The National Australia Bank (NAB) has released its official sales report for the online retail sector, and there are signs of bad times.

Online retail has taken a dive: NAB report

The National Australia Bank (NAB) has released its official sales report for the online retail sector, and there are signs of bad times.
NAB chief economist Alan Oster said the report has a ‘very weak’ forecast for retailers.
The NAB’s cashless retail sales index is highly regarded as one of the more accurate reports when it comes to predicting the results of the Australian Bureau of Statistics (ABS) own findings on the nation’s economy.
Because it processes about 2 million cashless transactions per day, NAB has a wealth of data that allows it to report on retail spending behaviour to forecast sales trends. But if its newest report is right, a majority of those transactions are not going into retail sales.
The following months are also looking bleak, with Mr Oster further saying that “ABS retail trade will fall 0.5% a month-on-month basis, the weakest forecast in our series going back some half a decade”.
Retail leasing specialist Phillip Chapman, director of Lease1, commented: “Another weak result such as this is the last thing the retail sector needs, with a decade of record low inflation and margin compression, the industry needs to desperately find a savings in occupancy costs.”

The report

NAB is certain that there are a number of issues (both locally and abroad) that could be behind this downward trend. Among these included are costs in the housing market, low income growth among consumers, as well as competition from e-commerce (which NAB had reported on more positively in its March sales index for online retail). The NAB Online Retail Sales Index contracted -3.8% in April on a month-on-month (mom), seasonally adjusted (sa) basis. This follows an upwardly revised March result (+2.4%, was +1.7% mom, sa). While not of the same magnitude, the April result is consistent with the broader retail sales weakness it has identified in its Cashless Retail ABS forecast for April (-0.5%).
After a strong March, all eight online retail categories recorded a contraction in month-on-month sales growth, with the largest sales category, Homewares and appliances (-6.9% mom, sa), the second weakest in the month behind takeaway food (-8.6%). In year-on-year terms, five of the eight NAB Online Retail Sales Index categories were lower compared to April 2018. Department and variety stores remains the fastest growing category in year-on-year terms (26.1% y/y). Games and toys performed best, albeit contracting, in month-on-month terms (-0.2% mom, sa).
In month-on-month terms, all states and territories recorded a contraction in growth, led by Tasmania (-6.4%). The two largest online sales states, NSW (+0.5% yoy, sa) and Victoria (+1.6%), recorded considerably weak year-on-year growth in April.
At +0.7%, international online retailers performed better in month-on-month terms relative to domestic competitors (-4.4% mom, sa). However, in year-on-year terms, from the series, considerable weakness in international online sales remains.
The NAB estimates that in the 12 months to April, Australians spent $28.98 billion on online retail, a level that is close to around 9% of the traditional bricks and mortar retail sector (March 2019, Australian Bureau of Statistics), and about 17% higher than the 12 months to April 2018.

NAB chief economist Alan Oster commented:

“Our NAB Online retail sales index data indicates considerable weakness in online retail sales for April 2019. Online retail sales tend to be more volatile than broader retail, experiencing far greater monthly fluctuations. This month, both online retail and broader cashless retail series indicated very weak retail conditions. While year-on-year growth in online sales has also slowed considerably in recent months, these comparisons are made to a period of elevated sales in 2018, with major new merchants to Australia, and also pre-GST exemption effects.
“By category, department stores continued to lead year-on-year growth. In the month, all categories experienced a contraction in sales, with a drop in sales for Games and Toys the most mild. In month-on-month terms, Takeaway food (-8.6% mom, sa) was the worst performer. This result may indicate structural change in this sector given recent high profile exits and consolidation. The largest spending share category, homewares and appliances, recorded the second worst growth rate in the month, and also contracted in year-on-year terms. The Cashless retail indicator also pointed to weakness in this key retail sector in April. While department stores continue to record the strongest growth, this category has slowed from high double digits post the introduction of the GST on all goods in July 2018.
“Tasmania, with about 2% of online retail sales, was weakest in April, after leading growth in March. New South Wales, Victoria and Queensland represent over three quarters of the online market in Australia by sales value. Of these larger sales states, Queensland was strongest over the year.
“By merchant location, domestic online retailers continue to outpace their offshore counterparts, with international slowing in year-on-year terms. However, domestic retail sales contracted in the month, while their international counterparts recorded mild growth.
“It is worth noting here that our definition of a domestic online retailer can include those merchants whose parent organisation might be overseas with an Australian Subsidiary. Using GST as a key defining characteristic of domestic and international is no longer appropriate given changes made in July 2018,” Mr Oster said.

