As stores close doors, consumers open wallets on internet

    As stores close doors, consumers open wallets on internet

    By  
    SHARE

    A FRESH wave of fashion store closures has underlined how Australia’s $300 billion retail sector is being drained by internet bargains and the sag in consumer confidence.

    The Premier Retail group, which owns popular chains such as Portmans, Just Jeans, Jay Jays, Peter Alexander, Jacqui E and Dotti, will close 50 stores as part of restructuring under recently appointed chief executive Mark McInnes.

    Consumers, hit by rising interest rates and a steeper cost of living, have turned to saving their spare dollars rather than spending – robbing local shops of revenue and forcing many to engage in massive discounting to shift unwanted goods.

    Mr McInnes said yesterday overstocked clothing stores were desperately trying to offload winter fashions before spring, but heavy discounting was not working.

    ”Prices are down 60 and 70 per cent and they’re still not buying,” he said.

    ”… Markdowns have to become deeper and deeper, just to get any traction.”

    ”There’s almost a price you can’t sell it for, particularly if your plan is to hold inventory to next winter to sell it. That just does not work.”

    One of the main challenges facing retailers is the growth in online shopping.

    A report published by yesterday said online spending would surge by 25 per cent to almost $6 billion this year.

    The report found 44 per cent of all online spending went overseas, and better prices were the overwhelming reason shoppers made overseas purchases. It predicted online retail sales would rise by 12.6 per cent a year between now and 2015, thanks to growing popularity of mobile web devices such as smartphones.

    ”Australians will each spend more than an estimated $600 online in 2011, compared with $536 in 2010,” PricewaterhouseCoopers’ global retail and consumer advisory leader, , said.

    Many retailers have cited the internet for their dwindling sales. Book chains Borders and Angus & Robertson, which collapsed earlier this year, said online purchases had hurt its business.

    This month highlighted online retailers, political uncertainty and recession-like consumer sentiment for its own sales and profit warning to investors.

    Premier Investments, with Solomon Lew as chairman and majority shareholder, will shut 50 loss-making outlets from its retail arm when their leases in shopping centres and malls end.

    Premier plans to open 100 stores over the next three years, although nearly 20 will be in Singapore and some in New Zealand. Up to 30 Peter Alexander stores will open in Australia and up to 50 Smiggle stationery stores in Australia and New Zealand.

    ”Undoubtedly the retail market has been very challenging,” said McInnes, the former David Jones chief executive who started with Premier in April.

    ”If you look at Access Economics’ outlook report they say customers are really saving off the back of the GFC, they are restoring their savings back to pre-GFC rates, and there is a bit of a confidence crisis with everything that has gone on with floods and carbon tax.

    ”But the positives are low unemployment, good wage growth, heavy investment in particular in the resources sector into China and beyond, and everyone’s got a job, everyone is earning money. So the question is how do you get customers to spend with your store?”

    The Prime Minister, Julia Gillard, said retailing was just one sector feeling the effects of the high Australian dollar, which had created a ”patchwork economy” characterised by strength in mining but weakness in other industries.

    ”We do know that there are sections of retail in particular that are feeling a brunt from the high Aussie dollar, cautious consumers and the like,” Gillard said.

    Source – The Sydney Morning Herald