ABS stats reveal clothing sales were soft in December, as analysts predict weak retail growth ahead

Australian clothing retailers could be in for a challenging 2018, with recently released sales estimates from the Australian Bureau of Statistics indicating fashion sales in particular have been soft.

The bureau’s seasonally adjusted sales numbers for the December Christmas shopping period reveal that within the retail industry, clothing sales fell by 0.5% in December 2017, whereas footwear and accessories sales rose by 0.9%.

However, when combined, sales in the clothing, footwear and personal accessories categories were down 0.1% for December.

The numbers also point to a decline of 0.5% overall in sales turnover between November to December 2017, with department stores receiving the brunt of the drop.

Meanwhile, categories including food, liquor and supermarket retailers saw sales increase in December. Food sales were up a seasonally adjusted 0.7% for the month.

The drop in clothing sales estimates comes at a difficult time for the retail industry, with brands reducing store numbers, pivoting to alternate sales models and appointing administrators.

Well-known brands have faced challenges very early on in 2018, including fashion brand Maggie T, which called in administrators in the first week of January.

Fashion labels continue to struggle

IBISworld analyst Jason Aravanis predicts revenue growth will be minor across the retail sector in 2018.

“Clothing retail revenue is expected to grow at an annualised 3.7% over the five years through 2017-18, largely due to bricks-and-mortar retailers’ expansion of their online sales channels,” he tells SmartCompany. 

“However, industry revenue is expected to grow by only 0.8% in 2017-18 due to weak consumer sentiment.”

Aravanis says a number of factors are at play in the fashion retail space, including the blurring of bricks-and-mortar and online shopping locations, and changing consumer behaviour.

“Australian bricks-and-mortar retailers have been facing mounting pressure from online stores over the past five years, losing sales to the growing number of Australians purchasing clothing from foreign retailer websites,” he says.

“Many traditional retailers have been establishing or improving their online sales platforms, fuelling growth over recent years.”

Gary Mortimer, a retail expert and associate professor at Queensland University of Technology’s school of business, believes a constant push for retailers to discount their products is a leading force behind weak sales numbers.

“Unfortunately fashion retailers have become their own worst enemy. Constant discounting throughout the year has lead to a continuous decline in growth in fashion and clothing,” he says.

Mortimer observes that a race to the bottom mentality has made shoppers complacent. They are now waiting for a product to go on sale, only for the product to sell for a larger discount elsewhere, he says.

In order for this cycle to be broken, Mortimer believes at least one retailer will need to change tact to save itself.

International entrants in the local market are also bringing their own strategies, with Mortimer pointing to Debenham’s recent opening in Melbourne, with the UK department store committing to only holding limited stock and small, curated range of products at full price.

“It’s a case of who’s going to blink first. Every retailer will continue to discount. It will take brave retailer to be strong and pull back,” Mortimer says. 

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