If 2011 was a bad year for Australian retailers, their losing streak would likely continue through 2012.

The bleak outlook is generally because of the global economic slowdown which has affected several industries across Australia, except for mining. As a result, experts are foreseeing empty offices, shops and factories as banks, offices and retailers shed jobs or outright shutter their enterprises.

In the case of the retail industry, aside from personal belt-tightening measures made by consumers, what worsened the situation for bricks-and-mortar stores was the competition posed by online retailers, particularly those based overseas. Besides the shifting consumer preference for ecommerce, the overseas online retailers enjoyed the advantage of offering lower prices because of Australian rules that exempt sales below $1,000 from the general sales tax.

The latest victim of the weak retail environment is womenswear retailer Specialty Fashion Group which warned of a big profit fall and stores closures due to disappointing results of Christmas trading.

Gary Perlstein, chief executive of Specialty Fashion Group, estimated that the company's earnings before interest, tax, depreciation and amortization for the six months to December 31 could plummet by up to 38.4 per cent between $21 million and $22 million.

This may lead the retailer to close 120 outlets over the next three years while the weak sales trend among traditional stores continue and rentals remain high.

Specialty, which runs 900 outlets across various brands such as Millers, Katies, Crossroads, Autograph, City Chic and La Senza, registered 4.5 per cent lower comparable store sales for the past six months, Mr Perlstein disclosed.

"Heavy discounting started a month before Christmas but consumers still remained very cautious. The interest rate cuts did not have any positive effect on consumers' spending habits," he told The Australian.

Mr Perlstein acknowledged that bricks-and-mortar store operators have no recourse except to be part of the online bandwagon to survive. He said the group will continue to give its online stores more push in the hope that the portals would bring at least 15 per cent of Specialty sales over the next three years.

"We have embraced online shopping. It's a much lower cost structure and we expect online to coexist with bricks and mortar stores. It's a 'bricks and click' strategy," he added.

The same strategy has been adapted by other major Australian retailers such as Myer and Harvey Norman in a bid to keep their companies afloat.

News of the lower profit forecast caused Specialty's shares to go down 8.5 per cent to 43 cents, which is a 12-month low.

The gloomy retail environment also persists in other western markets such as the U.S. and the U.K. This led The Retail Education Centre to release on Wednesday a white paper titled The State of the Retail Industry.

The paper criticises a report on the industry written by British retail expert Mary Portas on how to revive High Street and an earlier report on a similar topic by Colliers CRE. The white paper said the two earlier reports failed to address the core problems of the industry and to answer the question why are some retailers such as Tesco and Holland & Barrett are the third and fourth most profitable businesses in the U.K., while many retailers are struggling.

It partly blamed the failure of many retailers to industry executives being inadequately equipped to run a business and the incompetence of majority of middle managers. It also attributed the mushrooming of niche markets to the Internet which has completely changed the factors of distribution by providing consumers the widest choice available.

The report recommended that retailers adopt the Blue Ocean strategy as the only way it can survive, particularly for enterprises selling books, DVDs, music and furniture,

Retail accounts for 8 per cent of the United Kingdom's gross domestic product (GDP), 7.9 per cent of the U.S. GDP and 18 per cent of Australia. The industry provides work for 3 million Britons, 14.4 million Americans and 1.5 million Australians.

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