KPMG’s flagship Retail Health Index (RHI) is projected to remain negative for the near term with a protracted recovery period extending into 2025. We expect retailers to batten down the hatches and stay focused on margin and inventory management while consumer spending remains constrained.

What do we see in the retail sector?

After years of robust consumer spending, largely driven by record levels of fiscal and monetary stimulus, there is now a rapid decline in consumer confidence and a shift in spending patterns. This suggests a less optimistic immediate outlook for the retail sector compared to its performance in recent years. The KPMG Retail Health Index suggests that a recovery in retail spending may not occur until well into 2025. As a result, we believe retailers should focus on margin and inventory management while they ride out the storm.

Traditionally, slowdowns have led businesses to exercise greater restraint in capex spending and slow down investment in technology and transformation to conserve cash and protect balance sheets. However, whilst not the most suitable way forward for all, businesses with sound balance sheet fundamentals should view this impending slowdown as an opportunity to enact change and invest in readiness for the next upswing.

The discretionary retail sector appears particularly vulnerable, with up to 55 percent of people believing now is a bad time to buy major household goods, according to the ANZ-Roy Morgan Consumer Confidence survey. Even food retailing has seen a pull back in the volume of consumption activity, with households buying fewer items and lower cost brands as belts tighten in response to higher interest rates.

Where will retail leaders focus?

Legal scales icon

Core vs non-core will be squarely in focus

This means investments which are cash consuming but unlikely to produce their projected benefits in the near term will likely be slowed down or shelved.

Legal scales icon

Inventory and margin management will have no room for error

Consumer austerity will drive a hunt for value, and we are likely to see a shift back to just in time inventory management as retailers seek to optimise working capital.

Legal scales icon

Online channel in market and customer experience are vital to success

Online will remain an important channel to market and customer experience will define those retailers who are more trusted than others when the times are tough for consumers.

Linked people

Labour costs and capacity remains a challenge

As retail volumes slow, gross margin dollars will inevitably be impacted with further growth in retail prices likely to become more difficult.

Handing out money icon

Cost of Doing Business remains the ongoing subject of transformation discussions in retail board rooms across the country. 

Our best retailers are laser focused on creating operational efficiency across the front, middle and back office, driving productivity. Retailers with the strongest balance sheets will keep their foot to the floor to drive a long-term competitive advantage.


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, then please contact us.

Contact us

Related services and industries