The State of Australian Retail
Cautious spending continues to be a driving force, prompting a shift in consumer shopping pattern. Australians are now opting for smaller, more targeted shopping trips, replacing the traditional pattern of large, less frequent hauls.
The decline in buying households, both year-on-year and compared to two years ago, adds another layer of complexity. This could indicate budget constraints or a shift towards alternative shopping channels. Overall, the data reveals a resilient consumer base adapting to a changing economic landscape. Retailers must remain agile, catering to value-conscious shoppers and those seeking convenience through more frequent trips.
Average price per volume increase vs YA
Average price per volume increase vs 2YA
Data reveals that Australian shoppers are increasingly spreading their spending across multiple retailers. The percentage of households shopping at four different retailers in the latest quarter has risen compared to last year and two years ago. This trend suggests that consumers actively seek out the best deals and product variety, highlighting a continued focus on value and choice.
The online channel is particularly appealing to younger generations and families seeking convenience. While convenience is the primary motivator (75%), easily seeing promotions and utilising Click and Collect options resonates with budget-conscious shoppers. Families, regardless of life stage, exhibit a higher inclination towards online grocery shopping, further emphasising the importance of convenience and value in this segment.
75% of respondents chose Convenience
49% selected the ease of seeing promotions on items they usually buy
45% indicated 24/7 access as a motivator
45% also liked the ability to Click and Collect without delivery charges
51% of respondents indicated extra charges as a barrier
51% also mentioned enjoying the in-store experience
49% stated that the inability to examine products in person prevents them from shopping online
44% expressed concerns on product quality (expiry dates, freshness)
In the latest 52 weeks,
Australian households are cross-shopping in both Online and Bricks & Mortar, down -1.4pts vs YA
Avg $ spend per trip in Online ($112) vs Bricks & Mortar ($49)
Reallocation of Bricks & Mortar spend to Online channel
Private label products are steadily gaining popularity in Australia, partly due to Aldi's growing presence. While the current market share of 24% matches the global average, there's still a lot of room for growth, especially when compared to countries like the UK. This indicates opportunities for retailers to expand their private-label offerings and for consumers to access more affordable options. Although reaching the levels seen in other developed markets will take time, the positive trend suggests private label products will continue to play a crucial role in the Australian grocery landscape.
Australian Private Label value growth in 2024 (vs +5.8% growth for Branded products)
Only 4% of Young Transitionals and Start up Families do not purchase PL (9% total population)
Half of these two groups buy more cheaper store brands than before (38% total population)
While Private Label products are particularly attracted to budget-conscious shoppers like Strugglers, their appeal extends beyond this group. Cautious and Unchanged consumers also show an increasing openness to trying store brands. The younger generation, despite facing financial pressures like high housing costs, demonstrate fewer barriers to purchasing Private Label and are actively incorporating it into their shopping habits. High-income households also hold a favourable view of Private Label quality, surpassing the overall population's perception.
High Income buyers are driving positive PL perception (54% agree PL quality is comparable to most brands vs 51% total population)
54% of Strugglers buy more cheaper store brands than before (38% total population)
While Cautious and Unchanged over-index in trying out different store brands
An analysis of net consumer spending intentions reveals a growing focus on essentials, with discretionary spending under increasing scrutiny. Sectors such as holidays, socialising, and out-of-home activities are particularly vulnerable to cutbacks. Conversely, consumers anticipate increased expenditure on essential categories like utilities, housing, groceries, and transportation. This trend offers a degree of protection to the FMCG industry, a positive sign for many businesses in this sector.
Delving deeper into FMCG spending intentions, specific categories emerge as winners and losers. Health & Wellness, along with fresh produce, are expected to see increased spending, highlighting a continued prioritisation of health and well-being. In contrast, categories such as alcohol, snacks, and candy face potential cutbacks as consumers tighten their belts.
These insights highlight the evolving consumer landscape and the need for businesses to adapt. While the FMCG sector enjoys a degree of resilience, understanding and catering to shifting consumer priorities will be crucial for sustained success.
