The tumbling Australian dollar is likely to put even more pressure on local retailers already facing another year of challenges, according to a new report.
The local edition of Deloitte’s 2019 Global Powers of Retailing report, released on Monday, said declining property prices hit consumers’ willingness to spend in the second half of last year, meaning retailers in Australia have little room to manoeuvre if import costs keep rising on the falling dollar.
“Retailers’ heavy reliance on imports has many watching the value of the Australian dollar closely,” said David White, Deloitte’s retail, wholesale and distribution leader for Australia.
“Any major decline in the currency could result in significant cost pressures at a time when there is little room to increase consumer prices.”
The Aussie dollar, already down about 2.5 per cent this month against the US dollar, dropped another third of a US cent on Friday after the RBA cut both inflation and GDP forecasts.
The local unit is down about 13 per cent against the greenback since January last year.
And consumer spending in the year ahead will be contingent on wage growth and, as consumer wealth declines, “the willingness to forgo savings for spendings declines”, Mr White warned.
Sluggish wage growth has been a longstanding issue in consumer spending growth, with the RBA on Friday trimming its GDP and inflation forecasts for the year to June and the following 12 months.
The Deloitte report said the world’s top 250 retailers raked in a total $US4.53 trillion ($6.38 trillion) in revenue last year, up 5.7 per cent on 2017.
Thirty-nine of those retailers operate in Australia and, on the plus side, 2019 should also create opportunities for some to flourish.
The untapped potential of Chinese ‘non-store’ marketplaces presents one such opportunity, the report found, thanks to a growing Chinese middle class and a high-demand for Australian products.
Similarly, a focus on reinventing relationships with consumers to add value and operating in a more sustainable manner offer chances for retailers to make themselves more competitive.
While the list of the top 10 global retailers continues to be dominated by US companies, Wesfarmers and Woolworths were both in the top 25.
Meanwhile, JB Hi-Fi shot up from No.218 to No.182 after adding more than $1 billion in revenue thanks to a full-year contribution from the acquisition of whitegoods retailer The Good Guys.