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The chief executives of Australia’s two largest private employers have thrown their support behind an increase in workers’ wages amid persistently rising inflation and a tightening labour market.

Woolworths boss Brad Banducci and Wesfarmers managing director Rob Scott both made comments on Tuesday supporting wage rises, with Banducci backing calls from industry body the Australian Retailers Association for an increase in the minimum wage in line with the underlying rate of inflation.

Scott, who oversees the operation of major retailers Bunnings, Kmart and Target, told the Macquarie Australia Conference he expected to see rising wages “across the board” in the year ahead, something he welcomed in light of the rising level of inflation.

“From a Wesfarmers point of view, I see real wage growth as a very good thing. Real wage growth is a good thing for the economy, and if it’s good for the economy, it’s generally good for Wesfarmers,” he said.

Banducci, whose company employs about 200,000 Australians, was also supportive of wage rises, though noted that there was no “silver bullet” that would fix Australia’s inflation woes. The retailer said shoppers could be facing a double whammy of price rises from suppliers in the next 12 months.

“We’re very clear that while we need to deliver value for our customers, we also need to make sure that our team can have salaries and wages that keep pace with the underlying increase in the cost of living,” Banducci said.

The supermarket boss said so far around 40 per cent of the company’s supplier base had requested price increases, and the supermarket was in negotiation with an additional 20 per cent. At Woolworths’ third-quarter sales results on Tuesday, the company reported inflation across its food business of 2.7 per cent, lower than rival Coles’ 3.3 per cent.

“There are indications from some of our larger suppliers that within 12 months, they will come back for a second cost increase,” Natalie Davis, Woolworths’ head of supermarkets told analysts. “That’s really reflecting the ongoing cost pressures they’re seeing on commodity prices, manufacturing costs and international freight.”

Banducci’s remarks supporting wage rises are at odds with other retail bodies and fellow supermarket executives, with Coles’ boss Steven Cain warning last week of the danger of wages rising in tandem with inflation, as he called for an increase in immigration rates to offset rising prices.

The comments come as Woolworths reported a strong start to the new year, with sales from January to March rising 9.7 per cent across the business to $15.1 billion. This included comparable growth of 4.4 per cent at the company’s key supermarket division to $11.4 billion, ahead of analyst estimates.

Despite these strong sales results, Banducci said the quarter had been challenging, with floods, supply chain disruptions and high levels of COVID-related absenteeism hurting the supermarket’s standing with customers.

However, the company said trading had been strong so far in the fourth and final quarter of the financial year, with the business now focusing on “returning to a more stable operating rhythm.”

Costs relating to COVID-19 have continued to fall, coming in at $66 million for the quarter, with the business saying it is continuing to look at cutting additional pandemic-related costs where possible.

On Tuesday, the Reserve Bank raised interest rates by 0.25 percentage points to 0.35 per cent, the first-rate rise since 2010. Speaking ahead of the decision, Banducci would not comment on what this might mean for shoppers, saying instead the supermarket was focused on “delivering value for customers”.

Shares in Woolworths had gained 0.6 per cent on Tuesday by mid-afternoon but fell in line with the broader market following the RBA’s decision.

Online furniture retailer Temple & Webster is moving into the home improvement and DIY market with an online store aimed at challenging the dominance of Australia’s biggest hardware chain Bunnings.

The company plans to spend $10 million over this financial year and the next establishing The Build, an online store selling home improvement products such as ceiling fans, lighting fixtures, bathroom vanities and wallpaper. Further categories, such as tools and building equipment, will be added over the coming months, Temple & Webster told its shareholders on Wednesday morning.

The retailer announced the plans as it updated shareholders on its trading performance through the second half of the 2022 financial year so far, with sales up 23 per cent for January through to the end of April. The company expects its earnings margin to be around 3 per cent for the full year.

Investors weren’t impressed, sending the stock down 6.7 per cent to $5.04 in late afternoon trade.

The expansion into home improvement is a notable deviation for the online furniture retailer, which has established itself as a significant player in Australia’s home goods market during the pandemic, thanks to a boom in demand for home office equipment such as desks and office chairs.

Chief executive Mark Coulter said the move was a “natural extension” for the ASX-listed business as Australians were drawn to home improvement projects.

“Australia is a country of home renovators, we love our homes, and we love making them more beautiful,” he said. “We believe our expertise in ecommerce and the home will help make The Build become Australia’s first-stop shop when it comes to renovating and redecorating.”

The market for online improvement in Australia could be worth around $16 billion and the category was yet to make its mark online, with just 4 per cent of DIY shopping happening online compared to around 25 per cent in the UK, the company said.

Investors were sceptical, with RBC Capital Markets analyst Wei-Weng Chen saying the company’s sales were tracking well below estimates and that shareholders would look upon the launch of The Build with caution.

“While the total addressable market, margin opportunity and online-penetration story for the home improvement category looks attractive in the medium [and] longer term, we expect the market to approach the launch [...] with an element of caution, given the current macro headwinds facing the Australian property market,” the analyst said.

The company will also face a tough job when squaring off against Wesfarmers’ Bunnings juggernaut, which - despite only recently launching an online store - holds around 50 per cent market share for home improvement in Australia.

Perhaps in recognition of this, Temple & Webster said it doesn’t expect The Build to make a material contribution to its overall sales and earnings for the first four years. However, it expects the long-term-margins for the business will be better than its furniture and homewares category.

The boss of national retailer JB Hi-Fi has said he doesn’t believe rising interest rates will affect spending at his electronics chain as phones, laptops and tablets have become essential purchases for many consumers.

JB chief executive Terry Smart told the Macquarie Australia Conference on Wednesday that many of the products sold by the ASX-listed retailer were now “integral” to people’s lives, and that he didn’t expect consumer spending to falter even as cost of living pressures increase.

“A lot of our categories ... are becoming less discretionary. People can’t live without it, it’s such an integral part of their lives that they’re continuing to buy,” he said. “We’re still going to see that, I would like to think, during [rising interest rates].

