Everyone loves a stooge. Right now, it’s Australians who shop online.
If you believe the media hype, online shopping will bring the retail industry to its knees.
Of course, the recent survey from Macquarie Equities doesn’t help.
It found one in five Australians does most of their shopping online.
The mainstream media jumped all over this data. Headlines from the Age, and the Australian were almost threatening. The Age tells you ‘big retail groups anxiously await return of shoppers’.
The Australian cried ‘Strong currency lures more shoppers online’!
Headlines like this, paint a gloomy picture of the retail market.
But, the survey also explains 73% of shoppers only buy online because of the high Aussie dollar.
Are online shoppers really to blame?
Online shopping is often portrayed as the bad guy by the media.
Boston Consulting Group (BCG), recently carried out a study of consumer confidence. The Australian reported that BCG ‘…found the sharp decline in Australian’s discretionary spending came about despite the consumers feeling more secure about their jobs.’
James Roth, consumer practice lender at BCG said, ‘Australian consumers have a very cautious outlook’. He says Australians are cautious about spending. Of the 21 countries that took part in the survey, Australians are in the top three who plan to cut back discretionary spending.
He said, ‘Nearly half of all [Australian] respondents feel personally impacted by the economic crisis. That’s less than in the US but similar to European countries’.
So if online shopping isn’t a big threat to retailers, what is?
Katrina Ell, an analyst from Moody’s Economy.com said, ‘Slowing jobs and wage growth, as well as the threat of higher interest rates to come has taken a toll on confidence and discretionary spending.’
Sound Money. Sound Investments editor, Greg Canavan agrees. He writes, ‘retailers are under threat from online purchasing’. But he doesn’t believe this is the only cause of a falling retail market.
In his recent update Greg wrote:
‘…the retail sector is plagued with too much capacity. This is the result of many years of household debt growth, which resulted in huge demand for retail goods. Now that debt growth is not so cool, there are too many shops left chasing a dollar. The result is constant sales and price markdowns, a sure sign of too much capacity.’
It’s not all doom and gloom for the retail sector
According to a report in the Australian, Macquarie Equities says ‘…that more than a third of those surveyed would reduce the sum spent online if the dollar fell by 20%’.
A weakening Aussie dollar will drive some dollars back to local retailers. And Macquarie sees growth in retail this year:
‘Based on household disposable income predictions, Macquarie expects that the traditional bricks-and-motor retail sales will grow by about 5% this year.’
Many other analysts have downgraded forecast earnings for retail stocks too.
This hasn’t helped retail stock prices.
But despite the grim news, Greg surprised his subscribers with his latest stock tip.
Beaten down sector could prove to be a solid investment
Greg believes the market has now priced in lower earnings:
‘The market thinks things will be much worse than what these downgraded analyst forecasts suggest. It could well be right, but the fact that a pretty dire scenario is already in the price is a positive.’
But when many analysts are reluctant to recommend retail stocks, you have to ask yourself, ‘what drove Greg to tip a retailer?’
Greg says, ‘Recommending an out-of-favour stock in an out-of-favour sector is always tough. But one of my investment ‘rules’ is that if you feel good about an investment and think others would approve/endorse your decision, it’s probably the wrong one.’
In other words, you should buy when others are still selling.
And now Greg thinks it’s a perfect time to buy one Aussie retailer.
To find out which Aussie retailer Greg has added to his value investing buy list, click here.
Shae Smith.
Assistant Editor, Money Morning
{ 4 comments }
They say the net is costing retail sales but I’d rather wander into a real shop and buy from a real person. I can check and make sure the merchandise is what I want and in good order, and I have a human being to yell at if things go wrong. (and, for the record, I value this these privileges a hell of a lot more than a 10% discount, in response to the old “Online advantage due to no GST” argument.)
I was surprised when I found out that Angus and Robertson were doing it tough. I’ve bought alot of books in my time, and 99% of the time it was from wandering into a bookshop (often Angus and Robertson), browsing through the books, and buying from what I saw – many times I left with four or five books, while muttering to myself that I’d better stop wandering into book shops! I have bought zero books off the web – no browsing, no impulse buying…
I do fear the net might take over, thus taking away the bricks-and-mortar alternative, and so also removing net’s incentive to treat the customer right.
@ PT
Which online store did you go? I am sure as hell not gonna buy anything from that store considering I can usually find things that are at least 30-40% off from RRP on the net.
No Mav, I haven’t checked out the on-line prices.
I was just referring to a story that was popular around christmas time where retailers were whinging that net-stores had an unfair advantage over brick-stores because they didn’t have to charge GST. (Funny how the articles of that time never mentioned anything about exhorbitant shopping centre rents and all the rest…) Maybe old news is no news and I should have commented about that six months ago.
I haven’t bothered checking book prices on-line – that would require effort. My book purchases are mostly impulse buys – if I haven’t bought it by the time I walk out the store, 85% chance it won’t happen. And why would I want to risk chucking my credit card details on the net in return for, what, a $15.00 purchase (okay, $60 if I buy more than one?
Like I say, hopefully, guys like me will get to keep going to real stores so we can keep the internet honest for people like you!
1. getting out of the house to buy anything requires more effort than going to my computer, turn it on and and go on the internet.
2. online shopping is safer than you make it out to be (theres insurance for that you know)
3. no, people like me keep real stores honest for people like you. if online shopping didnt exist, retailers would be ripping you off by putting a ridiculous mark up on all their goods. online shopping creates competition and force retailers to be competitive.
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