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Aussie retailers upbeat about Christmas

Australian retailers are upbeat in the lead-up to Christmas and most believe shoppers will spend more than they did last year, according to a survey.

Three-quarters (76 per cent) of retailers expect Christmas sales in 2016 to exceed those in 2015, with nearly one-third (28 per cent) anticipating sales growth in excess of five per cent, Deloitte’s annual Christmas survey of retailers shows.

“It’s been a positive year for many overall and expectations for Christmas 2016 are good, with most retailers expecting growth in revenue and margins,” Deloitte’s national leader of retail and wholesale David White said.

Low interest rates, a strong financial year for many retailers and strength in the key markets of NSW and Victoria were behind that confidence, according to White.

Although fewer retailers expect online sales to exceed six per cent of the overall sales mix this year (36 per cent in 2016 compared to 47 per cent in 2015), a strong majority still consider an effective digital strategy to be important to their business.

“What we are seeing is a convergence between bricks-and-mortar operators and online. Instead of a head-to-head fight with digital channels seeking to replace physical stores, the channels are working together to provide the customer with an integrated offering,” White said.

He suggested that retailers are using digital channels effectively to drive foot traffic to bricks and mortar stores and increase basket size.

Discounts are also playing an important role in the lead-up to Christmas, with a third of retailers planning to begin discounting in early December, according to the survey. This is up from 27 per cent in 2015.

“It appears many retailers are prepared to sacrifice some margin early on to ensure they are not forced to heavily discount later in the festive period,” White said.

Looking ahead to 2017, retailers are optimistic, with 71 per cent planning to open more stores in the next 12 months – the highest percentage since the survey began five years ago.

White attributes this finding to retailers’ growing realisation of the benefits of having a bricks and mortar presence.

“With many pure play online retailers also now seeking a physical retail presence, the reality is that making money through online sales alone can be incredibly tough.”

As retailers refine their omnichannel strategy, this will be reflected in the look and role of new bricks and mortar stores, White suggested.

“New stores are becoming intertwined with retailers’ online offering, store layouts are changing, interactive technologies are being introduced, and the customer experience is being transformed.”

More new international entrants are expected in 2017, but local retailers are better prepared to take on new competition compared to five years ago, White said.

Meanwhile, foreign-owned online competition is now seen as the least threatening competitor, thanks to the rise in the number and quality of online offerings from Aussie retailers, he said.

Deloitte surveyed 52 executives and managers from leading retailers during September and October.

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