Published on 26/02/2016 by Punchmedia

Housing Boom Fuelling Retail Demand

As Australia's oldest electronics retailer, Dick Smith, prepares to shut down its operations in Australia and New Zealand, Harvey Norman has reported a 30.7 per cent jump in first-half profit to $185.5 million. Citing the country's continued housing boom as a major factor in producing the result, sales across Harvey Norman franchise stores rose $193.8 million to $2.72 billion for the six months ended December 31, with sales of lifestyle and homemaker goods boosted by buoyant new home construction and strong house prices in Australia. According to the retailing giant, solid activity in the housing sector, higher home prices, lower unemployment and low interest rates were all supportive of continuing housing development and dwelling and retail spending. "Strong employment growth and households' confidence have fueled household consumption growth. The homemaker categories, namely furniture, bedding, whitegoods, small appliances and cooking, have dominated retail trends and Harvey Norman franchisees, being well-positioned, have been strong beneficiaries of these trends,'' the retailer said. Domestic appliance retailers have faced a tough trading environment over the past five years. Industry revenue is projected to increase at 0.9% annualised over the five years through 2015-16, to $12.9 billion. Demand for domestic appliances has been driven by trends in real household disposable income, consumer sentiment and household formation.

Trading Landscape

Trends in real household disposable income are a key driver of demand for domestic appliances. Disposable income is expected to post solid growth over the five years through 2015-16, boosting consumers’ spending power and enabling them to demand the latest technological goods on the market. Trends in household formation rates have affected consumer demand for domestic appliances. An increase in the number of consumers aged between 25 and 34 establishing their own households has contributed to the modest rise in household numbers over the past five years.

Revenue and Profit

Despite a somewhat slow and steady performance over much of the past five years, industry revenue is expected to rise by 3.4% over 2015-16. Growth in disposable income is expected to fuel retail demand for domestic appliances. Cooling appliance sales are reported to have performed well during heatwaves over the summers of 2012-13 and 2013-14, which boosted consumer demand for window and inverter air conditioners.

Industry Trends

Demand for TVs has been strong due to the progressive shift from analogue to digital and the introduction of 3D TV technology and internet protocol TV (IPTV). Over the past five years, mobile phone sales have grown strongly, as an increasing number of Australians have been replacing their fixed-line phone service with mobile phones. The rising popularity of smartphones has also had a positive impact on industry sales. Over the past five years, sales growth across the domestic appliance market has been weighed down by ongoing competition from external players. Operators outside the industry, particularly discount department stores, have remained a dominant force across the domestic appliance market. Strategic promotional deals and strong advertising campaigns have enabled these external players to offer consumers competitive prices and extensive product ranges. * With AFR  

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Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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