New research released in the inaugural Australian Retailers Association (ARA) Australian Retailers’ Index revealed a net balance of 15 per cent of the sector reporting a decrease in profitability over the last quarter.

The index also revealed retail support for the Federal Government has dropped dramatically during the past quarter falling 28 points to a negative 32 per cent approval rating, with 42 per cent of retailers believing government policies worked against small business.

ARA executive director Richard Evans, who launched the quarterly index yesterday at the Retail World Management & Technology Exhibition in Sydney, said the sector shouldn’t be too quick to judge the new government but it’s clear confidence among retailers was much lower than the general SME population.

“The ARA Australian Retailers’ Index shows confidence amongst the retail sector has deteriorated significantly during the past quarter with a fall of seven percentage points. That’s 42 per cent lower than the same time last year.

“It is no surprise that 19 per cent of respondents are citing the current economic climate as the prime concern this quarter. People are not spending and this has retailers worried. In fact, at 12 per cent retail businesses were the most likely of any industry sector to report problems in this area.  

Evens said the profitability figures were in line with lower sales performance.

“The ARA Australian Retailers’ Index showed sales results for the sector had fallen 21 points since February, indicating a net balance of 10 per cent of retailers experiencing a decrease in sales over the past quarter.”

According to Evans retailers were still experiencing a decrease in profitability despite the report indicating 35 per cent of retailers increased their prices in the last quarter.

“Retailers need to remain competitive in this environment of economic uncertainty. There may be an increase in prices but they can’t apply their normal mark-up to maintain margins because consumers simply won’t pay. This is having a negative impact on their gross profit and explains why winter sales have started earlier than usual.”

Evans said the ARA Australian Retailers’ Index didn’t indicate a brighter future and warned optimism in the sector may be a little ahead of reality.

“Looking ahead, a net two per cent of retailers were expecting to increase their profitability. However, based on the actual experienced profitability in the last quarter, these expectations may cause further disappointment when the August ARA Australian Retailers’ Index is released.”

Evans said rising interest rates was another economic climate issue concerning seven per cent of retailers.

“There is a lot of concern about a range of issues including lack of work/sales and keeping staff (both 14 per cent) followed by cash flow and fuel costs (both 12 per cent). There is pressure coming from all angles.” 

He also said difficulty in finding and keeping staff was the prime concern for 14 per cent of retailers as the index revealed a decrease in employment but an increase in wages bills for the retail sector.

According to Evans the net balance of 11 per cent of retailers reporting an increased wages bill was well above the increase of eight per cent for general SMEs.

"Retailers’ wages bills are increasing even though there has been a decline in employment. The indicator for the decrease in retail employment is sitting at six per cent compared to three per cent for general SMEs.
"Retailers are paying more to retain experienced staff and to recruit quality employees but in the current environment retailers really need to get competitive and creative about staff retention.

"Employees aren’t just looking for jobs. They want a learning experience and career pathway. They want a flexible workplace and they want employment conducive to work life balance. More and more we are seeing retailers providing new opportunities for their employees in a bid to remain competitive in staff retention," said Evans.

The Australian Retailers’ Index analyses the Sensis Business Index results for businesses in the retail sector, providing a snapshot of the retail sector every quarter in the following categories: retailer confidence; retailer concerns; sales, profitability and employment; capital expenditure; wages and prices and assessment of Federal Government policies.