Operators in the retail sector have faced volatile trade conditions during the COVID-19 pandemic. Government restrictions, supply chain disruptions and an overall downturn in the Australian economy have dampened retail trade activity over the two years through 2020-21. However, many Australian households have reallocated expenditure towards upgrading household appliances, entertainment systems and furniture while international travel has remained restricted. This trend has benefited the Domestic Appliance Retailing and Furniture Retailing industries.
Households have been stuffing savings under the bed
According to the ABS, the quarterly household saving to income ratio rose to 19.8% in June 2020, which is the highest saving rate since June 1974. Many consumers are expected to spend money saved during the pandemic on household improvements, such as new furniture or domestic appliances. Additionally, households have been spending more time at home due to lockdown restrictions and work from home arrangements. These factors have further incentivised households to purchase new appliances and furniture during the pandemic, particularly office furniture and equipment required for remote working arrangements. People have also entertained more at home while large gatherings and entertainment venues have been restricted, leading to greater investment indoor and outdoor furniture. Consequently, the Furniture Retailing industry is expected to rise by 20.1% in 2020-21, to total $9.9 billion.
The Domestic Appliance Retailing industry is also expected to benefit from the rise in household savings during the COVID-19 pandemic. Many consumers are anticipated to allocate their savings towards home renovations, which is likely to boost demand for big-ticket domestic appliances, such fridges and washing machines. Overall, the Domestic Appliance Retailing industry is expected to increase by 3.5% in 2020-21, to total $15.4 billion.
Continued threat of online retailers
The Domestic Appliance Retailing industry is projected to rise at an annualised 2.0% over the five years through 2025-26, to $16.9 billion. Key drivers of industry growth are likely to stem from:
- Positive consumer sentiment
- A rise in household discretionary incomes
- Greater residential building construction activity, which often drives demand for new domestic appliances
However, external competition is forecast to intensify over the next five years, as department stores and online-only retailers, such as Kogan and Amazon, continue expand their range of domestic appliances. Additionally, as government restrictions on service-based industries, such as the International Airlines industry, are lifted, consumers are likely to reallocate a greater share of income towards these services away from domestic appliance and other household goods.
Despite a rise in discretionary income and consumer sentiment, the Furniture Retailing industry is forecast to decrease at an annualised 1.7% over the five years through 2025-26, to total $9.1 billion. Many households brought forward furniture upgrades and purchases in 2020-21, with demand projected to fall closer to pre-COVID-19 levels over the next five years. Industry performance is also likely to continue to come under threat from online-only retailers and second-hand marketplaces such as Gumtree and Facebook Marketplace, which are growing in popularity around consumers.
IBISWorld industry and company reports mentioned in this release:
