Retail spending grew in 2020, still some challenges ahead in 2021

Despite the many lockdowns, restrictions and the recession brought on by Covid-19, retail spending actually grew during 2020.

Sectors such as household goods have done really well with many people deciding to update their homes while in lockdown. However, as restrictions ease and borders open, these retailers are likely to face larger headwinds, says Deloitte Access Economics partner and Retail Forecasts principal author, David Rumbens.

“The retail sector tackled the Covid-19 crisis and come out on top,” he explains. Retail spending recovered strongly in the second half of 2020, more than offsetting the slump in June, to end higher in the year to December 2020.

“And this strong recovery was experienced across much of the sector, with nearly all segments of spend posting year-to gains in the December quarter, though it was non-food spending that led the way, home-related consumption also remained elevated.”

Household goods were a success story in 2020 as sales volumes grew 14.9 per cent over the calendar year. With people confined to their homes, they started to make home improvements and other purchases that improved comfort and utility of their own home, according to the report.

Household goods spending moderated in January, with sales up just 0.1 per cent over the month of January. Solid spending in hardware, building and garden supplies (up one per cent) and furniture, floor coverings, houseware and textile goods (up 0.4 per cent) was partially offset by a decline in sales of electrical and electronic goods (down one per cent).

“But as is so often the case with Australian retail, and this is the same for many other national economies too, there are still some challenges ahead,” says Rumbens.

Indeed, JobKeeper ended last month, meaning less money for households to spend. Spending is expected to slow down in the second half of 2021 to end 0.4 per cent lower in the year to December quarter.

“Unfortunately for many retailers in 2021, the economic recovery and re-opening of industries will more likely be a headwind than a boon,” Rumbens adds.

“This means more opportunities for non-retail spending and an increasing shift back towards travel and hospitality over the year.

“A return to ‘normal’ also poses a bigger risk to some retailers who have picked up their share of wallet over the past year. This includes household goods retailing, where the durability and one-off nature of the purchase increases the risk of a sharper pull back in spending.”