The ABS retail sales data, released yesterday, reported a headline increase of 0.7% in May, a better number than the 0.2% forecast.

But there’s mounting anecdotal evidence that the data is hiding what’s really happening on the ground, with the June figures likely to be grim.

Yes, the ABS numbers show food retailing to be steady. However, given increasing food prices, a steady number most likely indicates a real decline.

And at the more discretionary end of spending, household goods (-0.2%) and hospitality (-0.5%) both demonstrate that right now it is better to be selling a sausage than a sofa (or a sojourn). Victoria and NSW, the big markets, are flat or down. There is also weakness in the department store sector.

If even some of the things I’ve been hearing are true, the slump has only just begun. Tales like:

  • A consumer electronics retailer who normally gets an end of financial year bounce in computer sales saying it was dead last month.
  • “Someone turned the tap off in mid May” reports a furniture and homewares retailer when noting much lower customer numbers and sales.
  • Retailers are cutting back on the hours of casual and part-time staff. People who had been working twelve hours a week are now being offered six, and the six may become zero.

Reduced casual hours do not show up in unemployment figures, but we can expect that to start soon. As retail employs almost 15% of the workforce, the flow on to the broader economy can be huge.

Over the last couple of days, Crikey readers have commented that there now appears to be a lower level of customer service in Myer and David Jones, with tips like this:

I went to DJs last week to buy some u/pants at sale price (30% OFF) and could not find a sales person on the floor in the entire Menswear dept. I considered walking towards the exit in the hope of finding any staff in any dept. A brave late teen lad offered to help and apologised for the wait saying that he was the lone staffer for the dept! Unreal.

One also wrote that the June stocktake sales may have been less than successful.

The anecdotes are all part of the same, troubled story. Stores will have to get savvy to survive.

And at the moment, it seems, our department stores can’t turn a trick. Department store retailing is about offering huge, diverse ranges coupled with compelling experiences. Apparently struggling to meet sales targets, big department stores risk falling into the trap of cutting staff to unsustainable levels, becoming low-service, discount driven, commodity traders.

But by reducing staff numbers, these retailers diminish their ability to put on a show. Retailers that do not provide an element of theatre will see their offer judged only on its price, and that is a very slippery slope. In the current retail landscape, department stores will not win a price war. So they risk heading to a plane that they can’t actually compete on.

Long before the term junk mail went into the lexicon, shoppers eagerly awaited the letterboxed catalogue, Myer’s gift to their customers, announcing a sale event. Now outlets like DFO and Birkenhead Point appear to offer 52-week bargain mode, even though, depending on the store, the discount may be more perceived than real.

The rules have changed. Unless department stores offer an experience, they will lose their point of difference and will struggle, and we might be about to witness a fundamental change in the retail mix.

Rob Lake publishes Brandish — Retail Intelligence, a fortnightly newsletter and website about all things retail.

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