enhanced JobSeeker payments.
|“The ‘hands’ point of view is how physical retail will be different, particularly around touch; from a ‘heads’ perspective, how the digital ‘smarts’ around retail are rapidly changing; and from a ‘hearts’ perspective, how the emotions around consumption and shopping are shifting”
Combined, the packages are paid to approximately 7.6 million people and have enabled many businesses to continue operating by boosting consumer spending.
However, the payments were, at the time of publication, due to expire on 27 September.
Speaking at a Senate committee meeting in late May, Dr Philip Lowe, governor of the Reserve Bank of Australia, cautioned, “It’s going to be very important to keep the fiscal support going. It’s very important that we do not withdraw fiscal stimulus too early.”
He added, “Even as the recovery gets under way, there will still be a shadow cast by the pandemic. As a country, we will need to turn our minds as to how to move out of this shadow. A reform agenda that makes Australia a great place for businesses to expand, invest, innovate and hire people would certainly help.”
Paul Zahra, CEO of the Australian Retailers Association (ARA), said that while the retail sector was “shifting out of crisis towards recovery”, the economic recession indicated that “recovery will be slow”.
The ARA has called on the Morrison government to extend JobKeeper to selected retailers until February 2021, in order to support vital pre- and post-Christmas trading.
Speaking to the Australian Financial Review, Zahra said, “At this stage we’re facing a cliff and we’d prefer a slope. Retailers plan to batten down the hatches anyway, this will give them some relief to get them through this all important trading period.”
Indeed, many jewellery retailers have been among those to access the JobKeeper program. “We are lucky to be in Australia – I expected this to be a lot worse,” said Michael Sobbi of Linda & Co Designer Jewellers in Sydney.
“I think with the government grants and strong online sales, we are riding the wave to normality.”
The importance of having a financial buffer in place has been noted by a number of jewellery retailers and retail experts.
Steven Jansen, owner SS Impressions Jewellery Design Studio in Perth, advised, “Always have a rainy day fund – in both monetary and materials areas – for at least six months.”
|“The empty shops left by store closures and the inevitable retail collapses we’ll see in the post-COVID-19 environment will increase the power of retailers to extract better deals from landlords”
Nikhil Jogia, of Jogia Diamonds, also based in Perth, added, “Businesses, in any industry, that were struggling with weak balance sheets have faced the most trouble. Therefore, now more than ever would be a good time to build a stronger, more resilient balance sheet – whether that means lowering debt or increasing cash levels.”
Meanwhile, Van Belleghem emphasises flexibility: “Forecasting and predicting business has become almost impossible. Today it is important to think in terms of scenarios. Be ready to reinvent your business.”
Ben Manning, director Utopian Creations in Adelaide, said, “We have been working hard to improve the way our business functions – from improving our POS system right through to renovating our store and adding to our website. It’s an important opportunity to focus on the things that will help my business succeed once the country opens back up.”