The typical Aussie’s response to this uncertainty has been to rein in spending and increase savings. 

Unfortunately the retail industry is one of the first to suffer during such times as people quickly realise that the clothes they have in their wardrobe can last an extra season, or that the family TV will live on for a few more years. 

Over the past few months, things have started to turn for the retail industry, with consumer confidence at a six month high, largely due to the interest rate cut earlier this month – although the growth of online shopping is perceived to be the industry’s biggest threat.

Research by the Australian Communications and Media Authority released last week reveals 62 per cent of adult internet users have used the internet to purchase goods and services in the six months to April 2011. Around one in five of these online purchases were made via an overseas-based site.

Online shopping is nothing new, but in recent times it has experienced somewhat of a boom as consumers become more internet savvy and are willing to conduct desktop research for the best deal in town, interstate or even overseas. 

Fortunately retailers are responding to this shift, with an estimated 59 per cent of Australian small and medium businesses taking online orders from customers in April 2011.

Those that haven’t reviewed their business model to suit the changes in consumer spending habits will be left behind. Customers want convenience and the choice to decide how they spend their money and future business growth in the sector relies on being agile enough to change and adapt in an increasingly competitive environment.