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Retail Blues Australian retailers say they are doing it tough. They have paid for advertising to convince the public and the government that they are losing out to overseas online retailers who can sell to Australian consumers without paying GST so long as the price paid is less than $1,000. They have also blamed their woes on rising interest rates; abnormal weather; political uncertainty; higher electricity prices; and many other factors. Now Woolworths has issued a rare profit downgrade and cited lots of negative factors including a new frugalism, consumer confidence; inflation; deflation; interest rate rises; global economic conditions; increased personal savings; and increased energy, healthcare, and education costs (The Age, 25 January 2011, Business Day page 23). It seems that retailers are blaming everything but themselves for their woes. The fact is that consumers are spending up big on new cars, overseas holidays, and eating out at restaurants. But less so in shops. In addition, some consumers have become more fugal -those who smoke. The cost of tobacco went up by 25% in July 2010 due to a tax increase. It is the biggest price increase since 1975. For the 20% of consumers who smoke, this has sent their discretionary spending power literally up in smoke. Perhaps retailers should invest in better understanding consumers and better servicing their needs. Until they do so, investors may shy away from the industry. And shoppers will continue to spend elsewhere. The detailed report What Ails Retail? is available at www.foreseechange.com.au Charlie Nelson
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