Bare necessities: Consumers cut back on fashion as rates bite

The Reserve Bank’s pre-Christmas rate rise could dampen Australia’s passion for fashion, with consumer data suggesting shoppers are planning to spend less on categories like apparel and accessories in the coming months.

While retailers remain upbeat about the outlook, data from management consulting giant McKinsey & Company suggests that even wealthier consumers are starting to feel the pinch, with its survey showing a dip in optimism about Australia’s post-pandemic economic recovery among those earning more than $125,000 a year.

The McKinsey survey of more than 1,000 consumers, which tracks how many people are planning to increase and decrease spending on different categories, shows shoppers are looking to cut back in all areas except groceries and their daily commute. Meanwhile, categories like jewellery and luxury clothing brands are being put on the backburner.

“There is an intent to decrease spending on apparel, accessories are even lower and jewellery is even lower than that,” said Partner and lead of McKinsey & Company’s consumer and retail practice in Australia, Abe Levavi.

“If you put those things on a spectrum of necessity, even with [other] non-essentials, you would see jewellery be the lowest, because it’s the least essential.”

However, retailers are confident the healthy sales over the Black Friday/Cyber Monday shopping events will translate into solid Christmas sales.

David Jones chief executive Scott Fyfe said while rate rises were putting household budgets under pressure, shoppers were still keen on in-store experiences in 2023.

“Moving into 2023, we expect unique shopping experiences to become more important for consumers and we continue to enhance our offering and services,” he said.

“We saw record trading volumes and sales at the recent Black Friday / Cyber Monday shopping events, and this momentum shows no signs of slowing in the lead up to Christmas.”