Changing Tides: BDO Retail Market Update
30 March 2015
Are e-commerce operators still enjoying phenomenal growth, whilst their bricks and mortar counterparts struggle to cling onto consumers' spend? Or will the online bubble burst?
BDO has conducted a study* of the retail industry to identify which sub-sectors have shown the largest percentage (%) change in growth margins, over the past three fiscal years.
In exploring the online/offline split, we have analysed and identified the 20 highest, two low-growth (but stable), and the 10 poorest performing retail sub-sectors. Not surprisingly, online sales channels represent 19 of the top 20, with fast fashion the only bricks and mortar inclusion.
Despite the rise of Omni-channel retail, e-commerce revenue is still growing at higher rates than bricks and mortar.
Key findings include:
Online retailers of household and family products are set to be the emerging sector leaders as Australians shift their shopping priorities
- Online household furniture emerges as the top sub-sector overall, with the highest rates of forecasted revenue growth in both FY15 (20.1%) and FY16 (16.2%)
- Online baby products, online sporting apparel, online grocery and online books are set to round out the top five in FY15.
Online growth drops off
- Five of the top 10 performers in FY15 are forecasted to experience substantial drops in growth in FY16
- Sector growth figures of 20-30% experienced over the last few years are predicted to decrease to a more conservative and perhaps sustainable rate from FY15 and FY16 onwards.
Bricks and Mortar adapts and stabilises
- Bricks and mortar operators that have previously struggled are starting to successfully reduce, and in some cases reverse, sales decline
- In particular, toys and convenience stores are forecasted to continue their steady recovery and record solid positive growth in FY16, 2.3% and 1.1% respectively.
*Underlying data was sourced from IBISWorld, including revenue growth figures from a total 85 retail sectors for FY13 and FY14, and forecasts for FY15.