After October lull and a record Black Friday-Cyber Monday weekend, what's next for retail?

After October lull and a record Black Friday-Cyber Monday weekend, what's next for retail?

Chadstone Shopping Centre. Photo: Geometric Photography, via Unsplash.

Just as the Australian Bureau of Statistics (ABS) announced month-on-month retail turnover declined for the first time in 2022 in October, retailers appear on track to clocking a record Black Friday-Cyber Monday (BFCM) sales weekend.

However, there are concerns this may be at the expense of Christmas sales while higher interest rates weigh on budgets ahead of 2023.

The ABS reported a 0.2 per cent monthly decline in turnover in October, but industry representatives will be hoping that's a blip as sales are propped up by multiple sales events leading up to Christmas including Singles Day on 11 November and the BFCM weekend just past.

With annual inflation having run at 7.3 per cent in the September quarter, retailers would be hoping for a similar percentage rise at least in order to keep real economic growth rates in positive territory amidst higher costs of goods sold (COGS).

Adam McDonald, CEO of logistics consultancy TMX Global's ANZ arm, says November could surpass the Christmas peak this year because of the rise in these sales events, and whilst retail sales are still increasing the trend is "definitely coming off, and is likely to hit a cliff".

"This change in pattern is not just about the discounting that is seen in these events, but it is also about the increasing proportion of shopping that is being done online," McDonald says.

"People are wisely planning ahead for Christmas to take advantage of savings and to ensure time for delivery during this peak season.

McDonald says economic activity and consumer demand have held up in the face of the significant official interest rate rises this year, but that may be about to change.

"According to the major banks, fixed rate mortgages increased as a proportion of the home loan stock during the historic low interest rate period of the last decade,” he said.

“At the peak of activity in July 2020, 46 per cent of mortgages were fixed, with a significant proportion of these loans due to revert to more expensive variable rates between July and December 2023.

“What this means is that households may be about to hit a cost-of-living crunch mid next year, with the coming November sales one of the last opportunities to splash out before austerity hits household budgets.”

The expert notes supply chains could be put under pressure by this uptick in activity in November.

"The stock is in the warehouses. Buffers have been built to counter the broader supply chain disruptions that were felt during COVID,” he says.

“And we have seen our clients put significant time and money into optimising their supply and delivery chains over the past two and a half years, so we are better placed than ever before.

“But global events and widespread flooding are still going to exert pressure on the chain when the sales demand kicks in.”

Sean Crook, co-founder and director of freight forwarder Neolink, says factory orders from his customers were at record levels from August to the beginning of October.

"A lot of these orders were mainly driven by a high expectation for record sales for Black Friday, as well as building stock for Christmas," Crook explains.

"Initial feedback we have received from customers at this stage is that their warehouses have been extremely busy picking orders for black Friday deliveries and ensuring they meet customers' expectations.

"The bigger concerns most of our customers have is whether or not Christmas will be as big as previous years and the black Friday sales will cannibalise potential Christmas sales as consumers becoming a lot more price sensitive with record levels of inflation."

He says Neolink works with factory orders that typically take four weeks to be ready to ship, so most of the orders coming into the company's system now are to ensure goods get shipped prior to the Chinese New Year at the end of January.

"We won't really know how successful Christmas has been until we start to see factory order data come into our system from January and how successful Christmas was as factories look to replenish end of year stock, but at this stage a lot of business owners and C-Level directors we speak to are anticipating a slow start to 2023," he says.

Alex Ewart, co-founder of logistics technology company Explorate, adds that the sharp drop in international shipping rates will also likely change the way retailers manage their inventory.

"Given this, we also expect retailers will return to a more traditional, just-in-time inventory management rationale - rather than overordering for the just-in-case scenarios that were prevalent throughout COVID," Ewart says.

"When compared to previous years and peak seasons of August to December, we're definitely in a far softer market from a demand perspective. Even in the lead up to the Black Friday Sales, a lot of retailers were clearing and marking down excess stock rather than pre ordering in order to fulfill an expected surge in sales," he says.

"Also with everything returning to normal, there is going to be more pressure on businesses from their customers to provide quick and transparent supply chain information."

