In the latest instalment of our Worldview series gleaning insight from global markets, we hear how Covid-19 has had a significant impact on Australian retail but it might not be as negative as first anticipated 12 months ago

In early 2020, the Australian consumer psyche was shaken. Lines formed outside of Centrelink for social support payments, there were countless news reports of job losses, stories of people not being able to pay their rent and panic shopping left supermarket shelves bare.

While the past 12 months have no doubt been tough, there have also been sprouts of growth in the retail sector.

Burwood Brickworks, Melbourne

Source: Frasers Property

Burwood Brickworks mall in Melbourne produces more energy than it needs through renewable resources

Since the global pandemic struck, Australians have endured periodic lockdowns but for the most part consumers and retailers have soldiered through the crisis. The pandemic and resulting restrictions have forced retailers to pivot how they operate and altered Australian consumer shopping behaviour.

However, the jury is out on whether these shifting consumer behaviours – such as how they shop and spend money – will be long-lasting changes or temporary reactions to the pandemic.

One significant behavioural shift that is most likely a permanent change is the shift toward online shopping. Even in the lead up to the Covid-19 pandemic, online retail in Australia was experiencing growth.

Lockdowns and anxiety about the pandemic drove Australian consumers to embrace online shopping like never before. According to National Australia Bank, Australians spent AU$44.2bn shopping online in 2020 – a 40% increase on 2019 that meant ecommerce represented 13% of total retail trade.

Retailers have responded to online shopping shifts in a number of ways. For many small businesses, such as bakeries and butchers, there was a pivot towards home delivery, curated occasion-based meal boxes and even partnerships with other businesses to create new offerings.

Several new business start-ups have emerged. One such company, Tarts Anon, has fully embraced Instagram as a sales channel, rather than the outlay required for a brick-and-mortar store. The micro-patisserie was launched last September by former Dinner by Heston head pastry chef Gareth Whitton and his partner Catherine Way. Demand has been so strong that the side-hustle has had to institute a Newbies Night during the first week of each month.

Another successful start-up is Providoor, an online marketplace designed to deliver food from Melbourne’s best restaurants to consumers’ homes. All meals are chef-prepared, restaurant-quality and finished at home.

These businesses highlight the opportunities that existed to find new ways of doing retail during the pandemic.

Home victory

Many more traditional Australian retailers have also flourished during Covid. The prolonged period of working from home has renewed focus on consumer wellbeing with many consumers spending on home décor and DIY.

Many sectors have been propped up by the Australian government’s Job Keeper wage subsidy, which has had significant positive effects on electronics and home equipment sales. Sales at electronics retailer JB Hi-Fi almost trebled during the second half of 2020 having been given the help it needed to emerge through the worst of the crisis.

Australian online homeware retailers such as Temple & Webster have enjoyed tremendous growth in the past year. What is unknown is whether the sales growth in such businesses will face a bubble when consumers return to post-pandemic life.

“It is possible many small businesses have been artificially propped up by Job Keeper payments and when they end, we might see an increase in business closures”

Once the dust settles from the public health crisis, consumers will likely return in significant numbers to physical retail and shopping malls in particular. Many property owners have been investing in physical experiences and sustainability in anticipation of a return of footfall.

Once the focus on physical retail returns, consumers will likely expect a more engaging, sustainable retail space providing the possibility to socially connect with people and nature. Mixed-use developments, such as Burwood Brickworks in Melbourne, are set to welcome shoppers back and showcase sustainability as a centrepiece of the physical environment. The mall produces more energy than it needs through renewable resources.

Despite the relatively positive outlook for Australian retail during the pandemic, this outlook is set for a significant test at the end of March when the Job Keeper scheme ends. It is possible that many small businesses have been artificially propped up with this payment and when it ends, we might see an increase in business closures.

The toughest test for retail Down Under could still be yet to come.