Covid has changed us in ways we’re still struggling to understand.
Something unusual is happening in the way Aussie consumers spend.
I’m not sure if this is just a temporary Covid adjustment, or if we’re looking at something more permanent here.
Anyway, we know that retail sales are doing well. Households are cashed up, and they’re spending freely.
Retail spending was up 1.1% in April, which is a fairly decent result, but it comes on the back of a string of strong results, and retail sales are now 20% higher than they were a year ago.
There’s still a bit of Covid noise affecting those numbers, so I think this chart really cuts through to what’s actually going on.
We can see that in the first months of Covid it see-sawed all over the place, but from that point on, retail sales moved steadily higher.
We’re now at a level that, if we had followed the pre-Covid trend, we wouldn’t have reached for another three years.
That’s another way of saying we’ve had about four years’ worth of retail sales in just 12 months.
But there’s still a few puzzles. A couple of weeks ago, shares in The Reject Shop were smashed 11% lower on the back of reports that foot traffic and sales had been particularly disappointing.
This is partly the lock-down story. The Reject Shop has a number of stores in our CBDs, and our CBDs are still ghost-towns.
Roy Morgan released CBD traffic data last week, and it showed that all our capitals are way under what would be considered normal levels of traffic.
Melbourne’s obviously been smashed by the lockdown, but our best performing city is Adelaide (who knows why), but even Adelaide is running at just 65% capacity.
So our CBDs have a long road of struggle ahead of them.
And so this explains part of The Reject Shop’s story, but not all of it. The majority of it’s stores are located in suburban shopping boxes.
So if retail sales are three years ahead of schedule, why are sales at The Reject Shop so disappointing?
There’s two things I can think of.
The first is that households are so flush with cash right now (and they are), that they’re turning their back on the super-discount outlets in favour of their mid or high end competitors.
So rather than going to The Reject Shop, they’re going to K-mart.
That’s probably having some impact, but I’m not sure it’d be huge.
The other thought I have is that maybe all that discount stuff has gone online.
Lockdown has shown people that you can get whatever you want online these days, at $2-Shop prices.
Now that consumers have gotten over the hurdle and tasted the convenience, they’re not going back.
The Reject Shop was always competing on price.
It’s hard to compete on price with a retailer in China with no physical outlets!
So I reckon that’s part of the picture too.
Covid has changed us as a society. It has changed the way we do things.
And maybe one of those things is how we buy cheap plastic stuff?
And all this makes me wonder, what other massive changes are there, lurking beneath the surface?
Interesting times indeed.