Savvy shoppers put savings first
The slowdown in the economy and the rise of the internet are changing the way consumers shop, writes Glenda Kwek.
Australians are the developed world's most frequent online shoppers at international retailers, a global survey has found, in yet another blow to retailers struggling with a subdued market.
The shift towards online shopping came as more Australians chose to save rather than spend, the annual global survey of almost 30,000 consumers by the Boston Consulting Group found.
The survey, which included 2502 Australian respondents, came as domestic retail sales and consumer confidence remained soft.
"Australian consumers are threatening to go on strike. Fears about the economy and job security are certainly factors, and these have noticeably increased the past year," BCG's Australia and New Zealand head, Jane Danziger, said.
About 46 per cent of the respondents said they preferred to save rather than spend, up from 40 per cent last year. At the same time, 54 per cent said they were less inclined to buy new items, a rise from 49 per cent last year.
The respondents said range, availability and price were the key factors in their decision to shop from overseas web merchants.
The survey was not all bad news for retailers. Respondents said they were planning to lift their spending on holidays, fresh food and for their children over the next year, and were also saving more to buy real estate.
ANZ senior economist Ricki Polygenis said the retail sector had not benefited as much from the Reserve Bank's cuts to interest rates as had been expected. "The only real evidence at the moment of a response to lower rates is in the housing market. Consumers remain very cautious and that is not particularly surprising given the soft outlook for the labour market and wages," Ms Polygenis said.
"While household balance sheets actually look in an OK position, confidence remains fairly subdued given the general weakness in the domestic economy."
Ms Danziger said the results could also point to a more permanent change in consumer spending behaviour, where reduced spending was not just driven by fears about the economy and job security.
"The results clearly show retailers would be foolish to pin their hopes for a spending recovery on an uptick in the Australian economy," she said.
"There are some fundamental shifts taking place in consumer attitudes and behaviours. The biggest trend is the preference for savings over spending, with almost half of all Australians now in this mindset."
BCG found that 49 per cent of respondents were saving more amid fears of an economic downturn, while 43 per cent said they were saving for future spending on healthcare and for their retirement. At the same time, they were more insecure about their jobs than respondents in the US, Canada and Germany even though Australia has a lower unemployment rate.
Australian households have increased their savings rate from nearly zero to more than 10 per cent of their income over the past decade. In the early 2000s, household savings fell below zero for the first time on record, according to Bureau of Statistics data.
"I think there's new momentum out there that the Reserve Bank might like," NAB chief economist Alan Oster said about the savings ratio. "Consumers have gone back to the sort of behaviours they had in the 1950s and '60s."
Australian household debt ratios are high compared to other countries, with the Reserve Bank expressing concerns earlier this year about a rise in household debt amid a low-interest rate environment.
Australians spent $13.7 billion in 12 months to May, with online sales growing 18 per cent for the year, compared with the previous corresponding period, NAB's latest monthly index showed.
Sales lifted by 3.2 per cent year-on-year for bricks and mortar retailers, up from 2.4 per cent the previous year. Overall retail sales lifted a seasonally adjusted 0.1 per cent in May, following a 0.1 per cent increase in April, ABS data released earlier this month found.
Mr Oster said there were no signs the retail sector would experience a revival in the short term.
"It's hard to see discretionary retail picking up any time soon. Maybe getting elections out of the way and further rate cuts might help, but I think generally consumers are still nervous and that's going to take some time," he said.