These charts explain why the retail crunch is hurting department stores in Australia

Rob Elliott/AFP/Getty Images

The decline of the department store in Australia has been accelerating from several directions.

Myer, which yesterday released its first quarter 2018 numbers showing another fall in sales, explained to an investor day briefing what has been happening in the market.

Notably, the fact that it’s tougher for department stores than it was even just two years ago.

Overall Australian retail sales growth has dropped to 1-3% since mid-2016 from 5%-6% in 2015.

Full service and discount department stores sales growth weakened sharply in mid-2016, falling for 11 of the past 13 months.

And footfall in shopping centres — the number of people shopping — has been in consistent decline over the past 12 months.

This chart tells the story:

Source: Myer

Myer CEO Richard Umbers says customers are increasingly shopping online, and traffic to shopping centres and physical stores is declining.

The department store’s own metrics in digital and online are moving in the right direction.

“Sales, profitability, click and collect take up, website traffic and conversion are all increasing,” Umbers says.

Rapid online migration is only one factor. The overall market is changing rapidly, as these charts show:

Source: Myer

Millennials are becoming a bigger part of the shopping market. And they like to shop online and spend more cash on entertainment and experiences.

At the same time, wage growth has slowed to an all-time low of less than 2% a year, households have fewer dollars to spend after paying the bills and overall consumer sentiment is low, as these charts show:

Source: Myer

Research by industry analysts IBISWorld research confirms that frugal consumers and online shopping have reduced foot traffic.

The next big retail test is Christmas. An estimated 10.8% of all retail spending occurs in December in the lead-up to Christmas Day.

“Despite the season’s importance for shopping centres, growth in Christmas spending has slowed over the past five years,” says Kim Do, IBISWorld senior industry analyst.

“More conservative retail spending can largely be attributed to negative consumer sentiment, along with subdued growth in household consumption expenditure and household discretionary income over the same period.

“Many consumers have opted to shop online as a result of these trends.”

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