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Australian retailers lifted their market share game and helped leverage consumer confidence by boosting their marketing spend by over 35 per cent, including investment in digital marketing, over the last financial year.
The BDO’s 2015 Spend Trend report showed Australian retail sales lifted again in FY15, despite some high-profile losses, as the sector gets ready to leverage ideal consumer conditions in 2016 by increasing marketing investment.
Analysing key 2014-15 financial ratios and indicators for 18 ASX-listed retailers, including Wesfarmers (WES) and Woolworths (WLW) and 13 US and UK-based retailers, the report showed Australian specialty retailers increased sales revenue by 5.3 per cent, or approximately $1 billion, from 2014-15. This contrasted with a 9.4 per cent increase across the international retailers.
BDO partner and retail specialist, John Bresolin, claimed this year’s report revealed positive signs for Australian retailers and shareholders, as last week’s hold in interest rates and the lower Australian dollar combine to make shopping locally more attractive to consumers.
He said a social media surge among Australian retailers has coincided with some encouraging growth in online sales, with many recording significant double-digit growth in relative terms.
“Many retailers now employ dedicated social media staff or have appointed a digital marketing department to coordinate these efforts, with tools like Facebook, Instagram and YouTube being used heavily in key sales periods such as the lead-up to Christmas,” he said.
LUSH Cosmetics brand communications manager, Natasha Ritz, said the beauty brand uses social media to drive engagement, provide fantastic customer care, discuss topical issues, drive brand loyalty and build trust.
“We are moving towards a more omni-channel approach by connecting messaging digitally and in stores, and we are always looking at opportunities to use technology to better serve our customers in whichever way they’d like to engage with us as a brand,” Ritz said. “Social media allows LUSH to tell our story, share content and encourage conversation, not just about our brand or products but topical issues and deeper messages, to help build trust and relationships with our customers.”
Despite crucial business KPIs such as sales revenue, net profit margin, gross margin and gearing improving or remaining stable for Australian retailers, the larger international retailers are still outperforming Australian companies in key areas of revenue growth and net profit margin.
While Australian specialty retailers recorded an 18.7 per cent increase in average net profit margins to 4.3 per cent, boosted largely by Billabong’s write-downs in 2014-15, the international retailers still maintained a higher average rate of 5.3 per cent.
Stock is also moving more slowly for Australian retailers, and the report noted a slowdown of 4.8 per cent to 55.5 days for the speciality retail group sector, and a 4.3 per cent drop to 31.9 days for the broader group. Bucking this trend slightly were the international retailers, increasing 0.4 per cent to 45 days in FY15.
“Australian retailers still have a long way to go if they are to match their international counterparts, whose online sales represent well in excess of 10 per cent of their total revenue,” Bresolin added.