Outlook for 2018 offers insight into a complex retail playing field

Retail Outlook 2018

Inside Retail has released its outlook for the year ahead, and it paints a complex picture of a changing landscape in retail where opportunity and challenge are reflected in equal measure.

Their survey indicates that the customer experience is an increasing focus, more retailers are concerned about international competition and addressing consumer confidence remains a challenge as major retail stores grapple with a shifting playing field.

Here’s an insight into retail sentiment and where the priorities lie in the year ahead.


The retail landscape

As the Inside Retail Outlook 2018 notes, last year was a mixed bag for retailers. The threat of Amazon’s imminent arrival loomed large, while some big players in the retail realm succumbed to a new consumer landscape. Among them were David Lawrence, Howard’s Storage World, Oroton, SurfStitch, Diana Ferrari and Maggie T.

At the other end of the spectrum retailers like Supercheap Auto were embracing change, unveiling new offerings like the flagship Penrith store where the customer experience and omnichannel commerce was at the heart of the ethos.

At the end of the year, the majority (44.1%) of the 266 retailers and 90 industry members surveyed described the previous 12 months as “ordinary”.

A further 37% said the year had been good, 12% noted it was poor, 4% remarked it was the worst they had experienced, and 2.5% were at the opposite extreme, describing 2018 as the best they had experienced.

“Respondents paint a telling picture of deteriorating retail conditions,” Inside Retail notes. “The proportion of retailers who classified trading conditions as ordinary increased to 44 per cent in 2017 from 25.5 per cent in 2016. However, the proportion of traders either characterising conditions as the best or worst that they have experienced decreased, illustrating a move on the middle when it comes to sentiment.”

Comparing conditions in 2017 to 2016, most (30.2%) said 2017 was roughly the same, while a further 31.1% noted a slight improvement, 22.3% said it was slightly worse, 10.9% saw a significant improvement and 3.91% said things were significantly worse.



There’s little doubt a shifting retail landscape with increasing online and international competition presents an altered retail environment, and for most retailers their greatest anticipated challenges in 2018 are discounting (17.5%) and consumer confidence (16.5%).

Inside Retail goes on to explain there is a current “sales” culture where the annual retail calendar is laden with events like Black Friday, mid-year sales, Boxing Day sales and more, creating an unsustainable environment of discounting.

In the meantime, the household budget is increasingly stretched due to low wage growth.

Further major challenges highlighted by survey respondents include:

  • International entrants to the retail market – 13.9%
  • Offshore online retailers – 13%
  • Rental overheads – 12.6%
  • Labour costs – 10.1%
  • Global economic factors – 5.5%
  • The value of the Australian dollar – 3.4%
  • Private labels – 3%
  • Government regulation – 1.9%

Future priorities

A quarter of the way through 2018, retailers have their focus firmly on e-commerce and omnichannel offerings, with these factors emerging as the major priorities for the year. Over 60% of respondents highlighted these were both strategically imperative to them in 2018, but on an interesting note new markets came in close behind, with 50% indicating they would focus on this over the months ahead.

Just under 80% of retailers plan on investing more on digital and online innovation in 2018.

Meanwhile, Inside Retail continues: “If last year was about rethinking how retailers can modernise their business models to take advantage of consumer demand for digital, then this will be the year it is implemented. A definitive 99 per cent of our survey respondents said their businesses will at least maintain their investment in online this year, while more than two-thirds said they plan to increase their investment.

“Leading the push are the largest players in the market, from Woolworths’ new on-demand delivery and in-store pickup services to Super Retail Group’s $100 million-plus digital investment and Myer’s new online marketplace offer.”

And ultimately embracing digital will enable retailers to offer a better customer experience, which was a major topic of discussion in the report.


The customer experience

At the heart of any retail offering in the digital age is the customer experience, and in an era where traditional retail is challenged, it’s proving more important than ever before.

Over three quarters of retailers believe customer expectations will increase in 2018, and it will encompass price, customer service, online delivery and speed, instore digital offerings, and product quality and variety.

The majority of retailers believe they can satisfy most of these elements.


Millennial momentum

Key to the customer experience will be factoring in Millennials, with this generation moving firmly into the prime spending position. Digitally savvy, ethically minded and keen for a unique offering that meets their needs, they interact with brands in a totally different way to previous generations.

“With fresh ideals and aspirations, having personal experiences are more important to them than owning things,” Inside Retail notes.

Meanwhile they readily utilise technology including mobile phones, social media and online research to source, compare and rate brands, products and interactions.

“With access to product information, reviews and price comparisons at their fingertips, millennial customers are turning to brands that can offer them maximum convenience at the lowest cost.”


Data and analytics driving the future

Behind the customer experience, millennial momentum and meeting consumer expectations is the push to capture and harness consumer data. And this is also a key retail factor for 2018.

Inside Retail explains: “The use of data to drive personalised retail experiences, investment in non-transactional brand engagement and improvement in digital integration more generally have emerged as key factors ahead among survey respondents.”

This data is allowing retailers to better understand consumer habits and then tailor the experience to suit. It empowers them to hone every element of the transaction process, from advertising and marketing to discounting, product lines, interactive displays and consumer follow-up.


The final word

The Retail Outlook 2018 presents a big picture of Australian retail at a crossroads, where they have the opportunity to jump in and embrace a new generation, new technology, and new payment options at a time when clientele have greater demands than ever before.

Or in the words of report contributor James Stewart: “…we believe Australia’s future successful retailers will be customer centric, innovative and invest in their long-term future through offering digital and physical experiences.”