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Are retailers' efforts destined to doom?

Survey reveals Australian consumers want value not just low prices.

While Australian retailers continue to respond to falling revenues by slashing prices and pointing the finger at online and overseas competition – Sydney based consulting firm, brainmates, has new research to suggest these actions won’t achieve the revival hoped for. The survey, conducted as part of the research, showed only 36% buy products on sale - a staggering statistic that raises serious doubts about the appropriateness of the widespread discounting strategy retailers across the nation have adopted. This coincides with recent warnings about the impact of deep discounting on profit margins - expected to be reflected in next quarter sales figures[1].

Sponsored by Nine Rewards, the brainmates research surveyed 1073 of the Nine Rewards 1.4 million permission-based members across Australia, including men (47.7%) and women (52.3%), aged 18-64 and living in main cities across Australia (83%). Salaries ranged from under 30K (13%) to over 100K (36%); the majority (56%) earned 50-100K.

Given the abundance of reports claiming various factors for the declining revenues that our traditional retailers are experiencing, brainmates sought to extensively test these theories and get to the core of what Australian consumers need and value in a retail experience. As director Adrienne Tan says, “Only once we understand the consumer needs, will we be able to respond with solutions that are guaranteed to succeed. There is no point discounting or creating online stores if this is only a small part of the problem. We need to have the complete picture and we can only get that from talking to our customers and understanding their needs.”

The result is a research report, ‘A Fresh Perspective on Australian Retail’, delivering a number of interesting insights to answer the burning question of the moment –what do retailers need to do to get consumers spending in their stores.

Besides highlighting a less than positive response to sales and group buying, the report also suggests that e-commerce is not the culprit it is made out to be. Only 14% of respondents claimed to ‘mostly shop online’ – suggesting the majority are still making the bulk of their purchases in traditional stores. Additionally, though ABS figures suggest online retail is growing faster than traditional retail, online still only accounts for 4.9% of total retail sales in Australia[2].

With weak consumer confidence and increased savings being quoted as a reason for the retail industry decline, the survey also asked respondents about their general concerns and feelings about the economy, their salaries, and a number of other topical factors. The report details these findings and concludes that despite the prevalence of the ‘cautious consumer sentiment’ (born from the 2008 recession), consumers are still spending and expect to continue to do so. Today’s ‘cautious consumer’ has been misunderstood and inaccurately defined; they have not stopped spending, they have simply changed their spending habits and attitudes – preferring to take a more considered approach to making purchases. The results below provide a more accurate picture of the ‘cautious consumer’.

The Australian cautious consumer decoded: (“how has your spending changed over the last 12 months”)

Researches the best price before buying (61%)

Plans what they want to buy (46%)

Doesn’t buy as much as used to when at the shops (46%)

IBISWorld General Manager (Australia), Ms Karen Dobie agrees quoted as saying "In 2011, Australian shoppers have been savvy, seeking out the best value for money, the best range and the best service. This trend is anticipated to continue through Christmas.[3]"

The key insight is that Australian consumers want value for money. 85% of survey respondents voted price as the main factor they consider when shopping, and 83% said quality was most important. Brianna Ragel from brainmates offers, “This explains the cautious consumer behaviour we’re seeing, with customers taking their time to investigate prices and features of the product before purchasing. However, they are very willing to spend if the product meets their requirements – and most importantly if the retail experience meets their expectations. With more places to buy – online, in stores, through group buying sites- the importance of a good retail experience is key.”

Testament to this is the fact that some smaller Australian retailers are growing despite the turbulence. Take for example Kogan, the Australian electrical retailer. Since being named 15th fastest growing company in Australia (according to the 2010 BRW Fast 100 ranking) they have continued to grow through 2011, while the electrical goods sector has experienced a decline in revenues. Kogan’s success can be attributed to their ability to pinpoint the elements in the retail experience that their customers value – in their case innovation, bargains, and great quality[4].

In terms of the current strategy of deep discounting that retailers are pursuing to get shoppers back in stores, well, any definitive conclusion about this can only be made once the new sales figures are in. These new ABS figures are expected on 9 January. Revenue expectations have already been revised downwards to a 2.4 percent annual increase, as reported by the Australian National Retailers Association. Margy Osmond, chief executive of the Association, which represents large retailers including Woolworths and Coles, told Reuters, "What we keep hearing from our members is that transactions might be up, but the discounting is so deep that it is not a great story for the retailers[5]."

For editorial enquiries and a copy of the Report please contact brainmates.

About brainmates

brainmates leads companies to strategise, design and deploy customer-centric products and services. We offer professional services and training and have helped leading clients enhance their products and services. Our clients include industry leaders in media, communications, financial services, medical devices, software and hardware manufacturers.

About Nine Rewards

Nine Rewards, part of the Nine Entertainment Co., manages online panels in Australia and New Zealand to promote products, acquire customers and gather insights. With over 1.4 million members in Australia, Nine Rewards has an active online community with a unique recruitment source mainly across the NEC such as Ticketek, Magshop and ninemsn.

The Nine Rewards client focused team understand and have extensive experience with online databases, survey design, fieldwork and research best practice principles. With quality data and expertise, Nine Rewards is dedicated to providing excellent service and delivery on all surveys. Nine Rewards provides full-service online fieldwork services utilising quality survey tools;

• Online sample - Nine Rewards

• Online survey scripting and hosting

• Data output and coding

• Analysis and reporting

The Nine Rewards Omnibus runs every month achieving a nationally representative sample by age, gender and location of Australians aged 18-64 years old. Jump on to the omnibus with your question/s and receive your data in 10 days.

+61 2 9266 4214


[1] ‘Aussie retailers say post-Xmas sales up slightly, still patchy’. By Victoria Thieberger, Jan 2nd 2012. http://www.reuters.com/article/2012/01/03/australia-retailers-idUSL3E8C20SE20120103

[2] As above

[3] IBIS Report, Nov 2011: http://www.ibisworld.com.au/about/media/pressrelease/release.aspx?id=274

[4] Kogan claims success for “buy before we make” retail plan


[5] ‘Aussie retailers say post-Xmas sales up slightly, still patchy’. By Victoria Thieberger, Jan 2nd 2012. http://www.reuters.com/article/2012/01/03/australia-retailers-idUSL3E8C20SE20120103