Deloitte’s latest annual Global Powers of Retailing report reveals three locally based retailers: Wesfarmers, Woolworths and JB HiFi – remain in the Top 250, after JB HiFi was added last year. Between them, they generated revenues of US$96.95 billion.

Only 39 of the Top 250 Global Powers (and three of the top 10) operate in Australia, one more than last year signifying potential in the Australian market to add more international retailers to the mix.

According to David White, national leader of Deloitte’s Retail, Wholesale & Distribution Group: “While the retail environment globally, as well as in Australia, continues to present challenges, the world’s top 250 retailers collectively still achieved strong growth in FY18.

“Ongoing competitive challenges from both domestic and international retailers remain a perennial feature of the Australian landscape, and online retail continued its growth trajectory. Although total online sales remain lower than many other developed retail markets, local retailers are starting to reap the rewards from earlier digital investments, and we can expect digital sales to be increasingly important to local performance.

“That said, the role of the physical store will remain critical, with digital integration and the creation of a meaningful customer experiences using innovative store formats, new in-store technologies and personalised customer service key to a successful strategy.”

The top 10 global retailers continue to be dominated by US companies, with Amazon jumping two places in the rankings, to become the world’s fourth largest retailer. And based on current growth rates, only Wal-Mart will be bigger than Amazon in two years’ time.

“This is an extraordinary feat considering Amazon only entered the top 10 two years ago and remains a strong pointer for local retailers,” White said.

“The apocalyptic impact some expected Amazon to have on the Australian retail market might not have materialised just yet, but the giant’s subscription-based Prime delivery service is priced at more than half its US equivalent here, and its frictionless omni-channel delivery experience is increasingly challenging the speed of Australian retailer’s fulfilment models. We can certainly expect to see more investment and innovation on this front in 2019.

“Our local supermarket majors, Wesfarmers and Woolworths, continue to be ranked highly in the Top 250, while JB Hi-Fi, has shot up the rankings, adding more than $1 billion of revenue on the prior year reflecting a full year’s impact of its acquisition of the Good Guys.”

Global retailers in the Australian market

During 2018, new global retailers continued to enter the Australian market, as existing retailers also expanded their operations. There were 11 movements in and out of the Top 250, and while the Australian retailers remain unchanged, two non-store retail operators in the previously unrepresented Chinese geography – JD.com and Vipshop Holdings – have hit Australia’s shores. Major internationals like JD Sports and H&M continued their local growth through expanding their store footprints, while high profile exits from the Australian market included Gap, Toys “R” Us and Forever 21.

Retailers operating in Australia – movements in the Top 250

“Our growing Asian tourist demographic is driving a marked increase in luxury and specialist retailers investing in their Australian operations to compete for the Asian tourist dollar. And demand for international luxury branded specialty goods has also seen diversified investment from the likes of Lotte Shopping Co., which acquired JR Duty Free in 2018 as it seeks to capitalise on the growing inbound Chinese and South East Asian market.” White said

The outook?

“There is widespread expectation that global growth will slow further in 2019, and for global retailers, market conditions will mean slower consumer spending growth and potentially disrupted global supply chains,” White said.

“Australia’s retail environment was a tale of two halves during 2018. Performance was strong earlier in the year as cheap credit and rising asset prices fuelled confidence to spend, however by year’s end we saw significant declines in household wealth through both falling house prices and share market declines.

“This weighed on the retail sector. Sales slowed through the year to produce a lean Christmas, and purchases of consumer durables starting to top out.

“Retail sales volumes are expected to grow as stronger labour market conditions offset declines in wealth, but the early part of 2019 may be challenging.

“Retailers’ heavy reliance on imports has many watching the value of the Australian dollar closely. Any major decline in the currency could result in significant cost pressures at a time when there is little room to increase consumer prices.

“Consumer spending for the year ahead will be largely driven by wage growth as consumer wealth declines and the willingness to forgo savings for spending diminishes.”

The next wave of growth

Just as 2018 saw several highs and lows for Australian retailers, 2019 is shaping up to be yet another year of disruption.

“Constant change remains a pervasive influence, but disrupted markets can also create opportunity, and we see a number of these for retailers operating in Australia in 2019,” White said.

1. Opportunity in the disruption on our doorstep
Retailers in the Asia Pacific region have been relatively slow to invest in international operations. This landscape is rapidly changing with the increase in the number and scale of ‘non-store’ operators and online marketplaces sourcing and curating products from around the world. For retailers seeking new markets, Chinese ‘non-store’ marketplaces powered by mobile and digital represent a major area for growth. The growth in the Chinese middle class, combined with the demand for Australian products, presents significant untapped opportunity for many Australian retailers.

2. Collaborations, strategic partnerships and acquisitions in vogue
For some time, retailers have been focused on reinventing the consumer relationship – moving from product and transaction-based interactions to deeper and more meaningful relationships that add value. The focus on creating new or adjacent services for competitive edge (and ultimate growth) is increasing, and 2019 should see greater collaboration and strategic partnerships as retailers continue to shift their strategies to understanding and owning more of the consumer and their everyday lifestyle.

3. Doing well by doing good
Retailers have a critical role to play in operating more sustainably – and the rise of the conscious consumer is a key driver of a growing focus on a sustainable future for retail. Opportunity awaits retailers committed to driving change in more responsible practices, as consumers increasingly expect that brands should be accountable for sustainable manufacturing practices, transparency and reducing their overall carbon footprint.