Regional consumers hold the key to recharging our local economy
The COVID-19 pandemic has accelerated changes in Australian consumption patterns which may create negative consequence for regional businesses. This needs to be addressed by regional consumers. It’s now more important than ever for each of us to push our dollar further and support the notion of “think local, buy local” to ensure support for your region.
Two forces are undermining consumer purchases from regional businesses: what we are buying now and where we are buying it from.
Nationally, we had a retail boom in March as we all stocked up on household essentials. It’s hard not to remember the images of shoppers stockpiling toilet paper, flour and pasta. Who could forget this?
Latest figures from Alphabeta show that spending on essential goods jumped in March before falling in April. Spending on discretionary goods and services fell through March and bottomed out all through April at about 70% of normal levels. Consumer discretionary goods and services are those considered as non-essential by consumers, but desirable if their available income is sufficient to purchase them. The good news here is that total spending came back in early May to around 96% of normal levels for this time of year.
Figures show spending was boosted in the second last week of May, as a result of the Coronavirus supplement (doubling of unemployment benefit and youth allowance) as well as the easing of restrictions.
So while consumer spending is improving, the question has to be asked – are regional towns and cities getting their fair share? Unfortunately, what we are seeing is that the COVID-19 pandemic has accelerated two trends which will take trade away from regional businesses.
The first trend that has emerged over the last few months is the change in our spending habits. We’ve seen a switch from spending on hospitality and tourism to homewares and home improvements. While this has generated some great figures for local hardware stores, it does mean less money is circulating locally. When we look at homewares, which includes items such as a lounge or a fridge, we only buy this once every few years. It’s a big purchase and this generally comes from larger regional centres and online stores.
Secondly, the switch to online purchasing is favouring high volume online outlets, where it’s all about price minimization and efficiency. No wonder Australia Post is struggling with parcel deliveries. These goods sales are place-agnostic and are pulling the rug out from underneath many regional businesses, and someone’s doing very well out of this. But it’s not the local store.
Regional businesses can’t compete well on high volume essentials, and are most competitive on high value products and most importantly, on services. But the collapse in spending on these has stalled these businesses everywhere, especially in regions. Online sales can be a growth path for individual regional makers and retailers – but for the region to benefit as a whole it needs to win more of these sales than it loses in others.
The last near recession Australia had after the Global Financial Crisis needed a boost of confidence and activity by business investors for us to recover. Recovery from COVID-19 restrictions will be very different, as the stock market is booming at the same time as unemployment is surging. Recovery from this recession will require a boost of confidence and spending from consumers for us to recover. Even though record numbers of Australians are out of work or underemployed, overall consumer spending is on the way up. How and where we choose to spend will have a critical impact on the recovery this time, especially in regions where leakage of spending out to other places is accelerating.
So the message here is think before you spend. Look locally, in your own regional town or city. Don’t just default to buy online through the big portals. Where your dollar goes is more important now than ever. Think about how you can be part of your region’s recovery. See what you can buy locally, and get out and spend in your region as soon and as often as you can.