Worst Christmas At Retail in 34 Years – Bah Humbug!!!

I woke up to be bombarded by headlines in every major main media that we had just witnessed the worst Christmas at retail in 34 years. Very scary indeed – if it were true. The truth – if anyone is interested in hearing it – is the opposite. According to the most recently released official ABS All Retail Sales data, December 2011 was actually three percent better than December 2010 in physical retail. In addition, online retail (which accounts for an estimated six percent of additional retail spend) is believed to have increased somewhere between twenty-eight and thirty percent this past December.

Combined, the retail dollars taken in December 2011 are more than five percent up on the previous Christmas and far from being the worst in thirty-four years, they are actually an all time record in dollars spent at the tills. ABS data also tells us that general household consumption is up by a total of seven per cent over last year.

The major retailers and shopping centre operators I have spoken to have all relayed stories of a healthier Christmas sales period than the previous year.

Far from advocating a cut to the cash rate, taken on these numbers in isolation, the Reserve Bank should be lifting interest rates. The thing that saves an interest rate increase is the level of inflation being so low due to relentless discounting led in particular by the pricing battle to the death between Woolworths Group and Wesfarmers Retail.

The simple lesson here – stop consuming main media and looking to journalists to tell you what is going on in retail because they either don’t know or are making up headlines deliberately constructed to create fear.

Retail is going through another step change period. They have happened with regularity through the three thousand year history of our industry. This one is a big one. But you can’t solve the problems facing your business without getting the facts straight to understand the true context you are facing.

Australia has relative full employment for the economic model we operate under. Any retailer worth his salt will tell you the casual labor pool is at an all time low right now. Household income is up by nearly four per cent. Debt is down not because consumers have suddenly become spend thrifts but because a) the financial services industry has pushed toward debit facilities post the so-called Global Financial Crisis and b) the financial planning industry has abandoned its radical leveraged equity pursuit that saw a multitude of Australian’s superannuation wiped out or severely damaged in disasters like the collapse of Storm.

The problems with physical retail today do not lie at the feet of consumers. Consumers behave and react in the context that faces them and as a result of six million years of evolution.

The problems with physical retail lie at our feet. We are the ones who need to rise to the challenge of persuading consumers to spend their time and their money – in increasing amounts and with increasing margins – with us.