The Westpac consumer sentiment index rose by 18% to 93.8 in September 2020 and is now only 1.6% below the six-month average leading into COVID-19.
The measure was taken after a material drop in COVID-19 cases in Victoria, but before the announcement of the road map to lifting restrictions and is underpinned by a 14.9% rise in Victoria.
The rebound comes after the index fell by 6.1% in July and 9.5% in August as consumers nationally reacted to lockdowns in Victoria, which gave an insight into the possibility and consequences of a second major outbreak.
According to McGrathNicol Advisory partner, Jason Ireland, consumers remain “jumpy” and their sensitivity to the release of new information and data relating to the pandemic appears to have driven the September rally.
“At 93.8 the index is now close to where it stood in June 2020, just after the first restrictions were lifted, with some states (WA, QLD, SA) above their respective June levels. Victoria remains 5.6% below the June levels despite the jump in September, while NSW has returned to its June level,” he told Retailbiz.
Ireland made note of shopping centre data from Kepler Analytics which has shown that whilst traffic levels are still down compared to the same period last year, people are making a return to bricks and mortar stores.
“Better COVID-19 case results appear to have resulted in increased confidence in spending time in store, with more normalised store dwell times compared to the same period last year, other than Victoria where traffic levels have been down as much as 99%. Transaction values remain higher with growth of 22%.”
Consumer behaviour has become much more volatile as a result of COVID-19 with monthly fluctuations in consumer confidence and ABS retail sales becoming unprecedented.
“There was some decoupling in the July ABS sales data where sales grew by 3.2% in a month where consumer confidence fell by 6.1%, however we expect to see a continuation of the direct link between confidence and consumer spending as the eager but more cautious and targeted consumer is watching COVID-19 case rates closely as a proxy for economic outlook,” Ireland said.
“Some of the underlying indices show a real change with consumers view of economic conditions in the next 12 months (up 41% but still pessimistic) and the next five years (up 19% and now neutral).”
Retailers must continue to adapt and think strategically at a micro level, while attempting to implement the following approaches recommended by Ireland:
- Plan locally – while broad branding strategies might remain relevant, tactical planning and strategies should be much more local.
- Work the portfolio – put resources into areas less affected where possible, whilst changing tack in others to limit pain.
- Follow confidence data (public and local) and communicate accordingly to meet customer demand.
- Continue to offer customers choice of channel – many customers’ preferences have changed permanently.
- Partner with suppliers to order differently to modify purchasing processes to conserve cash and share risk.