Tuesday, June 18, 2024

Retailers passing increased CODB onto consumers

Fifty-eight per cent of Australian retailers surveyed admit to passing the “majority” of the higher costs of doing business onto consumers, according to new research from Shopify. Twenty-three per cent of respondents have passed on all costs.

The ‘Shopify Australian Retail Report’, conducted in partnership with YouGov, unpacks the tactics retailers are employing to manage the current economic environment, their investment priorities for the next 12 months, and their plans to connect to Australian consumers who are becoming increasingly value conscious.

The study of more than 200 medium to large retailers and 1000 Australian consumers, says Shopify, “sheds light on shifting consumer behaviours and lays out effective pathways to growth for retailers to connect with customers facing economic pressures”.

Unsurprisingly, almost all (99%) of the Australian retailers surveyed have been impacted by macroeconomic pressures with the higher costs of wages (45%) being the biggest strain on company budgets. This is followed by the increased cost of servicing debt (43%), and surging operational costs, including energy bills and rent (41%).

For 95% of the Australian retailers surveyed, the immediate response to manage these mounting pressures has been to pass “at least some” of the increased cost of doing business onto consumers.

The one group said to be “bucking this trend” is direct-to-consumer (DTC) retailers, with 62% of respondents absorbing the majority of costs.

The tension, for retailers, says Shopify exists in the finding that three in four (75%) surveyed consumers have opted to cut back spending in order to save money and 82% have changed their spending habits due to increased cost of living.

“Australian retailers are in a precarious position, as they are facing growing price-sensitivity amongst consumers dealing with the higher cost of living, whilst having to overcome those same inflationary pressures themselves. It really is like being stuck between a rock and a hard place,” says Shopify Director of Technology Services & Enterprise APAC James Johnson.

“In such a competitive environment, many of the retailers we’re speaking with are doubling down on customer-focused initiatives, whether that’s expanding their product offering to appeal to a broader range of consumers, or investments in customer experience, personalisation, and loyalty programs.”

Customer experience

Ninety-three per cent of the Australian retailers surveyed cite customer experience as either “important” or “critical”.

In fact, the retailers “most likely” to view customer experience as critical for their business’ survival were also those that may be considered the “most successful by measures” – 50% of businesses with $500 million-plus annual revenue, 41% of retailers in operation for 20-plus years, and 34% of retailers with 500-plus employees.

According to Shopify, Australia’s “largest and most successful” businesses are betting on personalisation to improve their customer experience over the next 12 months, adopting methods such as data-driven recommendations and personal touches like handwritten notes with delivery.

Nearly half (47%) of the businesses surveyed with over 500 employees, and nearly three quarters (73%) of businesses earning over $500 million in revenue, have adopted or are planning to implement personalisation strategies, being their biggest priority for the next twelve months.

DTC businesses are also making personalisation a top priority when it comes to customer experience with 62% of respondents saying this will be their focus.

41% of surveyed B2C retailers are looking to invest in additional customer insights such as qualitative and quantitative data as their number one priority.

On the other hand, B2B organisations have a strong focus on the integration of online shopping with in-store experience as their main focus with 41% of surveyed businesses doing this.


Almost all (98%) of Australian businesses surveyed are investing in different technology measures over the next 12 months, with nearly half (44%) investing in real-time data analysis.

Almost two thirds (64%) of respondents will be using technology to improve their customer experience through automation.

Second to this, over half (55%) said they are planning to enhance their customer’s online experience such as automatic refunds.

Interestingly, says Shopify, retailers located in NSW are 50% more likely to enhance online customer experience in the next 12 months compared to those in Victoria.

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