Retail slump not the end for IT

Several distributors and retailers remain optimistic about the state of the market

Several distributors and retailers remain optimistic about the state of the market, despite a substantial hit to consumer sales during February.

Australian Bureau of Statistics (ABS) figures showed an overall seasonally adjusted decrease of 2 per cent for February to $18.8 billion. This compares to a 3.8 per cent increase in December, and 0.5 per cent rise January.

However, Australian turnover increased by 0.5 per cent on the same month last year, and IT spending appears to be relatively sheltered. Australian Retailers Association (ARA) spokesperson, Michael Lonie, said the results were better than expected and claimed it actually predicted a weaker result.

“February is usually a down month, and we came off some very good trading months in December and January, which accounts for the dramatic fall,” he said. “We’re coming off the back of eight or nine really good years. It’s part of the natural cycle that there will be a downturn, but people are panicking at the slightest sign of trouble.”

Sydney-based distributor, Anyware Computer Accessories, said it experienced a similar drop in February, but claimed things picked back up in March.

“The quick pick up in March counteracted the drop in sales in February, which was nothing out of the ordinary,” national retail channel manager, Melita

Medina, said. “We’re optimistic about the state of retail at the moment – provided distributors focus on building relationships with the key retailers, there’s plenty of business out there.”

Manaccom managing director, Ian Mackay, was pleased with the figures, which suggested the consumer IT segment was buoyant.

“Our sales are strong, and retailers willing to invest in promotions should do well,” he said. “It is impossible to guess what will happen in the coming months, as the market is entirely dependent on confidence, but the ABS statistics were very positive.”

Harvey Norman computers and communications general manager, Luke Naish, said the retailer was also happy with its IT sales.

“We’ve had growth and continued unit expansion,” he said. “We’ve run some aggressive promotional campaigns, so some of that result can be attributed to an increase in market share.

“We expect things to get tougher at the back end of Q2 and into Q3.”

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JB Hi-Fi CEO, Richard Uechtritz, hadn’t seen a downturn in spending and claimed anecdotal evidence pointed to consumers being willing to spend on home entertainment. The listed retail chain posted a record half-year profit to December 31.

“Sales are still healthy. We’ve traded through the tough times we’ve already had, and unless things go from bad to much worse, we’re finding that if people are given the reason to spend with new gadgets and the like, they will,” he said.

While the overall retail industry was showing mixed results, IT spending was relatively sheltered, managing director of consultancy firm The Retail Doctor, Brian Walker, said.

“People are less willing to spend extravagantly, but spending on accessories and gadgets is still lucrative, given there’s a ‘stay at home’ social trend at the moment,” he said. “Organisations like JB Hi-Fi still appear to be doing really well, there’s strong demand for fashionable items like Apple products, and while those retailers who aren’t in good shape will find it hard, those who are fi t will recover from the crisis.”

However, despite their positive outlook, industry representatives remained unconvinced that cash handouts from the forthcoming government stimulus package will be as helpful as the Christmas package.

“There will still be a positive impact, but the extent of which remains to be seen,” Walker said. “It really depends on whether the positive signs – such as low petrol cost, low interest rates and the like – can outweigh the negative media around the economy and where we are in terms of unemployment.”

Harvey Norman was not expecting a dramatic impact from the stimulus package.

“The timing of the first package was good – Christmas is a time when people are more willing to spend in the first place,” Naish said.

“April is not such a lucrative time, and we feel the temptation will be there with consumers to bank the money and retire some debt.”

While some demographics would be more willing to spend the handouts, the ARA expected the overall effect for retail may well be less than the previous stimulus package, due to a decrease in consumer confidence, Lonie said.

“Young people will be more willing to spend the money,” he said.

“I expect the likes of JB Hi-Fi and The Good Guys – who operate on cash rather than credit card – will see a fair spend out of the package.” Lonie predicted April would be a tough month for retailers, and said more organisations were heavily discounting goods.

“That said, if the unemployment figure doesn’t deteriorate too much further, and stays under 6.5 per cent, we believe there will be an upturn towards the end of the year,” he said.