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Thursday, December 23, 2010 1:57 PM

Retail Recession Hits Australia; Retailers Cry for Help

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In the face of a property bust down under, Australian shoppers have increasingly turned to the internet in search of bargains. In turn, Australia retailers are whining about $1000 duty free allowance on overseas shopping.

Retailers Cry For "Reform"

Please consider Retailers cry out for trading help

The gloom engulfing the nation's retailers is deepening in the week before Christmas - traditionally their best period.

Peak employer group the Victorian Employers Chamber of Commerce and Industry yesterday called for a stimulus-like package to help ailing retailers.

Spokesman Chris James said if retail did not rebound over Christmas, which it was unlikely to do, reforms were needed.

These included personal tax cuts to give people the confidence to start spending and industrial relations reform, with particular attention to lifting restrictions on businesses employing students and casuals.
Shopping Slump

Inquiring minds are reading Retailers cry poor as sales drop sharply
Major store bosses claim Australia is experiencing a retail recession, with the quietest and slowest Christmas shopping period in 20 years.

Rising utility bills, mortgage rates and rents have decimated families' disposable incomes, forcing many retailers to start Boxing Day sales one month in advance in a bid to entice shoppers.

Harvey Norman boss Gerry Harvey said there would be "blood on the streets" in the retail sector because business is so bad, the worst since the recession of the early 1990s.

"It's a crisis, the worst in 20 years," he said.

"There is a recession in retail right now. Boxing Day sales have had to come early because retailers need to sell something to pay their staff."

The news comes as the Government announced an inquiry into the future of the retail sector to examine issues of competition, and the $1000 GST and duty-free threshold on overseas shopping.

Australian retailers and shopping centre owners have formed an alliance to try to persuade the government to abolish the $1000 GST-free threshold. They plan to spend millions on an advertising campaign to try to have imported goods subject to tax and import duty.
Subdued Sales

The West Australian reports Slow start to festive season sales
Retail Traders Association of WA executive director Wayne Spencer says the sales on Boxing Day, the biggest retail trading day of the year, will be vital for struggling retailers this year.

"It's make or break for the retailers," he said.

Mr Spencer predicts WA's spend will slip from $2.81 billion last year to $2.8 billion this year.

He said despite there being an additional 52,000 people in WA, the spend was likely to be down, close to 10 per cent a person.

The Australian Retailers Association says more than 65 per cent of retailers nationally are trading worse than the same time last year.
Email From Down Under

I frequently get emails from down under. Here is one from "Brisbane Bear" that just came in.
Hey Mish,

Retailers are desperately lobbying the government to do 'something' about the dire state of the economy. Retail is being hit by the perfect storm and shoppers are turning to the internet.

For example, a shirt made in China for $5, sells in the USA for $30. The same shirt might sell for Australia for $120. A pair of quality boots selling for $120 online, retails in OZ for $220.

Our business models are not even remotely competitive.

The internet is not only letting people buy cheaper, it is actually allowing people to compare prices. Folks are learning quick smart that they are & have been ripped off for years.

The other big problem businesses are facing are these Groupon type companies offering amazing deals on just about everything.

These deal prices are quickly becoming the new price.

Brisbane Bear
Commercial Real Estate Bust Coming

Sales are flat and Australian merchants are screaming. Watch what happens when sales drop 10%. Inquiring minds might be wondering how stores can be struggling so much. The answer is a massively overbuilt retail sector and stores are struggling to meet their monthly nut. The same thing happened in the US.

Look for a wave of bankruptcies, vacancies, and a huge commercial real estate bust to go along with the residential housing bust. That was point number six in Ten Economic and Investment Themes for 2011
6. Property Bubble Bursts Wide Open in Australia and Canada

Australia, having largely avoided the global recession runs out of luck this time around. Look for the Australian economy to fall into outright recession. Look for Canada to slow dramatically as its property bubble pops. The US property bubble is much further progressed, by years, than Australia, Canada, and China. This matters immensely.
On April 18, 2008 I wrote Shopping Center Economic Model Is History. 2 years and 8 months later, Australia is about to find out the same thing.

Halting the $1000 GST and duty-free threshold on overseas shopping will increase the demand for bargains. Marginal stores are in serious trouble.

Look for Australia's "retail recession" to become a full blown recession.

Mike "Mish" Shedlock
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