Westpac, NAB sign up with Australia Post, not ANZ

Australia Post signed historic agreements with Westpac and NAB that will help guarantee the future of essential banking services, via post offices, in communities across Australia.
Westpac and NAB have both given multi-year commitments to partner with Australia Post, enabling their customers to continue to conduct banking transactions in 3,500 post offices across Australia using the Bank@Post service.
Importantly, these agreements include a new Community Representation Fee of $22 million per annum, as well as revised transaction fees that will enable critical investment in the post office network.
The announcement follows Commonwealth Bank’s decision last week to also sign a landmark new Bank@Post agreement that includes a $22 million annual Community Representation Fee.
Together, the decision of these three banks means Australia Post has secured hundreds of millions of dollars of additional funding required for post offices in the years to come.
Australia Post group chief executive officer and managing director Christine Holgate said: “This additional funding will enable us to invest in the post office network so that we can provide safe, reliable banking services, boost funding to our licensed post office partners and, importantly, continue to support communities across Australia,”
“I would like to sincerely thank Brian Hartzer, Westpac CEO, and his team, plus Andrew Thorburn, group CEO & MD, and the broader team at NAB for demonstrating their leadership and giving their support to the Bank@Post service. In signing these agreements, they have both shown their commitment to securing the future of vital banking services which is critical to the long-term social and economic prosperity for communities across our nation.
“I have been really encouraged by the discussions with the three banks’ executive teams. We are together considering additional services for small businesses including coin floats and opening/closing accounts, as well as much more.”
Previously, Australia Post has lost money on providing these banking transaction services on behalf of its banking partners. Australia Post does not have the funds to subsidise this service further or make the critical investment needed.  Many of Australia Post’s local post offices are operated by licensed post office partners, who as small businesses, do not have the capital investment needed either.
The support of these three Australian large banks is essential to maintaining post offices, saving jobs, and sustaining this essential community service, particularly in rural and regional Australia.
There are 1,550 communities across Australia, largely in rural and regional areas, which have a post office but no bank branch. These communities rely on Australia Post to provide access to banking services, such as withdrawals, deposits, balance inquiries via Bank@Post, as well as other essential government services like passports.
Australia Post will use the community representation fees paid by the banks to invest in post office network infrastructure, including in technology, security upgrades and local marketing support.
These new agreements also enable Australia Post to increase Bank@Post base transaction payments to its licensed post office partners by approximately 50 per cent and increase the annual minimum payment to them by 25 per cent.  This will be an important revenue boost for these partners and in return help ensure their viability.
Ms Holgate said she was disappointed that ANZ Bank has chosen not to commit to this request for support to our community Post Offices at this time.
“We have today given ANZ notice that their current agreement for Bank@Post services with Australia Post will end in three months,” Ms Holgate said.
“We will offer ANZ a new contract to ensure their customers are still able to access the benefit of our services and they are not disadvantaged whilst ANZ continues to develop its own strategic options. The new contract will have a different Community Representation Fee to be paid annually, coupled with revised transaction costs. The fee is essential as Australia Post needs to make the investments in the service to ensure both our people and service are safe. With no long-term commitment from ANZ it is critical they contribute to the investment required.
“We have had a long and successful relationship with ANZ for many years, with 6,000 ANZ customers, many of whom are small businesses, using this growing service every day across 99 per cent of our post office network. I remain hopeful that we will find a positive way forward together soon.”

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