“And if it’s really going to get tough, we’re a discount retailer. Customers trade down to where they absolutely know they’re going to get the best deal, and that’s going to be both JB and The Good Guys.”

Smart’s comments come as JB Hi-Fi reported continued strength in its sales for the first four months of the new year, with trade at its Australian business increasing 11.9 per cent from January through to the end of April.

Revenue at the Good Guys was also up, gaining 5.5 per cent for the period, and the company’s historically troubled New Zealand business also performed well, increasing sales by 4.8 per cent. Morgans analyst Alexander Mees said JB Hi-Fi’s result was the best third-quarter result out of the major retailers so far.

“The evidence from discretionary businesses like JB, Breville and Super Retail yesterday paints a more positive picture of consumer spending in the face of rising inflation than share prices would have you expect,” he said.

“It wouldn’t be the first time the stock market has underestimated the resilience of the Australian consumer.”

However, despite this, JB Hi-Fi’s shares fell 4.3 per cent to $49.95 by mid-afternoon on Wednesday, as the company also warned investors about supply chain delays and inventory availability moving into the last quarter of the financial year.

Retailers across the board have warned about the effects of rising inflation, with both heads of major supermarkets Coles and Woolworths warning that customers could expect the price of their weekly shop to increase notably.

However, this was not the case for Smart, who said while JB had seen price increases flow through from suppliers over the last six months, the hikes were largely “hidden” in consumer electronics as manufacturers roll out new models that are naturally priced higher.

“[Inflation] is not going to impact our promotional activity going forward because we buy from multiple suppliers, they all compete against one another as well,” he said.

Smart also warned that JB’s famously low cost of doing business could take a hit in the months ahead as more and more customers return to shopping in-stores, requiring the retailer to spend more on staff to ensure service levels are up to scratch.

Australian casual youth apparel retailer General Pants Co has been bought by Alquemie Group, the retail investment platform of private-equity company Acta Capital. 

General Pants Co CEO Sacha Laing will take on the role of group CEO at Alquemie and current shareholders including Victor Smorgon Group, Phil Staub and Jackie Vidor, have agreed to reinvest “a significant portion of their proceeds” into Alquemie, the company said in a statement. Laing has previously held leadership roles at Colette, Country Road Group and David Jones. 

Founded in 1972, General Pants Co sells brands including Lee, Subtitled, Ksubi, and Tommy Jeans through a network of 60 stores across Australia and New Zealand. The company will join Lego Certified Stores, Ginger & Smart, SurfStitch and Pumpkin Patch in Alquemie’s rapidly growing portfolio, with further acquisitions planned. 

Acta Capital founder and CEO Richard Facioni said the acquisition gives Alquemie “significant scale and breadth of operations” as it seeks to partner with “exceptional, like-minded management teams to build great businesses”.

“General Pants Co is highly complementary to our existing portfolio and positions Alquemie for continued growth as we build a leading multi-channel retail investment business,” he said in a statement. 

Laing described it as a privilege to join Alquemie at a pivotal time and said she was looking forward to working closely with Facioni.

Discount department store Big W has partnered with recycling platform TerraCycle to launch a toy recycling scheme in all 176 stores nationwide.

After a trial in limited stores, the retailers’ Toys for Joy program collected over 18 tonnes of old toys.

The two companies say around 26.8 million toys are discarded in Australia every year, the majority placed in normal rubbish as they are not kerbside recyclable.

Big W MD, Pejman Okhovat says the program aims to reduce the number of toys that end up in landfills.

“Toys for Joy provides parents peace of mind knowing that as they declutter, they are disposing of old toys in a manner that helps to reduce landfills,” he said.

Jean Bailliard, GM of TerraCycle Australia, has praised Big W for providing an in-store recycling solution for parents.

“The program not only saves worn-out toys from landfill, but our recycling process also takes complex materials like metal, rubber and a variety of plastics and turns them into new materials for reuse.”

The program has also received praise from the environment minister, Sussan Ley. She said initiatives like Big W’s will change the national conversation around recycling.

Big W customers are encouraged to drop their pre-loved toys in the Toys for Joy chest placed in front of all Big W stores. Books, stationery, paintbrushes, playdough, board games, batteries, or oversized and wooden toys are not accepted.

Adidas lowered expectations for 2022 after a first-quarter slump as renewed Covid-19-related lockdowns in Greater China continue to hit the German sportswear company.

First-quarter currency-adjusted sales shrank by 3 percent worldwide, to 5.3 billion euros ($5.58 billion), while profit from continuing operations fell 38 percent, to 310 million euros, it said on Friday.

In Greater China, sales collapsed by 35 percent in the first quarter; for the year, revenue is expected to fall significantly due to store closures and strong traffic declines.

The company now expects to come in at the lower end of its 2022 forecast for an 11-13 percent increase in currency-neutral sales as well as for net income from continuing operations of between 1.8 and 1.9 billion euros.

Adidas also cut its operating margin forecast, saying it will remain at the previous year’s level of 9.4 percent instead of increasing to 11 percent.

“In this environment, characterized by severe external challenges, it is imperative to stay focused on our strategic objectives,” said Chief Executive Kasper Rorsted.

“While we will remain agile, we will not jeopardize our long-term growth opportunity for short-term profit optimization.”

The company expects a return to growth in the second quarter despite the continued sales decline in Greater China and a 200-million-euro negative impact from supply chain constraints.

In the second half of 2022, net sales are expected to grow over 20 percent, driven, among other things, by unconstrained supply, strong momentum in Western markets and major sports events.

Stick to new COVID-19-era habits, or go back to the old ways of doing things? For most US consumers, the answer seems to be “both.” Two years into the pandemic, people across the country have discovered that they like shopping online, but they’re also going back to brick-and-mortar stores. They’re venturing out of their homes again, but they’re continuing to spend money on home improvement. And—in what could be boon or bane for manufacturers and retailers—today’s consumers are quite willing to abandon their once-preferred brands in favor of new ones that offer value or novelty.

This article highlight findings from the latest Consumer Pulse survey, which was in the field between February 25 and March 1, 2022, and garnered responses from more than 2,100 US adults (sampled and weighted to match the general US population). The survey results, combined with third-party data on consumer spending, provide insights into how US consumer sentiment and behavior have been evolving since the COVID-19 pandemic began. And the evolution continues: this survey did not address the invasion of Ukraine in any form. We believe, therefore, that the results do not capture the full effect of the invasion on US consumer sentiment.

It remains to be seen how—and how intensely—recent geopolitical and economic developments will affect US consumers’ outlook. What’s clear is that, more than ever, companies must stay on top of consumers’ fast-changing attitudes and behaviors.

Inflation hasn’t stopped consumers from spending—yet. 

In the early months of 2022, amid record inflation, US consumers continued to open their wallets. US inflation grew to nearly 8.5 percent in March 2022, with the May 2021 to March 2022 period showing the highest inflation in a decade. Yet, US consumers spent 18 percent more in March 2022 than they did two years earlier, and 12 percent more than they were forecast to spend based on the pre-COVID-19 trajectory.

This loosening of purse strings was perhaps not surprising: US consumers had approximately $2.8 trillion more in savings than they had in 2019, and many didn’t hesitate to dip into those savings as pandemic restrictions eased across the country. But it isn’t just the savers who have been making purchases: credit card debt is starting to rise as well. People in every age cohort and income group spent more of their money, but year-over-year spending growth was highest among millennials (17 percent) and high-income consumers (16 percent). That said, consumer sentiment began to dip in late February, as we discuss further below.

Consumers continue to spend more on certain product categories, but inflation is slowing volume growth. 

In some categories, much of the growth in spending in February and March 2022 was because people bought more; inflation accounted for only a small portion of growth. This was especially true in categories that boomed during the pandemic: sporting apparel, pet supplies, cosmetics, and software and electronics. But in other categories—including gasoline, restaurants, and travel—inflation has masked a drop in volume of consumption. Consumers bought mostly goods rather than services or experiences. Spending on goods was higher than prepandemic levels, whereas spending on services was still 2 percent lower than it was prepandemic—a pattern that will likely continue until more people feel comfortable being in crowds and attending public indoor events.

In light of persistent inflation and the war in Ukraine, consumer confidence—which rose steadily through 2021—dipped in February 2022. Only 38 percent of survey respondents said they feel optimistic, down from 44 percent in October 2021. The steepest drop in consumer sentiment was among high-income consumers, a group that frequently traded up to more-expensive products and brands in 2020 and 2021 but that might soon moderate what it buys. Companies will need to figure out the value equation that high-income consumers find most compelling: Will they continue to spend but start to trade down more than they did in 2020 and 2021? Will they shift more of their spending to channels providing better value?

The “loyalty shake-up” continues. 

More US consumers reported switching to different brands and retailers in 2022 than at any time since the beginning of the pandemic—and most of them say they intend to incorporate that behavior into their routines. Their reasons? With inflation at a record high, more people are looking for value; price is at the top of the list of consumers’ motivations for switching. Almost all consumers—90 percent—have noticed that prices are going up. In particular, they’ve noticed significant price hikes in two things that many people buy multiple times a week: gasoline and groceries. Among consumers who said they’ve switched brands, slightly more than a third said they opted to buy private-label products.

Availability, which was a big reason for switching in 2020 and 2021, still matters a lot but is less of a differentiator than it was at the height of the pandemic, when some brands couldn’t keep up with demand and were constantly out of stock. Meanwhile, brand purpose is now less of a buying factor for consumers than it was in 2020. Novelty, on the other hand, has steadily risen in importance. Consumers are keen to try something different, making innovation an imperative for brands that want to win (or win back) consumers. Combining innovation with the perception of better value could be a particularly attractive offer.

Shoppers are spending more both online and in stores. 

People began shopping online in droves at the start of the pandemic, when they didn’t have much of a choice. But it turns out that many people enjoy the convenience that e-commerce offers. Even when brick-and-mortar stores reopened, spending in online channels continued to climb. Year-on-year growth in e-commerce was 27 percent in March 2022; the total uplift in e-commerce penetration, from the onset of COVID-19 until March 2022, was 33 percent.

Contrary to what some in the industry predicted, the rise in e-commerce hasn’t made brick- and-mortar retail obsolete. In fact, in-store spending is recovering at a healthy clip—with 8 percent year-over-year growth in March 2022, compared with approximately 5 percent in early 2021. Providing a seamless experience in both online and offline channels is becoming table stakes for brands and retailers. In addition, companies would do well to differentiate the service and experience of in-person shopping, while giving consumers reasons to continue to visit their websites and apps.

Omnichannel shopping is becoming the norm. 

Seventy-five percent of US consumers say they’re researching and purchasing both in-store and online. And this omnichannel behavior isn’t confined to a few types of products: consumers are doing it for both food and nonfood purchases across a broad range of categories. What’s more, 45 percent of consumers say social media is influencing their purchases.

Not surprisingly, social-media influence is heaviest among younger people and is most relevant in appearance-related categories such as cosmetics and sports apparel. Social commerce, already a phenomenon in China, is still nascent in the US market, but one in ten omnichannel shoppers said they’ve already made purchases directly via social media. It’s a channel that’s only growing in importance—yet too many consumer and retail executives today still haven’t taken the time to educate themselves in social media and thus are missing out on powerful opportunities to reach and engage consumers.

Even as people go out again, their “nesting” continues. 

More than half of US consumers have already resumed their normal out-of-home activities; another 20 percent are in the process of returning to their prepandemic routines outside the home. Almost 40 percent of survey respondents report that they’re now exclusively working in an office or other workplace outside the home. On average, consumers are working from home only about two days a week. But about one-third of consumers say they aren’t yet comfortable attending public indoor events.

