It's a hard-sell for retailers struggling with slowdown

Major retail chains are feeling the pinch and are warning of tough times ahead. Photo / Thinkstock

This week Maria Raffaele did some major retail therapy in Canberra, shaking off the winter blues with a weekend in the city's struggling shopping malls.

She came home laden with dresses, jackets, a coat, shawl, kaftan and shoes that on their price tags carried a total bill of more than $1000. Raffaele paid just $235.94 for the lot, cashing in on rampant discounting and sales that mark the desperation of the nation's retail sector.

The pain is being felt. Major chains such as David Jones, Myers and Harvey Norman are warning of hard times ahead, hammered home this week by the hewing of their share values in the wake of grim retail figures and increasing fears of another global financial meltdown.

Further afflicted by a growing swing to internet shopping, they are already looking at innovations such as 24-hour credit card shopping and in-store health services such as eye-testing and breast screening and weight loss clinics.

Others are pruning operations hard. Premier Investments intends axing 50 of its Just Jeans, Portmans, Peter Alexander, Jay Hays and Dotti outlets, joining closures by booksellers Angus & Robertson and Borders.

This week the Bureau of Statistics added to the sector's gloom with new figures showing the worst retail growth in 50 years, increasing by only 2.6 per cent in the 2010-11 year and recording small falls in May and June.

Among the worst-hit were take-away foods, book retailers and newsagents, clothing stores, and pharmaceutical, recreational and electrical good outlets.

The Government blames plunging consumer confidence and the stores themselves.

The Productivity Commission, which this week reported on the impact of internet sales on the sector, said retailing's share of consumer spending had fallen from more than 35 per cent 30 years ago to less than 30 per cent now.

More consumers were increasing spending on areas such as entertainment and travel, and in financial, real estate and other investments.

The sector itself has placed a large share of the blame on the rise of the internet and the strength of the Australian dollar, drawing money away from the nation's shopping malls to cheaper suppliers abroad.

The Commonwealth Bank estimates that almost half of the A$9.2 billion spent online by Australians online last year was sent overseas, although the internet still attracts only 3.8 per cent of retail spending.

But retailers fear a far greater impact in the future. A report by PricewaterhouseCoopers predicts that online spending will increase at twice the rate of overall retail sector growth in the next four years, with 44 per cent of the expected A$21.7 billion to be spent in 2015 directed abroad.

The National Retail Association warns that this could cost 88,000 jobs.

Retailers have demanded a levelling of the playing field by lowering the minimum $1000 threshhold for the imposition of the 10 per cent GST on goods bought online.

In its draft report released this week the Productivity Commission accepts that the threshhold should be lowered, but not yet: collecting the extra A$500 million in revenue by reducing it to a recommended A$20 would cost A$1.6 billion.

The commission said the growth of online shopping in Australia was slower than in other countries, the total value of foreign online shopping remained small, and 4 per cent of the 6 per cent online sales contributed to retailing's total was spend with Australian outlets.

The commission also said the sector would achieve more through reforms in state and local government planning and zoning regulations, and on retail trading hours to allow them to be tailored to changing social patterns.

"The current exemption from GST and duty for imports valued below $1000 is judged by the commission to be only a minor contributing factor to online offshore purchases by consumers," it said.

Assistant Treasurer Bill Shorten told ABC TV that the commission's report was a wake-up call that showed retailers needed to accept online shopping was here to stay and to look at high prices and embrace new technologies.

"The large retailers in particular have been put on notice by this draft report that some of the prices they're setting are very high and the profits they're seeking are very high," he said. "The large retailers shouldn't be surprised if consumers are voting with their feet to use the internet as the capacity to see what price competition is out there."