Retail crash not the end for IT

Despite a substantial downturn in retail spending in February, IT retailers express confidence

Retail sales fell in February but IT spending held up well

Retail sales fell in February but IT spending held up well

Australian retail sales took a substantial hit in February, but IT spending remains strong.

The latest Australian Bureau of Statistics (ABS) retail figures show an overall seasonally adjusted decrease of 2 per cent for February to $18.8 billion. This compares to an increase of 3.8 per cent in December, and 0.5 per cent in January.

However, Australian turnover increased 0.5 per cent in February compared with the same month in 2008. Retailers told ARN IT spending appeared to be relatively sheltered from the economic downturn.

“We’ve had growth and continued unit expansion,” Harvey Norman computers and communications general manager, Luke Naish, said. “We’ve run some aggressive promotional campaigns, so some of that result can be attributed to an increase in market share.

“We expect things to get tougher at the back end of Q2 and into Q3.”

Harvey Norman posted strong results for the six months to December 2008.

JB Hi-Fi also posted a record half-year profit in February.

CEO, Richard Uechtritz, said he hadn’t seen a downturn in spending and claimed anecdotal evidence pointed to consumers being willing to spend on home entertainment.

“Sales are still healthy,” he said. “We’ve been trading through the tough times that we’ve already had, and unless things go from bad to much worse, we’re finding that if people are given the reason to spend with new gadgets and the like, they will.”

Forster Betta Electrical manager, David Chai, said that while the regional NSW store had a tough time during the same period last year, sales were currently up 20 per cent.

“As much as 80 per cent of the population here is self-funded retirees,” Chai said. “We’re finding that while customer numbers in the store are down, they’re spending more.”

Managing director of consultancy firm, The Retail Doctor, Brian Walker, said while the overall retail industry was showing mixed results, IT spending was relatively sheltered.

“People are less willing to spend extravagantly, but spending on accessories and gadgets is still lucrative, given there’s a ‘stay at home’ social trend at the moment,” Walker said.

“Organisations like JB Hi-Fi still appear to be doing really well, there’s strong demand for fashionable items such as Apple products. While those retailers who aren’t in good shape will find it hard, those who are fit will recover from the crisis.”

The ABS statistics showed the greatest decreases in February were in department stores (-9.8 per cent), household good retailing (-3.8 per cent) and clothing and soft good retailing (-2.7 per cent).

Walker reiterated his comments made at the Microsoft Future of Retail event last week, that there were opportunities in retail, but retailers need to find efficiencies in processes to survive.

Despite the strong IT spending the jury is still out on whether the upcoming Federal Government stimulus package would benefit retail as much as the previous one, Walker said.

“There will still be a positive impact, but the extent of which remains to be seen,” he said.

“It really depends on whether the positive signs – such as low petrol cost, low interest rates and the like can outweigh the negative media around the economy and where we are in terms of unemployment.”

Similarly, Harvey Norman’s Naish was not expecting a dramatic impact from the stimulus package.

“The timing of the first package was good – Christmas is a time when people are more willing to spend in the first place,” Naish said. “April is not such a lucrative time, and we feel the temptation will be there with consumers to bank the money and retire some debt.”

While the Forster Betta Electrical store was expecting to continue to do brisk business until after April, Chai said it was not expecting any impact from the money handouts.

“Most of our customers will not even receive the money,” he said.

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