Interestingly, despite resuming most of their out-of-home activities, US consumers haven’t pulled back on making their homes more attractive and comfortable. Spending on home improvement and maintenance is still growing: it’s 11 percent higher than pre-COVID-19 projections even after adjusting for inflation. Given the overall shift in the way people have used their homes during the pandemic as well as many people’s expectations of continuing to work from home at least one day a week, companies can expect this nesting behavior to continue.

Consumers say they care about ESG, but it means different things to different people. 

When choosing which brands to buy, consumers—in particular, younger generations—say that their choices are at least somewhat influenced by environmental, social, and governance (ESG) factors. More than two-thirds of younger survey respondents said at least one aspect of ESG is very important to them. Paramount among their concerns is that companies are transparent and show that they care for people (employees, customers, others in their communities).

In general, younger consumers prioritize authenticity and social issues such as diversity, equity, and inclusion, whereas older consumers pay more attention to health and environmental issues. Today, with inflation driving many consumers to switch brands—value has become more of a motivator than values, so to speak—companies that can deliver on consumers’ expectations for both value and values will be best positioned for success.

The boom in online shopping that dominated the first two years of the pandemic is starting to unwind, as shoppers freed from lockdowns head back into bricks and mortar retail stores.

The pure-play e-commerce sharemarket darlings are having a tougher time also as supply chain disruptions and hefty shipping and freight costs eat into profits.

One of the highest-profile e-commerce companies, Kogan.com was severely punished again on the stockmarket on Friday as profits slipped in the three months ended March 31. Kogan.com is also still carrying large amounts of inventory in warehouses as a buffer against potentially long delays for some orders, which is weighing on profits.

Kogan.com founder and chief executive Ruslan Kogan said on Friday there had been a general slowdown in e-commerce across the market in the March quarter, as he foreshadowed a crackdown on costs in the business to preserve profit margins.

“Over the coming year, the company will be recalibrating its organisational costs in line with current growth levels to support a return to the historical operating margins previously generated,” Mr Kogan said.

Global online fashion retailer SHEIN is set to hold its first ever pop up shop in Australia, from May 13-15 in Melbourne.

SHEIN is an international B2C fast fashion e-commerce company that mainly focuses on womenswear, but also offers men's apparel, children's clothes, accessories, shoes, bags and other fashion items.

The pop up will showcase SHEIN’s Autumn Winter 2022 clothing and accessories which cover all ages, genders and sizes.

It will include some of the brand's newest collections including SHEIN X (its collaboration with emerging designers), EMERY ROSE (a boho collection), DAZY (an asian-fashion inspired collection), SHEGLAM (beauty collection) as well as home products and its pet clothing range PETSIN.

“We’re thrilled to be hosting our first ever Australian pop up and offering our Australian customers the opportunity to shop the collections in-store,” a SHEIN spokesperson said.

SHEIN has previously held pop up stores in New York, Los Angeles, Berlin, London and Singapore and is now heading here.

The pop-up shop will be located at 340 Flinders St, Melbourne, and will be open from 10am-6pm from Friday, May 13- Sunday, May 15.

Founded in 2012, SHEIN is a leading global online retailer with key operation centres in Guangzhou, China, Singapore and Los Angeles, along with other major markets. 

Jo Horgan is a talker. In her British accent, with vowels that remain unflattened despite living in Australia for almost four decades, Horgan talks and talks. Three times over the course of our conversation, politely inquiring members of her inner circle try to wrap us – her – up.

The first time, she waves them away, equally polite. The second, she invites them to sit. By the third time it’s clear to everyone that she has run out of excuses. “Right. I’m being cheeky now.”

By turns breathlessly effusive and pensively introspective, Horgan speaks with speed and obvious delight and then, shifting gears, she talks slowly and deliberately, selecting each word as if from a shelf in front of her. And yet she speaks. And she speaks. Because Jo Horgan has quite a lot to say.

Apparel and footwear retail companies Brand Collective and PAS Group are to merge, creating Australia’s third-largest fashion retail group. 

The deal, effective April 26, will aggregate 26 brands and 15 character licences, operate in 300 retail locations across Australia and New Zealand and employ 3000 staff. The company will also run some 250 wholesale accounts both locally and internationally. 

Trading under the Brand Collective banner, the business will boast revenue exceeding $600 million.

The newly combined Brand Collective is in the top three retailers in Australia with combined revenue of more than $600 million generated from its 26 brands and 15 character licences. 

The portfolio of brands will include Clarks, Hush Puppies, Shoes & Sox, Superdry, Replay, Review, Black Pepper, Yarra Trail, Everlast, Lonsdale, Julius Marlow, Grosby, Mossimo, Marco Polo, and Volley. 

The Brand Collective headquarters will relocate from Port Melbourne to Cremorne where PAS Group is currently located, the two businesses consolidating in one location in “campus-style” premises. 

Eric Morris will be CEO and Lisa Shalem, previously GM at Shoes & Sox, will assume the role of executive GM of the footwear division. 

Inside Retail understands that Brand Collective’s existing CEO Caleb Brown will be leaving the business. 

Larry Kestelman, of Brand Collective parent LK Group, said the merger would allow the group’s brands to continue to grow and “achieve their full potential”. 

Morris said the company’s Designworks division supplies products to department stores and discount department stores, while Shoes & Sox is the leading children’s footwear retailer in Australia, dominating the children’s footwear category in Myer. Brand Collective plans to expand the Shoe Warehouse network. 

“We will be working hard to grow the business through both continued organic growth and complementary acquisitions.”

The managing director of book retailing group Dymocks says book sales across the industry are continuing to grow in the early months of calendar 2022 even as economies fully open up, with part of the rise stemming from newer social media platforms like TikTok.

Mark Newman, who has been running Dymocks in Australia for two years, said industry sales are up 2 per cent in the first few months of 2022, after a stellar 8 per cent rise in 2021.

The “at-home” lifestyle in the pandemic had been a large reason for the jump, but there are powerful social media forces at work where TikTok users like to show themselves with the book they are reading, or about to read.

“It’s partly being driven by TikTok,” Mr Newman said.

