After navigating her small business through the pandemic, Sara Crampton was confronted with a different challenge in April last year.
"Our traffic increased, but the spend was plateauing. It was quite measurable," she recalled.
As the founder and director of The Undone, an online women's fashion retailer, the nature of her business meant the shift created another hurdle almost instantly.
"With how our business works, we're buying products six months ahead of time, so we couldn't quickly change our strategy," she told The Business.
"We had to try and figure out a way to move the stock, even though we saw our consumers were slowing down their purchasing behaviour.
"At that point in time, you're not quite sure if you're the only business that's going through that, or if it's a combined feeling in the environment."
Twelve months on, Ms Crampton said that feeling has flowed through to not only her business's touchpoints – including the brands and sales agents she buys stock from – but the wider retail sector.
"It's been a collective group of 'OK, let's all just make it through together', and then it just kept on going," she said.
"Everyone's trying to figure out what the new normal is in retail."
Furniture designer and retailer King Living has experienced a similar shift – and although its business has been "remarkably resilient", chief executive David Woollcott said the retailer has had to adjust its plans.
"We can see some really busy periods where our showrooms are full of customers and prospective customers, but we can also have some quieter periods," he told The Business.
"The best way to describe that is it's been sporadic."
Mr Woollcott said customer spending is still roughly the same as it was in previous years, but customers were taking longer before making their purchases.
The last time he saw the retail sector experience something similar was in 2008, Mr Woollcott said – when he started his career in Australia during the Global Financial Crisis.
"I have seen this before, albeit earlier in my career. I just haven't seen it quite as prolonged … I haven't seen it impacting the consumer quite as much," he said.
The two businesses may sell vastly different products, but their experiences reflect the broader issue retailers are grappling across the country.
'Subdued sales' or 'retail recession'?
Data released by the Australian Bureau of Statistics on Tuesday showed that retail sales have continued to flatline since the start of the year.
After declining by 0.4 per cent in March, retail trade figures showed spending rose by just 0.1 per cent in April — a sign that people are holding off on making non-essential purchases as cost of living pressures continue to squeeze households.
Collectively, Australians spent $19.5 million less on clothing, footwear and personal accessories in April. Compared to March, spending in this category declined by 0.7 per cent.
Spending on household goods increased by $37.7 million, or 0.7 per cent in April, and retail spending across the country is 1.3 per cent higher than it was a year ago, albeit driven by a population that's around 2.5 per cent larger.
But Paul Zahra, the chief executive of the Australian Retailers' Association, said the sector is already experiencing weak conditions and, with the cost of living keeping customers' wallets shut, it's exacerbating the pain for businesses.
"There's a lot of window shopping going on, that's about it," he told The Business.
"What we're seeing at the moment is the continuation of subdued sales. In fact, all of the discretionary retailers are particularly doing it tough, they're seeing their sales actually in decline, not flat, and that's of great concern.
"The only category that seems to be doing reasonably OK ... includes sporting goods and cosmetics.
"This is typical of a retail recession, where we see people spending money on cosmetics to actually update their look without updating their wardrobes. It's the most cost-effective way to actually be able to spend their money."
Heading into winter, which is traditionally a much slower period for retailers, Mr Zahra fears more businesses will reach a "tipping point" and be forced to make tough decisions.
"We're the largest private employer in the country and, if those sales continue to decline, this will only lead to job losses," he said.
"Retailers have good times and bad times. Right now they're doing it particularly tough."
Is sales season the answer?
With customers keeping their wallets closed, retailers are turning to discounts to encourage them to spend as the end of financial year approaches.
Professor Gary Mortimer, a retail and consumer behaviour expert at the Queensland University of Technology (QUT), said the period leading up to June 30 traditionally lends itself to mid-year sales — but there has been a clear trend of retailers already promoting their offerings.
"A number of retailers have come out earlier than normal and really launching their end of financial year sales in the mid to back end of May," he told The Business.
"Normally, it would be the June period when we start to see those sales ramp up.
"I think what's happening is that retailers are very cognisant of their full-year results that they'll need to bank by June 30, so they're really pushing the envelope to get anybody through the front door to make the last few dollars, hopefully to get them over the line."
However, Professor Mortimer said relying on sales can be a slippery slope for retailers.
"As soon as you start to play in that sales or promotional discounting space, it becomes a bit of a race to the bottom, you're constantly competing against the retailer next door selling similar goods and wares," he said.
"The expectation that retailers are now setting for customers is deeper discounts.
"Maybe in the past, if you saved 20 or 25 per cent off a category, be it clothing or footwear, you might be encouraged to make a purchase. I think what shoppers are looking for now is that 50, 60, even 70 per cent off."
Given how dire spending is in the retail sector currently, he also believes that sales periods will last longer than consumers are used to.
"I think [it's possible] those promotional periods that may have only been a couple of weeks in the past may stretch up to five or six weeks," Professor Mortimer said.
"[And] maybe the discounting gets a bit deeper than what it normally would be."
Thinking outside the box
At King Living, David Woollcott said while they are offering promotions, they have also introduced products that will appeal to a broader customer base.
"[The] promotions are based on value, and not necessarily based just on price. We always make sure that our prices are very attractive, but we do really make sure that they stack up from a value perspective … so the durability of our product," he said.
"We have about the same number of promotions that we always have, we've just made sure that it expanded over more product categories."
Having survived the challenges so far, Mr Woollcott believes the business will be able to weather the rest of the storm.
"We certainly have a plan, which is very specific to our company, and that's what we intend to deploy … we're fairly confident," he said.
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Back at The Undone, Sara Crampton is focused on creating a point of difference for her customers.
"At the moment, everyone's on sale, and I'm finding that our customer isn't responding to the sale method as they used to, because everyone's on sale," she said.
"It's hard to compete on price. You have to compete on a different level, and connect with your customer, build up your brand and your messaging into a really strong identity."
Focusing on empathetic customer service and communication goes a long way, Ms Crampton said, as does treating customers as more than someone who spends their money with the retailer – going as far as creating free outfit "lookbooks" for customers.
"Even if she [The Undone customer] can't buy with us right now, at least when she can in the years to come, she'll remember us as that person who was there for her when she couldn't spend," she said.
"[It's about] doing those little things as a business, keeping your mind on the customer first, and not just trying to sell her products.
"Because we know the reality of the next six months — I think another 12 months — I can plan and make sure that we be as realistic as possible with the amount of product buying and strategy.
"So long as nothing else pops up between now and then that throws us, I think we'll be unaffected."
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