Online sales drive strong retail spending in November

Matthew Elmas

12th Jan 2018

Online sales made the highest contribution to total retail spending in history last November, helping to drive year-on-year (y.o.y) retail sales to 2.87 per cent on November data, up from 1.8 per cent in October, according to the Australian Bureau of Statistics (ABS).

Online retail turnover contributed 5.5 per cent to unadjusted retail turnover, its largest contribution to total turnover since the ABS began tracking online activity.

Seasonally adjusted sales increased by 1.2 per cent to $26.37 billion for the month, building on a 0.5 per cent increase in October, underpinned by strong growth in household goods and the ‘other retailing’ sub-industry.

The result is the largest monthly increase since 2013 and was well-above expectation, with a Reuters poll of economists having tipped a 0.4 per cent rise.

Across the industry in seasonally-adjusted terms: clothing, footwear and personal accessories increased by 2.2 per cent for November and is now growing at 2.19 per cent y.o.y, while department stores fell 1.1 per cent, down 1.14 per cent y.o.y.

Household goods were up 4.5 per cent for the month, bringing y.o.y growth to 2.8 per cent, while other retailing increased by 2.2 per cent and is now growing at 3.87 per cent y.o.y.

Food retailing was relatively unchanged, and is now growing at 2.38 per cent y.o.y, much lower than cafes, restaurants and takeaway food services, which rose 0.4 per cent for the month and is now up 4.38 per cent y.o.y.

All states recorded growth for the month, Victoria recorded the strongest increase, up 1.8 per cent, while the Northern Territory lagged behind, growing 0.23 per cent.

The ABS’ director of quarterly economy wide surveys, Ben James, said the increasing popularity of Black Friday and the release of the iPhone X underpinned strong results for household goods and other retailing last November.

“Seasonally adjusted sales in both [household goods and other retailing] industries are influenced by the release of the iPhone X and the increasing popularity of promotions in November, including Black Friday sales,” he said.

Australian Retailers Association executive director Russell Zimmerman added that strength in household goods can be put down to several high-profile product launches, not just the iPhoneX.

“[It’s] not surprising as a number of new technologies including Google Home, the iPhone X and the Xbox One X were released in November, giving many Australians an early jump on new gadgets before Christmas,” Zimmerman said.

Eyes turn to December

However, the trend estimate for total retail, which provides a better view on momentum in the retail sector heading into December, increased by just 0.1 per cent for November, following a 0.1 per cent rise in October.

A bump in spending through discounting holidays such as Black Friday in November may also have moderated consumer appetites in December, although while Commsec senior economist Ryan Frelsman said that was a definite possibility, there are signs of a broader-based turnaround.

“Consumer confidence has bottomed as far as the surveys are concerned back in August, so following that with strong job growth we’ve seen a bit of a bounce in retail sales,” he said.

“It could be a blip but we’ve had two consecutive months of strong growth now and if you look at the charts there seems to be a bit of a turnaround.”

Zimmerman is sticking to the ARA’s forecasted 2.8 per cent increase in pre-Christmas sales to $50 billion, covering the period from November 15 to December 24.

The ARA is also forecasting more than $17 billion in post-Christmas sales, including $2.38 billion in Boxing Day sales.

“From what we’ve heard from our members so far, we think the overall Christmas trade will be reasonably strong with many big retailers seeing their biggest growth in their online sales,” Zimmerman said.

“With the ARA predicting a 3.96 per cent increase in online sales this Christmas, we’re looking forward to seeing the December trade figures when they are released in February, as this will give us more insight into how retailers performed over the Christmas period.”