Australia’s discretionary retail sector has been doing it tough. In the year to August 2013, discretionary retail grew by just 1.0% – well below both population growth and inflation. Department stores – a sub-component of discretionary retail – have performed particularly poorly, with sales slumping recently and growth turning sharply negative over the past six months (see next chart).
The purported causes behind the slump in department store sales are well documented, and include such things as competition from internet sales and greater consumer caution.
Now a new threat is coming to Australia’s shores. According to a segment aired last night on ABC’s The Business (video above), the world’s second largest fashion retailer – Swedish retail giant H&M – is setting-up shop in Melbourne’s CBD right next door to the flagship Myer and David Jones stores in the Bourke Street Mall. H&M, which operates more than 2,000 stores in 43 countries, then plans to expand across Australia, much like Costco did a few years back.
Obviously, this is good news for Australian consumers, who will benefit from greater choice and (potentially) lower prices. Certainly, the experience of other overseas retail arrivals, such as ALDI, Costco, and Zara, has proved beneficial, forcing local retailers to innovate and offer greater value. Bring it on, I say.
