2023 was a tough year. Recent insolvency data from the Australian Securities & Investments Commission (ASIC) also confirms this sentiment, revealing that 83 per cent of reports lodged were by businesses with assets of $100,000 or less, indicating the disproportionate impact recent economic turbulence has had on the small business community.
It would seem SMEs agree, with recent findings from YouGov SME Sentiment research commissioned by Prospa revealing nearly nine in ten are pessimistic about the year ahead. Concerningly, retailers are three times more likely than those working in beauty and health to say they don’t feel optimistic for 2024, likely as a result of inflation and fears of lower consumer spending.
With this in mind, retail businesses will need to have the right strategies in place to not only survive but thrive in today’s economic climate. Here are the top three ways retailers can set themselves up for success in 2024 and beyond.
Review your supplier arrangements and find savings
The top three concerns for SMEs are the rising cost of goods or services (58 per cent), increasing utility bills (48 per cent) and lower-than-expected consumer spending (36 per cent). With spending falling 3.9 per cent in December following the Black Friday and pre-Christmas shopping peak, purse strings have yet again tightened for consumers and businesses alike.
With this in mind, it will be critical for SMEs to assess which of their expenses are essential, and which can be cut. To keep this in balance, retailers should invest time at the start of the year to take a step back, assess the market and reevaluate which partnerships still serve them, and which don’t.
For instance, Australia Post’s recent postage stamp price hike from $1.20 to $1.50 will have caused logistical concerns for both pureplay e-commerce retailers and hybrid brick-and-click stores. Meanwhile, FedEx and DHL increased their shipping costs by 5.9 per cent and 4.9 per cent respectively as of January 1, 2024. Far from the major players having a monopoly on the market, disruptors like Sendle and Starshipit will likely gain in market share as retailers look to slim down their expenses.
While parcel delivery services are a good place to start, the same vetting process should be considered for all existing partners and suppliers. From electricity providers to cleaning product subscriptions, a little research could go a long way.
Invest in innovation for stronger business growth
Prospa’s findings also reveal that over half of small businesses would implement new tech if they had sufficient access to funds. This was closely followed by improving efficiencies and customer service (43 per cent) and adapting operations to support growth (39 per cent). This renewed focus on tech comes as a direct result of the pandemic as retailers increase online exposure in line with consumer demand.
In the retail industry, those with a stronger focus on digital innovation will lead the charge. Investing in advanced technologies to diversify payment options, personalise communications and offer stronger cyber security will lead to a better customer experience and, therefore, more successful business outcomes.
Secure faster access to financial support
With the most recent late payment data indicating an average of over three weeks, the need for financial support is growing across the board.
While over half of Australian SMEs have accessed funding from a traditional bank in the past, nearly the same amount said the process was slow. While this shows many businesses can identify where a financial gap may need to be plugged, they may not be aware of the faster, more accessible alternatives. As the ASIC data shows, time is of the essence for businesses and speed could be the difference between success and shutting up shop.
However, nothing is set in stone ahead of RBA’s next interest rate decision in February so retailers should dedicate some time to understanding what help is available. While traditional lenders often become the first stop, there is no one-size-fits-all in business financing, so it is important to ensure a perfect fit before signing on the dotted line.
Despite the waning optimism during 2023, 2024 is a new year and it’s only just beginning. With inflation slowing, this year could represent light at the end of the tunnel and an opportunity for the Australian small business community to get back on its feet. By doing the groundwork to onboard more cost-effective suppliers, investing in digital solutions that elevate the customer experience, and increasing awareness of the financial options available, the sky’s the limit for the retail sector in 2024.