Australians cut food spending, supermarkets feel squeeze

Despite the continued supermarket war in Australia between Coles and Woolworths in which prices on hundreds of items were cut by up to 25 percent, consumers brought less food. A report by Deloitte Access Economics, released on Wednesday, says food turnover growth in the last 12 months was only 0.7 percent.

In contrast, value of non-food turnover increased by 3.4 percent in the year to June 2016. Australian shoppers preferred to purchase clothes and other department store items over groceries. The previous year, Aussie spent their money on household furnishings, reports Herald Sun.

Deloitte points out that the situation is squeezing the profits of supermarkets which now rely on population growth to hike their food sales since real retail turnover per capita decreased. On the other hand, Myer, David Jones and other department stores are enjoying booming business selling clothes.

The report explains that transformation strategies put in place by department stores and the hype surrounding competitive international fashion entrants had a major impact on turnover in apparel category. Deloitte says that when incomes stagnate, retail spending as a proportion of household budget goes up, reports Business Insider Australia.

In 2014-15, real retail sales grew 3.3 percent which slowed down to 2.5 percent in 2015-16. Deloitte foresees retail sales growth further slowing down to 2 percent in 2016-17 before it would rebound to 3 percent in 2017-18.

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