Three businesses, three takes on navigating the dip in discretionary spending 

The butcher, the baker, and the candlestick maker: Talk taking on retail's “slump” in discretionary spending.

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Consumer confidence is down, but retail rents are on the rise, and by June 30, it’s tipped that over 10,000 retail companies will enter external administration.

KPMG’s latest Retail Health Index suggests that nominal growth is practically non-existent and industry insolvency numbers are higher than pre-pandemic levels. 

Lack-lustre consumer confidence has led to tightened discretionary spending across the nation and is being felt from fashion to footwear and everything in between – except for food retail, which seemingly, is the only sector experiencing substantial nominal growth.

KPMG has predicted that retail growth will remain stagnant until September 2025.

So with all this supposed doom and gloom, how are Australian retailers navigating the less-than-favourable economic conditions?

The Memo’s Kate Casey on investing in experience

Premium parenting retailer The Memo is shrugging off the challenging economic environment and continuing to expand its physical store network. 

The omnichannel retailer is scheduled to open its third boutique in Melbourne on June 22 at Highpoint shopping centre. It will join the new Fitzroy store that opened earlier this month and the original Armadale High Street location, which opened in September 2022.

The Memo has more store openings on the East Coast scheduled with 10 locations in the pipeline within the next six to 18 months.

Kate Casey, The Memo co-founder and CEO, told Inside Retail, “To maintain relevance and to ensure long-term sustainability in Australian retail, we believe we need to be a business that does omni[channel] well.”

“We still see the baby industry as fragmented, cluttered, confusing and stacked with messages that maybe do a good job of selling, but not so much listening and connecting with the audience, which has overwhelmed parents,” Casey said.

“By diversifying into physical retail, we can connect with our community in real life, creating a place where they can touch, try and talk through the items they’re considering for life with a baby,” Casey said.

“It’s a meaningful way to share our brand and bring people together, through services and events that drive important conversations around parenting,” Casey added.

The Memo has “always been more than just retail,” Casey said. In fact, it started out as an online-only business. 

“E-commerce is always there serving up what all customers expect and deserve – clear and relevant communication, quality curation and speedy delivery,” Casey said.

“If you can’t get to the store (which is particularly the case in the newborn stage when our customers are less mobile), e-commerce is a powerful resource and confidence, consistency and convenience are key to any customer experience, no matter the climate,” Casey said.

Regardless of what’s happening in the broader economy, Casey said that the brand’s focus has never changed. It has a mission to simplify baby shopping and foster a feel-good, supportive and informative omnichannel destination for parents.

“Over time, we have listened to our customers and expanded our assortment to include more options and choices for different tastes, budgets and lifestyles,” Casey said.

“We want our brand experience to feel accessible and we have diversified our offering to reflect price points that work for more Australian parents,” Casey added.

York St Brands’ CEO on focusing on shopping essentials

Craig Schweighoffer is the CEO and co-founder of York St Brands, the parent company of Tbh Skincare and Boost Lab.

“No doubt consumer confidence is down, driven by the cost-of-living crisis, impacting discretionary spending. The majority of consumers are feeling it,” Schweighoffer, a seasoned retailer, told Inside Retail.

“Fortunately for York St Brands, Boost Lab has always delivered high-efficacy products at an affordable price point, so not only are we retaining our historical customers, but we’re rapidly gaining new consumers actively seeking effective yet accessible skincare.” 

“We are confident that even if inflation eases and interest rates decrease, we will retain these new consumers as they realise you don’t need to spend excessively to get skincare that works.

Schweighoffer said the company is also looking for innovative ways to deliver value. 

“Our latest initiative allows consumers to save more as they purchase more, effectively lowering their overall cart value, and was a direct response to our consumer needs. It’s initiatives like this that continue to strengthen our brand’s relationship with consumers,” he said.

“Tbh Skincare marketing initiatives have always been centred around creating captivating brand experiences that draw in our audience. Its success lies in offering products that target our consumers’ main concerns of acne-prone skin. This type of product is one that consumers will continue to prioritise over other discretionary items,” he added.

“Squeezed from both sides by retail price pressures and rising supply costs driven by electricity expenses and general inflation, we remain resilient, investing in initiatives to enhance supply chain efficiencies and elevate customer experiences,” Schweighoffer said.

Merry People’s GM on looking overseas for growth

Merry People, an Australian gumboots business, adjusted its forecast expectations for this year “after experiencing the sudden economic trends at the beginning of 2023 which caught most people off guard,” James Smith, Merry People’s general manager, told Inside Retail.

Smith said that Merry People has had a strong start to 2024, and is exceeding expectations.

“We are finding consumers are still spending money and haven’t slowed down between 2023 and 2024 (there was a noticeable shift of customer consideration time from 2022 vs 2023) as we have had plenty of new colours, retiring products and limited collaboration releases to maintain the momentum which has worked,” he said.

“In knowing general spend levels are lower across the board, it’s vital we clearly differentiate our messaging and product quality that highlights our value to the customer,” Smith said.

In addition to highlighting the quality of its product, Merry People is looking at other markets where customers appear to be less impacted by the cost of living to continue driving growth,” he added.

“Globally we are seeing the USA maintain spending levels and the UK continues to go from strength to strength. With the success of Australia in 2024, we are re-investing with aggressive plans for the second half of the year in the USA and UK, via new product ranges and colours,” Smith concluded.

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