Consumers uncertain, but hope on the horizon for small business
With 1 in 4 Australians feeling unsure about their ability to meet financial commitments, Suncorp has seen some interesting customer spending and small businesses redefining their value proposition to remain relevant.
The hit to consumer confidence and tightening of household finances has driven changes in customer spending and a shift towards higher savings. Since the end of February, Suncorp has seen a 5% increase in personal savings with the average balance in savings accounts has risen by over $1,000.
Total spend* hit a low in mid-April, down by 17% from the beginning of March, but some recovery has been seen, now sitting just 5% below March levels. However, how consumers are spending their money is still very different. The biggest reductions in spending can be seen in transport, travel, fitness, restaurants and bars. While as increase has been seen in spending on alcohol, gambling, groceries and departments stores.
COVID-19 has not impacted all Australians equally. Consumers in higher income brackets, with more discretionary spend have experienced the largest reductions in total spend dropping around 15%, compared to only a 7% reduction in lower income brackets. The enforced restrictions on restaurants, bars and non-essential shopping has helped young customers increase their savings balance by 5-8% in April while those in low household income brackets are only able to make minimal impacts to their balances.
What does this mean for businesses?
As consumers opt for saving discretionary spending and adjust to reduced incomes, business revenues continue to fall. The COVID-19 economic fallout has shown little discrimination amongst business location, age, or size across Suncorp’s SME customers†. With the notable exception of retail trade, SME businesses across most industries saw large declines in revenues over the March and April period. Not surprisingly, most heavily hit were accommodation, food services and fitness providers, losing half of their revenues throughout this period.
Whilst most businesses have shown declines in revenues, the economic pressures caused by COVID-19 favoured the retail trade and wholesale trade industries. There is some hope on the horizon with revenues starting to form an upward trend at the start of May as businesses adjust and reposition their models to suit customer needs and as the government begins to relax regulations.