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News release


Retailer sentiment remains subdued, but expansion intentions are strong

Retailer Sentiment Survey finds AUD has been a double edged sword for retailers

SYDNEY, 15 DECEMBER 2010 – The threat of further interest rate rises and weak discretionary spending is keeping retailer sentiment subdued, but sentiment is much higher than GFC-affected levels in 2008 and 2009 and 68% of retailers now report expansion intentions, according to Jones Lang LaSalle’s latest Retailer Sentiment Survey.
The survey, conducted nationally in November this year, recorded retailer sentiment reaching a net balance of -9% of respondents reporting negative trading conditions. While pessimistic retailers still outnumber optimistic retailers, the result is a substantial improvement on the -29% net balance recorded in April 2009 and the -63% net balance recorded in October 2008.
“The survey illustrates that conditions remain challenging for retailers despite relatively strong consumer sentiment over recent months, particularly for fashion, footwear and accessories retailers that were well represented in our survey,” said Jones Lang LaSalle’s National Retail Analyst, Leigh Warner.
“Strong competition has in many cases led to aggressive price discounting, which has reduced the benefit of a stronger AUD for many retailers’ margins. The higher AUD has also boosted offshore internet purchases, while margins of some retailers have also been squeezed by rising product costs due to rapidly rising wages in China and other emerging manufacturing nations and increases in raw materials, such as cotton,” said Warner.
Despite the survey finding that 76% of respondents felt that the higher AUD had led to higher online sales and had a detrimental impact on their business, the higher AUD has had an overall positive impact on the majority of retailers. 54% of retailers reported that the strong AUD had a positive impact on their business by allowing price reduction, margin building or a combination of both, while 21% reported not impact on their business and just 24% reported an overall detrimental impact on their business.
According to Jones Lang LaSalle’s National Head of Retail, Tony Doherty, the most positive aspect of the survey for retail property owners is that 68% of retailers surveyed intend to expand over the next 12 months, while only 3% intend to consolidate or contract compared to 20% contemplating contraction in the April 2009 survey.
“While the expansion of many retailers will continued to be constrained by the availability of finance, the strong intention to expand shows retailers can see the light at the end of the tunnel and want to position themselves for stronger conditions over the next few years,” said Mr Doherty.
“Consumers are more positive about the general economic outlook and job security, and this confidence will eventually translate into growth opportunities for retailers, particularly if interest rates do stay on hold over the first half of 2011.
“As well as physical store expansion, many domestic retailers are also seeing the rise in internet shopping by Australian consumers as an opportunity to build their own online platforms, which in the past have struggled to gain critical mass.
“Already, large retailers such as Myer, Harvey Norman and also the Westfield Group are seeing the potential to capture the growing trend in online shopping and have boosted their online shopping presence,” Mr Doherty said.