Three predictions Australian retailers can’t afford to ignore

Inflation, labour shortages, pandemic recovery, supply chain issues and rising costs of living are just some of the issues facing retailers in the current climate. At the same time, there’s the need to meet ever-changing customer needs and demands. These challenges present opportunities for retailers that are willing to act.

To uncover how businesses are feeling and what they can expect in the months ahead, we partnered with YouGov to develop Square Australia’s first Future of Retail report, with insights based on a survey of over 500 retailers and 1,000 customers.

Here’s what we found.

Omnichannel is increasingly critical for retail

COVID-19 forced retail businesses to reassess how they sell to customers. With stores closed, many retailers have increased investment in digital channels.  

The need for this was clear, as retailers told us that more than half (52%) of annual sales revenue comes from online sales. Scaling the online shopping experience is now a key part of business operations for 43% of retailers.

Those who made the shift reaped the rewards, considering 34% of Aussies increased their monthly online retail spending during the post-peak pandemic period. But as people also return to brick-and-mortar stores, it’s also important to provide a seamless shopping experience across all channels.

Australian Retailers Association CEO Paul Zahra says those not set up as omnichannel retailers will struggle to compete.

“The pandemic highlighted just how important it is for businesses to have an online presence and that they’re able to cater for customers whichever way they want to interact with their business – through a mobile phone, computer or in-store.”

Retailers must start by finding the best ways to earn customers’ loyalty and doubling down on what’s most important to them.

Staff shortages will lead to rapid tech acceleration

Finding workers remained a challenge for retailers in 2022, with more than 41,000 retail job vacancies at the time of our report. A third (31%) of retailers believe attracting and retaining staff will remain a top challenge for at least the next six months. The survey found 82% currently outsource roles, while 34% increased wages in response to the competitive labour market and inflationary economy.

39% also said average working hours have increased year on year, while 16% reported a significant increase. Key decision makers in retail now work 30.8 hours per week on average.

In response, 84% of retailers are using or plan to use technology or automation to speed up time-consuming tasks. Retailers told us they are looking to decrease staff members’ hands-on time across areas such as stock management (28%), order tracking/shipping/returns (27%) and marketing (25%).

Tom’s Project NSW Director Youngmin Jo says transitioning from paper records to an in-store POS system saves it time “when processing sales in-store, managing inventory and reporting”.

As staff shortages continue, retailers need to take advantage of technology to allow workers to focus on the most valuable tasks, such as customer service.

Conscious shoppers will grow in influence

Rising costs of living have changed the spending habits of 68% of Aussie consumers. The good news for retailers is 87% believe it’s more important than ever to shop local and support Australian businesses.

To stand out in a competitive market, retailers must keep in mind that shoppers are increasingly concerned about where they spend their money. Our research found 88% care about business values.

Ethical issues are now front of mind for consumers. Transparency about where products are made and   maintaining sustainability are important considerations for more than half (53%), while a similar number (59%) value local produce.  

Gen Z is driving this change and has a strong desire to shop with companies they believe share their ethics and values. The Afterpay Retail Trends Report 2022 found 57% of Gen Z buy sustainable products where possible and 42% are loyal to brands with transparent, ethical advertising.

This audience’s influence and spending power is only set to increase, so retailers should look closely at their brand values, then use customer insights and smart marketing tactics to engage them.

Second Life Markets Co-Founder Stella Brackenridge says climate change and other global issues are influencing attitudes to shopping: “Billions of items of clothing are produced every year, but consumers decide what that number will be with their purchasing power.”

Our report suggests change is already underway, with 40% of retailers planning to evolve their brand to appeal to customers’ values and 35% indicating they will stock Australian-made or sustainable products.

Setting up for future success