Wednesday, June 19, 2024

Uncertainty for SMB retailers as Christmas approaches

As the Christmas and holiday trading period draws near, new research reveals 55% of surveyed small to medium-size retailers remain uncertain or concerned about their financial future.

The Australian Retailers Association (ARA) & American Express Small Retail Index shows that while 57% of surveyed small and mid-sized businesses are defying economic headwinds to meet or exceed their financial benchmarks, as many as 43% are falling short.

The cost of doing business continues to place significant strain on SMB retailers. Almost all respondents (93%) said they have seen cost increases in their businesses over the past 12 months, with more than one-third (36%) saying their costs have increased by more than 10%.

While decelerated consumer spending is the most pressing concern (57%), wage costs (41%), cost of goods and services (39%), staffing shortages (29%) and cash flow management (29%) also ranked in the top three pressing concerns.

To respond to pressures, retailers are prioritising investment in customer acquisition (66%) and loyalty (56%), while innovating in the areas of artificial intelligence and e-commerce.

ARA CEO Paul Zahra says the index highlights the multi-level pressures small retailers are under.

“It’s a difficult time to own a small business in Australia – one of the most difficult in recent history,” he says.

“Our small retail community is feeling the crunch as shoppers scrutinise their spending and costs continue to increase across the board – wages, rent, utilities, insurances and supply chain costs. They also continue to battle staffing shortages and needing to prioritise and resource investment into new technology and sustainability responses.

“Discretionary retailers are at the coalface of this pressure as we head into the Christmas trading period, when most discretionary retailers make up to two-thirds of their profits.

“It’s encouraging to see many SMBs are holding their own against these pressures. We typically expect these businesses are either trading in the essentials category like food, or servicing consumers who are less impacted by cost-of-living pressures.

“Despite the tumultuous operating environment, most retailers are showing extraordinary resilience by investing in innovation, e-commerce and sustainability to prepare themselves for the future.

“The ARA will continue to advocate for government support for SMBs. Small businesses are the cornerstone of our economy and it’s vital that they remain sustainable.”

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