The recently released Australian ARA Australian Retailers’ Index reveals SME retailers are cutting back on costs but spending more on advertising in a bid to drive sales.

Australian Retailers Association (ARA) executive director Richard Evans said retail SMEs were more concerned about the current economic climate than any other sector and with sales falling they were adapting to the new conditions. 

“With a drop in sales and profitability and increasing concern about the current economic climate, it’s not surprising 30 per cent of retailers indicate they have reduced their cost base in the past quarter.”
However, said Evans, that advertising had actually increased, with 16 per cent of retailers saying they were advertising more. This is five per cent higher than was the case for SMEs in general.

“This is a positive indication that retailers are starting to understand you can’t compete on price alone in times of economic uncertainty. Rather than focusing on making products cheaper, retailers are injecting dollars into advertising campaigns and thinking strategically about how they can give consumers, who have limited discretionary spend, a reason to shop.

Evans admits though that for small retailers advertising may not be the most cost-effective way to communicate with customers.

The index also shows that 13 per cent of retailers have not taken any steps yet to adapt to the current economic climate, with five per cent of retailers indicating they are planning to take action in the near future and eight per cent saying they are doing nothing.

“Australian retailing is in a period of change and the current economic uncertainty is a great source of opportunity for retailers. To grow and prosper, retailers must be adaptable to the new conditions,” said Evans.