Increased price competition slows industry revenue growth
Melbourne, Australia (PRWEB) March 27, 2013
The Discount Department Stores industry in Australia has brought in a good haul. Over the five years through 2012-13, industry revenue is forecast to grow at a compound annual rate of 2.1% to reach $8.92 billion. According to IBISWorld industry analyst Ee Jen Lee, “weak economic conditions have fuelled demand for discounted products, contributing to a rise in revenue over this period”. Furthermore, the industry would not be what it is now if not for the significant overhaul of a major company's operations. The restructuring of Kmart's operations in 2008 not only lifted the company's revenue in 2008-09, but also significantly boosted overall industry revenue. Kmart's success has been emulated by other companies and has incentivised others to revise procurement practices.
As retailers in the industry mainly compete on price, retailers have actively sought to be a market leader in this aspect. The strong exchange rate has enabled companies to purchase inventory more cheaply. Retailers have been able to pass on these savings to customers. “Retailers are bypassing the intermediaries to generate more savings”, says Lee. “This strategy is part of the overall supply chain or procurement process and is likely to be the main engine for growth moving forward”.
Although the Discount Department Stores industry is peppered with success stories, there have been some noteworthy exits. Retail Adventures was forced into administration, while several other smaller players have struggled to keep their heads above water. Their struggles stem from their business models and poor management, as the fundamentals suggest that demand for low-cost products has been strong. High household savings rates suggest consumers will retain prudent spending habits.
The level of market share concentration in the industry is considered high. The top three players are Woolworths Limited, which operates in the industry through its Big W brand; Wesfarmers Limited, which owns the Australian arm of Kmart; and the Reject Shop Limited.
For more information, visit IBISWorld’s Discount Department Stores report in Australia industry page.
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IBISWorld Industry Report Key Topics
Retailers in this industry sell various consumer goods at discounted prices. Unlike department stores that have separate cash registers in each department, discount department stores generally have central customer check-out locations.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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