TikTok users are posting using the hashtag #BookTok.

“Books and reading books has actually become ‘cool’ again,” he said.

He said there had been a strong upturn in book sales last year as people sought to read more when stuck at home.

“People have spent so much time on screens,” he said.

“Ultimately, books are entertainment.”

But bricks-and-mortar players were hit by trading restrictions which meant foot traffic was down in the depths of the pandemic, similar to retailers in other segments.

Mr Newman, who is in Adelaide to open a new $3.3 million Dymocks superstore on Wednesday in the old Regent Theatre building off Rundle Mall, believes the omnichannel approach is the right one to drive maximum growth.

Dymocks operates 50 stores, which is down from a peak of about 80 outlets when the business was almost exclusively bricks and mortar.

“Consumers, authors and publishers all want physical bookshops to continue to thrive,” he said.

Having large flagship stores is important for continued customer growth, because many people love to browse or read a couple of pages before they commit to a purchase.

He said online sales across Dymocks are at about 15 per cent of total sales. Before the pandemic, online sales across Dymocks was about 5 per cent. Mr Newman said Dymocks does not have an aspiration for how high the online penetration might reach.

“I think it’s difficult to say. We’re ready for it to be whatever it becomes,” he said.

Mr Newman said the new Regent Theatre superstore, which covers 980 square metres and includes three 10-metre high curved wooden arches as design features to draw customers’ eyes back to the bookshelves and off the ornate 13-metre high ceilings, is a company-owned store. Dymocks has eight company-owned stores, with 42 run under franchise agreements.

Dymocks competes against a range of players including traditional bricks-and-mortar independent booksellers such as Readings in Melbourne and Gleebooks in Sydney, and online giants such as Booktopia and Amazon.

Booktopia is a pure-play book retailer which listed on the ASX in a $43 million December 2020 initial public offering, but which has experienced a big decline in its share price over the past eight months. Booktopia was trading at $2.99 in late August last year, but has slipped to 70¢.

Booktopia shares were issued at $2.30 as part of the IPO and finished their first day of trading at $2.60, valuing the company at $357 million.

Booktopia had tried to raise $40 million through an IPO in 2016 but was forced to pull the plug because investors were spooked by the imminent arrival of Amazon and its book business, The Book Depository, into the $2.5 billion Australian book market.

Mr Newman said the new store contained 10 pieces of theatre furniture which had been discovered in the basement of the Regent Theatre. The theatre opened in 1928 and closed in 2004.

South Africa’s Woolworths Holdings has held discussions with investment banks as it considers selling David Jones, the up-­market Australian department store it purchased eight years ago.

A sale would finally end an investment odyssey that has cost Woolworths billions of dollars in writedowns, seen the company churn through five CEOs, and created an ongoing headache for management in South Africa.

Woolworths, listed on the Johannesburg Stock Exchange and not linked to the Australian supermarket chain, has already spoken to a number of banks as it looks for a buyer for David Jones to rid itself of its disappointing, sources said. It paid $2.1bn for the Australian retailer in 2014.

There has been speculation in Australian and South African investment markets that the Woolworths board has finally pulled the trigger on the sale of the 184-year-old department store.

On Monday, a Woolworths spokesman told The Australian that it did not comment on media or market speculation. “If there were any developments that warranted communication to the market, it would be done as and when required,” he said.

But insiders at David Jones headquarters in Melbourne and at Woolworths Holdings in South Africa tell a different story, with the final details of a number of sale options now being openly discussed with external advisers and bankers.

Woolworths is considering sale now that the company has returned to profit, its properties have been sold and most of its debt has been paid off.

The move comes as Australia emerges from the worst of the Covid-19 pandemic, which left many of the high-end retailer’s stores closed for months.

The end of lockdowns and restrictions is creating sales and profit momentum.

A succession of investment and merchant banks have been sounded out for the sale.

It is believed that Woolworths is highly unlikely to get close to the $2.1bn purchase price it paid in 2014 when it launched its takeover bid for the then ASX-listed David Jones.

The financial health of David Jones has improved considerably in the last few years.

It recently broke a three-year streak of losses to post its first bottom line net profit since 2018, lifted out of the red by property sales, lease benefits and an end to a horror run of impairments that grew to almost $1bn.

The addition of more than $70m in JobKeeper and other government wage subsidy programs helped David Jones return to profitability as its operations were shaken by prolonged lockdowns across Sydney and Melbourne.

The department store’s accounts lodged on the Johannesburg Stock Exchange in late 2021 showed adjusted earnings for 2021 of $84m.

Woolworths – which also owns the Country Road Group, Trenery, Witchery, Mimco and Politix – has pushed through restructures and cost cutting in the last 18 months.

Operationally David Jones has proved a costly headache and distraction for Woolworths – both for the former CEO who launched the takeover, Ian Moir, and his replacement, Roy Bagattini, who was appointed CEO in early 2020.

There has been considerable churn of senior executives and management at David Jones since Woolworths Holdings bought the business eight years ago.

The retailer has had five chief executives in six years.

To get its house in order Woolworths Holdings has pushed through a spate of activity, including property sales, led by the sale of the David Jones Elizabeth St Sydney CBD building for $510m, which produces a gain of $19.02m, and the sale of a building in Bourke St in the Melbourne CBD for $121m, with a gain on the sale of $23.76m.

The fast pace of the turnaround was driven by key operational initiatives, including the removal of tens of millions of dollars of costs, shutting down most of its loss-making food halls, exiting its disastrous BP food alliance and cutting floor space by as much as 7 per cent.

While sales at David Jones fell sharply for first six months of the financial year, they rose by 3.2 per cent in the six weeks to December 31.

Online sales, the company said, rose 44.2 per cent over the six-month period and contributed 28.1 per cent of the total.

Equities analysts had warned of a string of potential unfavourable investment updates for the retail sector as companies begin reporting first-half results.

But poor bricks-and-mortar sales are being balanced by a rise in online shopping at some of the country’s largest retailers.

