Retail Trends in 2017 – No Easy Wins

by Deputy Team, 4 minutes read
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Some retail analysts believe they have detected a recent improvement in sales trends and have been talking up chances of a good holiday season. Maybe. If current trends continue then sales this year will rise by about 4 per cent. Not great, not awful. But what comes afterward? What can retailers expect in 2017?

The Trump Card:  potential global impact on retail

Apart from an added layer of economic uncertainty arising from the shock result of the US presidential election, retailers will need to gird themselves for many of the same things they experienced in 2016.

The Trump effect is a major wildcard and no one quite knows what to expect. However, any time there is an underlying sense of insecurity or uncertainty, even if the origin is far away in a place like Washington, D.C., consumer confidence is always in peril.

People cut back on their spending on big-ticket items, and they become less inclined to do something that they’ve done recently with a vengeance in Australia – draw down on their savings to support spending on retail. We will get a better sense of the impact of the new US administration as January draws nearer.

Australian consumers are still spending

The personal saving rate in Australia in FY 2016 was almost a full percentage point below what it was in FY15. Even if consumers don’t continue to run down their bank balances in 2017, Australian retailers can still hope to have some economic tailwinds in their sails from continued subdued living cost increases (e.g. petrol prices), low interest rates and modestly rising house prices.

That’s the macro environment, but what about structural forces within the retail industry itself?

A number of industry challenges that have been around for the past couple of years are not going anywhere. Among the major ones:


  • Pricing power is likely to continue being very tough to achieve in soft goods, particularly apparel and accessories. There is still too much apparel in the market and marginal operators will continue to be squeezed as the big players – particularly the international operators – fan out and open new stores in primary and secondary markets. When retailers such as H&M enter the Australian market it signals a problem for local operators. When they open stores in places like Toowoomba and Wollongong, it’s very serious indeed. And that’s exactly what is happening.
  • The grocery sector is also heating up to boiling point. As Aldi expands nationwide and eats into the market share of the Woolworths, Coles and IGA, it’s not only Dick Smith who is getting exercised. (“Aldi is one of the smartest and most ruthless retailers in the world. Their greed is unlimited,” he is reported to have said in early November.) Whether or not you believe Gordon Gecko’s contention that “Greed is good”, the fact is that never again will the Australian market be a cushy place to operate, if it ever was.
  • Amazon setting up shop in Australia will impact food, apparel and everything else in retail. We’ve been hearing rumours for a while, and now there is a strong possibility of Amazon breaking into the market in 2017. Although Amazon will not be able to bulldoze its way into Australia with all of its products and services in a short space of time (and some services may never be introduced here for reasons of a lack of population density and infrastructure), this is not something retailers should be taking lightly.


  • Consumers will increasingly prefer experiences over stuff. Retailers and shopping centre operators alike have just got to find ways of making shopping more engaging and fun.
  • New takes on the ‘in-store’ event, pop-ups and entertainment hubs are among some of the fantastic models out there showing the way forward, but they are not mainstream and talk about improving the shopping centre experience still revolves way too much about more food and beverage.


  • E-commerce will continue to take market share as online operators thrive and omnichannel retailers gradually become more sophisticated. E-commerce sales have grown at roughly three to four times the rate of overall retail sales in 2016. There’s no sign of a slowdown.
  • Retailers really need to develop their omnichannel systems, particularly paying attention to their expensive physical retail space, and making sure it is being used not just for transactions but as a medium for online sales (store-to-site and click-and-collect) as well as online returns.
  • Mobile transactions will grab an increasing share of those online sales in 2017. So retailers really need to ensure their mobile sites are optimised for that channel and not just offer contorted versions of their e-commerce websites. Google’s latest search algorithms seem to favour mobile-optimised websites with higher rankings, which is sensible, as search is meant to be about relevancy and usefulness.

Conclusion: That’s a lot for retailers to grapple with. And it all comes in an environment where rents for prime retail space are not going ease. So look out for 2017 – it will be hard graft for everyone.

Michael Baker is an independent retail and retail property consultant based in Sydney, and a former head of research at the New York-based International Council of Shopping Centers. He can be reached at