The March 2024 KPMG Retail Health Index (RHI) shows a lift between the September and December quarters 2023 by 0.17 index points, an improvement over the previous quarter, but one that still suggests the overall health of the retail sector remains poor and one that suggests a balanced outcome by the end of 2024 may be at risk.
Key takeaways
We may not see retail market conditions recover to a healthy level until mid 2025.
While November 2023 produced good sales volumes, discretionary spending in December remained relatively weak as consumers adopted a spend and save approach to the traditional festive season.
Immigration remains a tailwind for household goods, however underlying consumer confidence remains very low and almost half of consumers believe this is a bad time to purchase major household items.
Household savings rates have now dropped well below their long-term average as consumer spending is redirected towards needs as opposed to wants in response to the drop off in disposable income and surge in the cost-of-living.
Despite strong H1FY24 results from some listed retailers, sector profitability remains well below its long-term average, as discretionary spend remains down and operating costs remain elevated for some retailers.
What are the mega trends for the retail sector?
KPMG’s team identified several mega trends facing the sector including:
Adoption of AI
The adoption of AI across the retail value chain, with approximately 70% of retail leaders indicating AI will be a game changer for retail models impacting supply chain, product development, demand planning and of course, the customer experience.
In-store technology
Acceleration of the investment in in-store technology to create a frictionless retail experience for consumers, including just walk out technology and biometric payment solutions such as Amazon Palm Pay, and leveraging technology to combat a global retail crime epidemic.
Sustainable retail
Continued investment in sustainable retail including the development of circular retail models (eg apparel brands launching peer to peer marketplaces to facilitate the resale of branded product in the second-hand market).
Read more about the future health of the Retail sector in the Retail Health Index for March 2024.
Download: Retail Health Index – March 2024
Quarterly insights on the future health of australia’s retail sector.
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Why KPMG
The KPMG Retail Health Index is based on a calculation that seeks to incorporate the revenue and cost drivers of a retail and consumer-focused business operating in the Australian economy, with an element of future expectations through incorporating a measure of consumer confidence.
If KPMG can help your business in any way navigate the current business environment and plan for any future developments that are facing the industry, please contact us.