JB Hi-Fi, which reported its first-half sales in January, recorded a 62.6 per cent increase in online sales – now making up 22.7 per cent of the total.

That result led Citi analysts to upgrade expectations for its rival Harvey Norman. They now expect earnings to increase by 9 per cent for the financial year. Harvey Norman is benefiting from a boom in home renovation.

Melbourne-founded smartphone mount manufacturer Quad Lock is considering a run at the ASX boards after a strong bout of growth during the pandemic that will see the company’s revenue top $100 million this year.

The business was founded by Rob Ward and Chris Peters in 2011, initially starting off as a crowdsourcing project for a sturdy iPhone mount for cars and bicycles. It rapidly gained popularity in cycling circles both locally and internationally to the point where the product has gained Kleenex-like levels of customer recognition, Mr Ward said.

“If you look at Google Trends, at one point the term ‘Quad Lock’ actually outgrew the generic search term of ‘iPhone bike mounts’, so we’re definitely the best known in the space,” he told The Age and The Sydney Morning Herald.

“We were the first of the case-based mounting solutions, and now everything out there, when new products come out, everything is comparing to us.”

In 2020, Quad Lock reported revenues of $47.5 million, which nearly doubled to $88.6 million in 2021. The business expects to crack $100 million in sales this year.

Mr Ward and his team are hoping to leverage its trajectory and popularity to further expand the business. Having taken on funding from local private equity powerhouse and Adore Beauty investor Quadrant in late 2020, the founder is frank about further corporatisation of the business being on the cards.

“When private equity buys into a company like ours there are three things on the cards: more private equity, an IPO, or a trade sale,” he said. “All three are an option, and we don’t have a preference for one over the other, but I do think as the business grows I’m not sure who a trade buyer would be.”

Preparing for these potential outcomes, Mr Ward has spent the last few years further corporatising the business, improving Quad Lock’s governance and bringing in a few heavy-hitting executives, such as former Catch chief financial officer Mark Spencer who joined the business last year.

But despite the business’ growth during the pandemic, Mr Ward said Quad Lock hasn’t been exempt from the same logistics and manufacturing woes plaguing other consumer goods brands, most notably the semiconductor shortage which has affected some of the company’s newer, high-tech products.

“We’d get a big product ready, plan to launch it, then find out we couldn’t get enough of that chipset and have to redo the whole product,” he said. “So it hasn’t been easy, but we haven’t been stopped in any major way.”

Quad Lock’s products are also quite high margin, Mr Ward said, which allowed the business to spend more to ship its goods internationally even when shipping rates exploded due to the virus.

Outside of a possible ASX listing, his focus is on building out the business-to-business side of the company and launching new product ranges, though the founder noted they would not be straying too far from the company’s roots.

“If anything, more and more of what we do is just doubling down,” he said.

Australia’s famed RM Williams boot could start being made from a plant-based leather alternative following a $26 million investment by mining magnate Andrew Forrest in a US sustainable textiles company.

Forrest’s Tattarang investment firm announced on Tuesday evening it had backed Illinois-based Natural Fiber Welding’s $US85 million ($114 million) series B investment round, pouring in $US20 million ($26.8 million) alongside a raft of high-profile investors such as BMW and Ralph Lauren.

Natural Fiber Welding’s (NFW) main products are Clarus, a collection of high-performance sustainable textiles, and Mirum, a plastic-free, plant-based leather alternative that is fully biodegradable.

It’s the latter that Tattarang is eyeing as a product that could potentially be used by another one of the firm’s investments: RM Williams boots. Tattarang chief investment officer John Hartman said Mirum could provide “wide-ranging” opportunities for the iconic Australian brand, though stressed the company’s core range would remain traditional leather.

“Leather is of course deeply entwined in the DNA of RM Williams, and we have no plan to change that, however we know consumers are increasingly seeking high-performance, plastic-free leather alternatives. NFW could provide an opportunity for us to further explore this with RM Williams,” Hartman said.

“Aligning with Andrew and Nicola Forrest’s ultimate goal to eliminate all plastic waste through the initiatives of Minderoo Foundation, Tattarang and RM Williams are on a journey of continuous improvement to remove plastics and other synthetics from our supply chains.”

Forrest acquired RM Williams in late 2020 as part of a $190 million deal, which was posed as a return of the company to Australian hands after years of foreign ownership. Following the acquisition, the company said it would focus more on sourcing Australian-made leathers for its boots, and bring as much of its boot manufacturing back to Australia as possible.

If RM Williams were to use NFW’s leather-like products, it would not be the first Australian company to do so, with Fitzroy-based bag and wallet maker Bellroy also making a line of Mirum-based accessories. Global brands such as H&M, Allbirds and Alexander McQueen have also used NFW’s textiles in their products.

“The textile industry is one of the world’s oldest and true innovation is rare,” Hartman said. “We see NFW and its patented technologies as a genuine disruptor with a significant addressable market delivering products that are sincerely better for human and ocean health.”

NFW intends to use the proceeds from its raising to further scale the business to meet the demand for its products, along with expanding its offerings into moulded composite materials.

This week, electronics retail group Winning launched its new online furniture, bedding and appliances destination Andoo. 

And while the product range is more varied than some of Winning’s other businesses, and it targets more affordable prices, Andoo also represents a group mentality shift towards sustainability.

“We’ve always said our mission is to provide the best shopping experience in the world,” Winning Group’s chief marketing officer Sven Lindell told Inside Retail. 

“But moving forward, our mission is to provide the best, and most caring, shopping experience in the world, and for the world.”

Andoo offers to remove and recycle its customers’ old appliances and mattresses as part of its delivery process. Appliances Online, one of Winning’s online businesses, also takes and recycles appliances during the delivery process, and is one of Australia’s biggest recyclers of e-waste.

According to Lindell the group was already heading in a more sustainable-focused direction with appliances, and it made sense to expand this effort into other parts of the group. 

“We want to make sure we can offer the same amazing [recycling] service across all parts of the home,” Lindell said. 

