What are some of the trends and challenges ragtraders can expect in 2011? Three experts across retail, etail and fashion offer their predictions.
The online front
Robert Bryant, general manager IBISWorld Australia.
The total online retail market is expected to be worth $21.3 billion in 2010/11, rising by 4.6 per cent from the year prior.
By the end of the 2011/12 financial year IBISWorld expects the market to be worth $22.2 billion. With the high and rising Australian dollar, the purchasing power of Australian consumers has risen. This is seeing more consumers purchasing from overseas online retailers as their goods are becoming comparatively less expensive as the dollar continues its rise.
Over the last five years, the industry has grown strongly, averaging yearly growth of 4.6 per cent. Increasing internet and broadband penetration, higher levels of computer literacy within society, convenience, the product range offered and the improvements in security of online shopping have been some of the key drivers behind this growth.
The breakdown of online retailing expenditure is estimated to be as follows:
• Travel, accommodation and tickets 40%
• Computer hardware and software 20%
• CDs, DVDs, books and magazines 15%
• Clothes, sporting equipment and toys 10%
• Groceries, food and alcohol 5%
• Other products and services 10%
Over the coming five years, IBISWorld expects the industry to continue growing, achieving annualised revenue growth of 3.9 per cent to reach $25.8 billion. The continued expansion of the market and the number of competitors will see greater supply to the online retailing market, while a growing population and higher incomes will support demand.
Part of the appeal for retailers to have online operations is that they do not incur the expensive costs associated with having a physical retail presence (retail chains and shops), they can avoid paying for retail staff and most importantly, it gives them around the clock exposure to an international customer base.
For customers the advantages of online retailing are that they are able to shop around the clock from the comfort of their home or office, whilst enjoying the benefits of paying lower prices because online retailers are able to pass on the cost savings onto their consumers. Another benefit for consumers is that they are able to compare prices more easily, they have more access to information about the product and there is a broader product range available also.
The supplier front
Jo Kellock, CEO, The Council of Textile and Fashion Industries of Australia (TFIA).
Competition is fierce and Australian manufacturers and trading firms remain amongst the most exposed in the world to these pressures, juggling the realities of international trade with the demanding needs of local customers. Falling import duty rates and a rising Aussie dollar might have meant cheaper raw materials for manufacturers, however the price of textile fibres has seen a significant rise in recent months with cotton rising over 53 per cent since August and polyester spiking at 49 per cent in seven days in November.
This is due to a combination of rising intermediates prices influenced by the rising cost of crude oil and demand outstripping supply both as a result of unsatisfied cotton demand translating to increased demand of cotton grade polyester fibre and a shortage of polyester intermediates to increase production. Prices are likely to continue to surge in the short term, marking a trend for early 2011.
How will the sector emerge from the economic crisis? Updated ABS manufacturing figures (2009) are due to be released next month which will give a better indication of the post-GFC position. The latest figures state that in the financial year ending June 2007, textile, clothing and footwear (TCF) industries contributed over $2.7 billion in industry value add (IVA) to the Australian economy. Clothing manufacturing lead this, contributing $1,043 million to the Australian economy in 2006/07.
There is some recent anecdotal evidence of clothing manufacturers investing in capital equipment (semi-automated machinery) and lean manufacturing training. In addition, enquiries to our organisation have increased over the last six months from designers and brands wanting to source local garment manufacture. We anticipate demand from these players will continue into 2011.
ABS May 2009 figures showed that an estimated 49,000 people were employed in the TCF industries (52 per cent employed in the clothing and footwear area). Women make up 61 per cent of workforce with a third working part-time. Victoria (21,000) and NSW (18,000) were the major employing states.
According to Manufacturing Skills Australia, the TCF manufacturing sector has the second highest projected decrease in employment growth (-3.1 per cent) of all sectors.
The ageing of the workforce is an issue facing the industry and will continue on into 2011. In 2008 the TCF manufacturing sector had the second highest median age (44 years) of all manufacturing sectors.
This is three years older than for manufacturing in general and seven years older than the median age of all industries. Answers will be found with investment in on-the-job, formal and flexible training programs. Uptake of industry trade qualifications in the fashion/clothing industry remains low with Australian apprenticeships numbering approximately 800 (mostly in laundry operations) in 2008 compared to other sectors e.g. 3062 for furnishings. This needs to be improved.
The trend toward sustainable products and services continues to gain momentum. There are now 46 successfully accredited ethical supply chains in Australia encompassing more than 500 suppliers and 5300 workers.
The retail front
Russell Zimmerman, executive director, Australian Retailers Association
At the end of a challenging year of trade, it’s only natural to reflect on past triumphs and tribulations but it’s equally timely to look to opportunities that lie in the 12 months ahead.
If retailing is driven by consumer demand, then the best way to identify opportunities is to examine shifts in consumer behaviour and thinking. To be successful and to stand the test of time, retailers must evolve with their customers.
They must mirror the communities in which they operate so that their customers’ interests become a business imperative.
Next year two key, although vastly different, consumer trends will be the continued increase of use of social media to recommend or reject brands and a shift towards sustainable and ethical living.
And therein lay the opportunities for fashion retailers.
Social media is the new word-of-mouth: There’s an old adage in the retail world that goes something like, ‘a satisfied customer will tell one friend, an unhappy customer tells everybody’. And the rise of social media, certainly gives new meaning to the concept of ‘telling everybody’ with Facebook alone currently boasting over 500 million registered users worldwide.
While social media provides a new platform for an unhappy customer to broadcast their experience to millions of consumers around the world, it is also an opportunity for loyal and happy customers to recommend their favourite brands and fashion retailers to all their friends and family with the touch of a button. Almost 60 per cent of social media users have chosen to ‘follow’ or ‘friend’ a retailer in the past.
According to the Nielsen Online Global Consumer Survey (2009), consumers show only 37 per cent trust in the online banner ads shown on the websites. People are more likely to believe the consumer opinions posted online and when people receive recommendation about a product from a friend the trust level is as high as 90 per cent.
If retailers aren’t entering the social media space in 2011, they have lost touch with the way their consumers communicate. Word-of-mouth will always be one of the best forms of marketing and social media is the new word-of-mouth.
Caring is the new black: In a bid to get a tighter grip on stock controls, retailers like Zara are putting in new, very small ranges every two to three weeks. As more retailers move to putting new smaller ranges into stores the dynamics of fashion consumerism will change with a higher turnover of unwanted clothes.
Overseas, Marks & Spencer has recognised unwanted apparel as an opportunity to give back to the community by partnering with Oxfam while driving customers back into their store by offering vouchers and discounts to customers who return their old clothes.
In Australia, Country Road initiative Fashion Trade also recognises the opportunity that lies in the societal shift towards sustainable and ethical living. The clothing donation program aims to raise money for the Red Cross and divert textile waste from landfill by encouraging people to recycle their pre-loved Country Road clothing and accessories.
Similarly, Sportsgirl has embraced the idea that everything old is new again by offering a small vintage line made from second-hand fabrics.
Australian retailers should also be considering the way ethical business practices are reflected in their supply chain as more and more consumers want reassurance that the outworkers making their garments are paid and treated fairly and in accordance with industrial relations law.