Azura Fashion Group co-founder Sam Wood says BFCM sales started earlier this year, highlighting sales have already been running for weeks now ahead of what has turned out to be the company's biggest revenue week to date.

"A lot of retailers are dealing with excess stock or oversupply and are looking to shift it all before the end of the year," Wood says.

"I believe we will see even heavier discounts as Christmas Day approaches, and retailers feel the pressure to get goods off their shelves.

"After two years from when the pandemic started and all of the in-store restrictions, this year’s Black Friday felt like a return to normal, not to mention people are more than happy to wait for a bargain with the increase in the cost of living and retailers are already starting to notice by offering a record number of sales to tempt buyers in, with the fear of getting caught holding a lot of inventory in January and February when consumers pull back."

Giovanni Pino, co-founder of product development, manufacturing and supply chain assistance scale-up Sourci, says whilst many customers have seen record Black Friday sales numbers, for some this follows a few months of struggle as e-commerce numbers started to slide.

"They're feeling that pressure as well as the advertising and marketing costs starting to increase, as well as the cost of goods going up as well," he says.

The entrepreneur echoed other experts' comments that a lot of consumers are using Black Friday as a way to pre-buy Christmas gifts at a discount, but also noted there could be less foot traffic in December as more people take the opportunity to travel.

"I wouldn't be very surprised to see that the record breaking Black Friday sales - and I've spoken to a few clients who have said this - will be followed by a bit of a drop off as people are now probably focusing on holidays, and have used that opportunity to spend what money they have on their Christmas gifts in advance," he says.

"I think people are enjoying experiences more than potentially shopping as well.

"For instance Melbourne and most of the east coast hasn't really felt the effects of summer yet - the weather's still quite cold - but I think once we move into that warmer weather as well, again there's going to be less of a focus on shopping in retail and online, and I think people will be out enjoying the weather and the freedoms that we haven't had for the last few years."

He added there was a sentiment of uncertainty in the marketplace that was leading some businesses - especially SMEs - to focus on maintaining healthy cash flow, and that may have the flow-on effect of stagnation in product development.

Jason Daniel, founder of LSKD, says Black Friday has become the biggest event of the year for the activewear and streetwear brand with sales up 3,000 per cent during the sale this year versus the same period in 2019.

"This year we anticipated our biggest sale yet with an expected 55 per cent increase in sales since last year, and on night one alone, we received close to 60,000 orders," he says, noting 176 new staff were hired just for the sale period to help with the packing and processing of orders.

The founders of fashion label Bianca & Bridgett and breast lift solution Booby Tape say Black Friday has been "on steroids".

"We feel consumer spending is back post-lockdowns as our businesses Booby Tape and Bianca and Bridgett were heavily impacted with women staying inside," co-founders Bianca Roccisano and Bridgett Roccisano wrote in a statement.

"So far the Christmas spending is higher than usual years as we feel there are so many functions and consumers are excited to be going out again."

Canadian-headquartered e-commerce platform Shopify has reported a 17 per cent increase globally in Black Friday sales from its users, including more than 100,000 merchants in Australia with the average cart size up 2.9 per cent at $167.99.

Melbourne was the top selling city on Black Friday for the multinational's Australian merchants, followed by Sydney, Perth, Brisbane and Adelaide. The multinational reports Apparel & Accessories as the top product category in Australia for Black Friday, followed by Health & Beauty, Home & Garden, Electronics, and Food & Beverage.

As a sign of a return to in-person shopping, point of sale (POS) - or offline, bricks-and-mortar - sales made by Shopify merchants in Australia have grown 29 per cent year-on-year for the event.

"This year’s Black Friday is back with a bang in Australia, as it grows to be one of the biggest commerce events with average spending having broken records from previous years," says Shaun Broughton, Shopify's managing director for APAC.

"We’ve seen consumers spend during this season to save in the long run, as they make more considered and conscious purchases from independent Aussie brands.

"It’s inspiring to see Shopify merchants buzzing this weekend, as they meet their customers online, in store, or everywhere in between, to make a real connection and build loyalty with shoppers."

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