“This isn’t about just doing what we know, it’s about revolutionising the way big, bulky items are handled and reducing the waste for not only our business, but for all communities.

“We want to leave the world a better place for our customers, our people, our communities, and our planet. And [Winning] is the vehicle for us to do that.”

While it’s early days, Lindell said Winning Group will soon unveil a new group strategy and website which will make its vision “a lot clearer”.

Winning Group chief executive John Winning said Andoo was created with a misag the planet and vulnerable communities. With this in mind, at launch, the business donated $500,000 worth of furniture to non-profit organisation Good360 to support flood-affected communities in New South Wales and Queensland.

“Andoo recognises the social and environmental challenges facing our planet, so this partnership [with Good360] works to take more action to improve the experience of the Australian communities that need our care most,” said Winning. 

Broadening the customer base

Andoo may sit well within Winning Group’s focus on the home, selling similar products to some of the group’s other businesses, but it is focused on a different customer segment.

“If you think of brands like Rogerseller and Winning Appliances, the proposition there is all about the premium, and we’re creating a premium environment in those stores,” explained Lindell. 

“But we’re now looking at scaling our operations to service in Australia [and New Zealand], and our online and digital channels are the way to do that.”

According to Lindell, Andoo, Appliances Online and Home Clearance will focus on being more affordable and accessible (being deliverable to over 90 per cent of the country), while Winning Group’s other brands will remain premium offerings.

The business’ upcoming ‘Winnings’ showroom, which will combine Winning Appliances, Rogerseller, and Spence & Lydas’ Redfern stores, will sit within the premium segment.

Winning Appliances general manager Harry Boileau told Inside Retail the new store would act as a destination for customers looking to plan and detail their renovation plans.

“This is definitely not a space where you come, spend $50 and walk out thinking ‘that was a good half an hour’. You’ll want to be fully immersed,” said Boileau.

The chief executive of Levi’s has declared globalisation “dead” following months of supply chain chaos and rising freight costs.

Chip Bergh, chief executive of the 169-year-old denim brand, said: “Everybody knows the supply chain issues that have impacted our business greatly over the last nine months or so, but the other thing that is happening is the geopolitical forces.

“I think globalisation is dead, and this trend where this [apparel] industry has habitually chased the lowest-cost-manufacturing base around the world over the last couple of centuries, I think it’s coming to an end.”

The original Levi Strauss was a Bavarian immigrant who moved to California and went into business in 1853.

Levi’s classic “501″ line became a wardrobe staple in the 1980s and early 1990s. The company now sells its wares in 110 countries.

It decided to move production from America to the Far East in the early 2000s. Mr Bergh told the World Retail Congress in Rome: “The name of the game today from a business standpoint is supply chain resilience and agility.

“When you are missing sales because a ship is parked outside and can’t get to the port and unload containers, and you’re leaving money on the table because the consumer can’t buy the product, that’s a big business issue.” He said that rising cost pressures and inflation were driven by the pandemic, supply chain bottlenecks and shortages of labour in some parts of the world.

Mr Bergh added: “We’ve now realised that [goods] being produced in the lowest-cost countries and putting product on a boat and shipping it to the other side of the world and not getting it to the shelves on time has a cost to it,” he added.

“We’re going to see more manufacturing shifting closer to market because of the importance of that agility and responsiveness and having confidence that the product is going to be on the shelf in store when you need it to be.”

He also warned, companies that failed to adopt “digitisation” as part of their modus operandi post-pandemic would “die”.

“If you are not a tech company today, you are going to be dead in 10 years time. We are an apparel company, but we are quickly becoming a tech company,” he said.

“The rapid move to digitisation is more than e-commerce and building out those digital capabilities for the consumer.

“There’s so much of our business that can be digitised - everything from how we design products to how we manage getting products to store.”

Pre-Covid, augmented reality, the metaverse and livestream shopping were distant concepts for many mainstream retailers. Fast-forward just a couple of years later, and Target is experimenting with AR and even McDonald’s in the US is joining the metaverse.

“We are at the forefront of innovation with social commerce, enhanced retailing and emerging retailing. New and emerging technologies are needed to ride on these trends,” said Joshua Emblin, Territory Director, APAC, at Commercetools. 

“This is why retailers must take advantage of agile infrastructure to successfully capitalise on limitless commerce possibilities and create a truly immersive experience.”

Here are a few of the next generation of retail opportunities for brands, according to the new Social, enhanced, emerging report from Commercetools.

Let’s get social

When Covid hit and retailers were forced to come up with new ways to maintain customer relationships, savvy brands turned their focus to social media, where an increasing number of Australians were now spending their time during the lockdowns. Off the back of that, retailers started selling products exactly where their customers were already spending their time. 

According to Commercetools’ report, the most popular platforms for shoppers to purchase from were Facebook (70 per cent) and Instagram (42 per cent). While TikTok is an emerging platform, purchases from it are significantly less (12 per cent).

While several platforms have recently launched live shopping capabilities, including Pinterest and Twitter, the one to watch is YouTube.

“YouTube is likely to rapidly develop into an effective sales channel in multiple categories and for a wide range of shopper segments,” stated the Commercetools report.

Although 28 per cent of shoppers interact with YouTube, it has not traditionally been possible for viewers to shop directly from the platform, although, a live shopping feature on YouTube15 has just launched. Interestingly, the 65+ demographic is particularly active on YouTube. In the last 12 months alone, that customer base’s social commerce spending has risen 50 per cent, from $10/month to $15/month.

According to the report, as retailers begin embracing more social channels, it’s important that brands ensure that the customer’s experiences are consistent across all platforms. 

This includes ensuring that the customers: 

• Access the same catalogue and products; 

• Enjoy the same campaigns and promotions; 

• Are able to use their loyalty privileges; and 

• Have their purchases captured, fulfilled and serviced seamlessly, regardless of the channels they interacted with.

Exploring the next frontier: AR and VR

From Adidas and Sephora to Ikea and Tesco, forward-thinking retailers have been experimenting with augmented reality and virtual retail for quite some time.

