The latest KPMG Retail Health Index (RHI) suggests that while there are signs of potential recovery and momentum, the overall outlook for the retail sector remains cautious. With continued challenges and slow growth in discretionary spending, ‘healthy’ retail conditions are not likely until mid-2025. The trading period in November and December will be crucial for determining sustainable recovery.
Key challenges for the retail sector
Consumers are cautious, reducing both discretionary and non-discretionary spending despite government policy changes aimed at increasing disposable income.
42% of Australian consumers are omnichannel, but prefer online, while 38% prefer a physical store. Australian consumers exhibit adaptability and remain channel agnostic, presenting a significant challenge for retailers.
Households are barely saving, with the savings ratio just above zero, and discretionary spending seeing no growth. The slight increase in services spending compared to goods and the minimal growth in overall household spending, highlight weak consumption despite higher non-discretionary spending.
What factors are affecting the retail market?
Retail employment shifts
While the number of job vacancies in the retail sector lifted slightly during the September quarter 2024, the job vacancy rate fell slightly given the proportionally higher growth in employment within the sector.
Cost of living challenges
The volume of food sales, the largest retail category, has declined for the third consecutive quarter, now 1.5% lower than December quarter 2023, driven by brand switching and reduced food budgets amidst ongoing cost-of-living challenges.
Sustainability in retail
There is a significant gap between retailers’ sustainability goals and their actions. With new sustainability reporting obligations starting on 1 January 2025, sector leaders must take necessary steps to meet these requirements.
Read more about the future health of the Retail sector in the Retail Health Index for December 2024.
Download: Retail Health Index – December 2024
Quarterly insights on the future health of Australia’s retail sector.
Download report (PDF 1MB)Previous editions
Why KPMG
The KPMG Retail Health Index (RHI) 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, then please contact us.
