Melbourne Cup spending set to dip as start-ups race for consumer dollars

Consumer spending during the Melbourne Cup will fall more than 6% this year, according to IBISWorld, but retailers and hospitality businesses have been advised they can still spark sales with special offers and racing day “packages”.

According to IBISWorld, Melbourne Cup Carnival spending will decline by 6.1% to $268.9 million in 2011, while attendance numbers will be down 1% to below 350,000 people.

There are several reasons for the fall in numbers. Last year marked the 150^th anniversary of the cup, so companies are more inclined to pull back on corporate and advertising expenditure.

Secondly, consumer sentiment has been at a record low in 2011, and this cautious approach has carried over into racing season expenditure.

Katie Dobie, IBISWorld general manager for Australia, predicts tourism will be the biggest loser this year, as less people travel to Melbourne to take part in the festivities.

“Beauty will be the next biggest loser, with a forecast decline of 8.7%,” Dobie says.

“More racegoers are expected to do their own hair, spray tans and manicures than in previous carnival seasons… [yet] fashion spending is expected to rise 1% on last year to reach $30.3 million.”

“Rising spending on fashion indicates that people are still willing to splurge a little on something special.”

“Spending is expected to rise on essentials such as dresses, suits and hats, but accessories will suffer as we’ll be more inclined to make do with last year’s handbag or earrings.”

“We expect mid-level fashion to do well as racegoers seek value for money.”

IBISWorld analyst Suzannah Rowley says clothing retailers look to capitalise on the racing season should boost their range of suits and dresses, and consider including them in some sort of package as a way of adding value.

“In terms of how retailers can capitalise on the races, having a good window display – and reasonable prices – is perhaps the best way to market to consumers,” Rowley says.

“One of the most effective ways to boost sales is to do marketing through different channels. Part of that are in-store promotions, a good online presence and sending emails to loyal buyers.”

“[Retailers should consider] having specials online and tying that with the in-store experience, such as offering up sales staff to help customers pick out a hat to go with their dress.”

Rowley says while retailers don’t want to run the risk of overwhelming their customers with racing paraphernalia, it’s better than failing to acknowledge the races at all.

“Not everyone goes to the races but a lot of people do… I think for boutique shops, even online sellers, it’s a time of year when they can capitalise on a niche market,” she says.

“People are still spending – just not as much.”

“It’s kind of no different to how tough it has been for retailers this year to secure a sale, so [these sales strategies] are something they should be doing anyway.”

In addition to the mixed outlook for retailers, IBISWorld predicts the hospitality sector to take a hit due to the smaller crowd at this year’s cup.

“Racegoers may be more inclined to pack a picnic lunch than spend on food and beverages at the track,” IBISWorld says.

Corporate spending is also tipped to fall, but Dobie says restaurants could still do well, with many racegoers opting to head out for dinner at the end of the day.

With this in mind, Rowley says one way to spark diners’ interest is to have a special deal, such as a meal with a glass of wine. She also advises employers to bulk up their staff numbers.

“Establishments that surround the racecourse, and in city areas, should bulk up their staff for the Melbourne Cup, Derby Day, Oaks Day and Stakes Day, particularly in the evening,” she says.