While many reports claim the retail sector is in a world of pain, IBISWorld said the retail climate has in fact been reasonably positive leading up to 2012-13.

Spending in January 2012 grew 2.7 per cent compared with January 2011, despite falling business and consumer sentiment. In 2011, total retail spending in Australia reached $248.4 billion, representing a 2.4% growth on the previous year.”

“IBISWorld anticipates total retail sales will grow a further 2.8 per cent to $255 billion in 2012 as consumers’ begin to feel more confident about our economic future and family finances,” IBISWorld general manager Karen Dobie said.

Looking specifically at different retail categories, IBISWorld expects hardware retailers, car retailers, supermarket and liquor stores, and watch and jewellery retailers to perform the best, while newspaper, book and stationery retailers and department stores will face the greatest challenges.  

IBISWorld expects hardware retailing will perform strongly during 2012-13 due to the growing trend of DIY home repairs and renovations. The sector is forecast to grow 5.9 per cent over 2012-13 to reach $12.26 billion.

The entry of Woolworths’ Masters stores into the Australian hardware arena has given the market a shake-up, challenging Bunnings’ longstanding supremacy in the market.

“Although the transition will no doubt take time, the immediate effect will be most significant for smaller, specialist retailers such as nurseries, electrical stores, and furniture and flooring retailers,” Dobie said.

Meanwhile, aggressive discounting and higher sales of private-label products are expected to be the hallmarks of the liquor and supermarket retailing sector over the next financial year. These retailers will both benefit from steady spending growth as household disposable income increases 4.4 per cent in 2012, and a further 4.6 per cent in 2013.

On the other hand, department stores are only forecast to grow 1 per cent over 2012-13 to be worth $19.44 billion. IBISWorld says the increase in competition and saavy Australian consumers shopping for bargains both online and in-store will add pressure to their margins.

“More international retailers are focusing on Australian shores in a bid to capitalise on our relatively robust retail climate, as we’ve seen with the successful entry of Zara, Topshop, IKEA and Costco – all of whom are looking to expand their presence within the country – creating additional competition for department stores,” Dobie said.            

While Zara and Topshop are expected to perform well over the coming year – drawing out consumer dollars with their promise of lower prices and greater turnover of fashion lines – Ms Dobie said that these chains are perhaps not the norm in Australia’s clothing retail sector.

“Broadly speaking, Australia’s retail sector is set for only modest growth in coming years due to falling prices, fierce competition and the impact of our higher dollar.”