Discounts key to retail rebound in 2025: BDO

Retailers should focus on offering affordable options such as discounts and budget-friendly products to win customers back this year after a difficult 2024, according to BDO partner Salim Biskri.

Biskri, the mid-tier firm’s national head of retail, said that while an interest rate cut was on the horizon, retailers should not rely on it alone to boost spending.

“Even with lower interest rates, many consumers will still be facing cost-of-living pressures,” he said.

“Retailers will need to stay focused on offering affordable options, such as discounts and budget-friendly products, to meet ongoing demand for value.”

Data from the Australian Bureau of Statistics released on Thursday showed retail turnover rose 0.8 per cent in November, following a 0.5 per cent rise in October and 0.4 per cent in September.

Despite coming in below expectations of a 1 per cent rise, November’s figure was the biggest increase recorded in 10 months. Compared to a year earlier, sales were also up 3 per cent.

Biskri said there were multiple reasons for hope in 2025 after a “challenging” 2024.

“Entering 2024, there was a sense of confidence in the retail sector. Inflation and interest rates were forecast to fall, freight challenges were easing, and consumers started the year with optimism, hoping that improvements in the macroeconomic and political environment would boost confidence.”

“However, optimism began to fade in the second half of the year. With no reduction in interest rates and high inflation continuing to affect the cost of living, discretionary spending took a hit.”

He said rate cuts, the upcoming federal election and relief for renters were all factors that might impact confidence and consumer spending in the coming year.

“Banks and economists are currently forecasting first interest rate reduction in the second half of 2025 as the RBA is in no rush to decrease them until there are two quarters of low inflation before considering reducing the rates.”

“Forecast of some relief for renters with slower net migration and a boost in rental supply might result in a slowdown in rent growth forecasted which could positively impact cash savings and discretionary spending.”

But he also advised retailers to remain flexible, with strategies such as loyalty programs, offering second-hand products and flexible payment plans “key to staying competitive”.

Retailers’ success would also be determined by how they used technology and embraced sustainability.

“AI will play a central role in shaping the future of online shopping.”

“Retailers will need to leverage AI to enhance the customer experience, offering personalised product recommendations and improving customer service to build stronger relationships with shoppers.”

“Finally, sustainability will continue to be a critical factor for retail success in 2025 … consumers are increasingly demanding environmentally responsible products and services.”

“Retailers that prioritise sustainability – whether through ‘take back’ programs, repair services, or trade-in options – are likely to gain a competitive edge as we move into the new year.”