Last year, Gucci collaborated with Snap to launch the world’s first augmented reality shoe try-on campaign. Customers were invited to ‘try on’ four different pairs of the brand’s limited-edition sneakers. Once they had tried the sneakers, Snapchatters could then go straight to the product page and make a purchase via the “shop now” button.

If you think AR is simply for bored Gen Z consumers, think again, as interest is actually strongest among Millennials, who account for one in three of all retail spending in Australia, said the report. Meanwhile, the global AR-in-retail market is forecast to grow at a rate of 47 per cent between 2020 and 2027.

While only 13 per cent of Australians so far have used AR to try on clothes online and some experts believe it won’t be until 2025 that it increases to 18 per cent, 73 per cent feel that they are more likely to purchase items that they had tried on with AR. Indeed, AR and VR have the ability to potentially reduce returns by 31 per cent.

It’s time to listen up: Voice commerce

It’s surprising that voice commerce doesn’t get as much airplay as other emerging retail opportunities, such as the metaverse or AR, especially as 26 per cent of Australians own a smart speaker. Engagement with these devices is high, with 67 per cent using one every day and 88 per cent using them at least once a week, largely to either check the weather (56 per cent), ask a general question (53 per cent) or check the time (50 per cent). At the moment, only 33 per cent of smart speaker owners use their device to interact with a brand, product or service online. Even fewer have used it to purchase a new product (28 per cent). 

However, according to the Commercetools report, there’s still opportunity there for brands.

“While shoppers’ desire to see the item is the most common barrier to e-commerce, it should not necessarily be a barrier to the use of voice commerce to re-order regular items. While subscription services for mainstream retail items typically hover around 5 per cent, around 20 per cent of shoppers are interested in the concept. Voice commerce could potentially address at least some of this market,” stated the report.

“As has been the case with e-commerce, it is likely that over time barriers to voice commerce such as ‘hadn’t thought of it,’ ‘not interested’ and ‘not sure of the process’ will all become less significant” 

While some of these forms of emerging retail may seem like an optional “nice-to-have” by some in the industry, the reality is that forward-thinking retailers know that the key to success is in ensuring that you are exactly where your consumer is.

“The modern consumer is bombarded with a plethora of online shopping channels – social commerce, voice commerce and live shopping,” said Emblin in the report. 

“Truly a modern retailer would be able to engage in commerce anywhere and everywhere, with no limitations and boundaries, to engage the modern consumer.”

Inflation is well and truly back in the headlines. After years of bemoaning that prices weren’t increasing fast enough, the Reserve Bank of Australiais now grappling with just how soon and how hard it should act to bring inflation under control.

Headline inflation is running at 3.5 per cent and the RBA doesn’t expect it to fall back within its 2 to 3 per cent target range until the middle of next year.

With prices increasing at their fastest rate in a decade, concerns about the cost of living will feature prominently in the upcoming federal election campaign.

But what is inflation, why is it rising, and what can be done to rein it in?

What is inflation and the consumer price index?

Inflation is the rate of increase in the price of the goods and services purchased by households.

Prices generally increase over time, so inflation is usually positive. Since 1990, annual inflation has averaged close to 2.5 per cent, meaning the average cost of what households buy has increased by about 2.5 per cent each year.

While prices across the economy do fall from time to time – a situation known as deflation – these periods are usually short-lived, and generally only occur during economic downturns.

The most well-known measure of inflation is the consumer price index (CPI), which is compiled on a quarterly basis by the Australian Bureau of Statistics (ABS).

The CPI is a weighted average of the price of thousands of different goods and services commonly purchased by households, which are then grouped into 87 different categories like meals out and takeaway food, women’s clothing, and domestic holiday travel.

To estimate the CPI, the ABS aggregates prices from various sources including government agencies, schools, and retail outlets. While some prices are collected in person, the ABS has made increasing use of digital price collection methods in recent years like supermarket scanner data.

The ABS determines what weight to assign each category by reviewing data on how households spend their money. The weights are updated annually to make sure they accurately reflect shifting patterns in consumer spending.

The two largest items in the CPI are the cost of purchasing a newly-built dwelling and rents, which collectively account for about 15 per cent of the index.

The newly-built dwelling measure does not measure changes in house prices, which are not included in the CPI. Instead, it measures the price of a new dwelling excluding the value of the land component. Changes in the price of established houses are excluded from the CPI because they are considered a transfer of an existing asset.

Since reported inflation can be volatile due to large price swings in just a handful of products, economists often focus on measures of underlying inflation.

The most commonly used measure of underlying inflation is the trimmed mean, which excludes those categories of items which had the largest price increases and the largest price falls in a given quarter.

What causes prices to rise?

There is no single cause of inflation. Prices generally increase at a faster rate as the economy strengthens. As unemployment falls, firms are forced to pay higher wages, bolstering consumers’ purchasing power and increasing demand for goods and services.

Prices rise in this situation because households want to buy more than was produced at previous prices.

Because wages are an input cost for businesses, firms may also hike prices to pay for higher wages. This logic extends to changes in other input costs. For example, timber and bricks are important materials for building a new house. If the cost of these inputs were to increase, home builders may raise prices.

Changes in the Australian dollar can cause temporary fluctuations in inflation. A lower exchange rate makes imported items like clothes and furniture more expensive, leading retailers to raise prices. About one-third of items in the CPI basket are sensitive to movements in the dollar.

Sometimes prices rise because supply is constrained. Fluctuations in petrol prices are often caused by changes in the supply of oil rather than shifts in how much consumers want to buy. Similarly, natural disasters can cause widespread supply disruptions which lead to price rises, particularly for fresh food.

Government policies, especially taxes and subsidies, also influence inflation. For example, tobacco prices increased by about 14 per cent per annum between 2013 and 2020 due to the introduction of a new excise indexation regime.

Prices also rise because we expect them to. Economists refer to this as inflation expectations. Peoples’ expectations for how fast prices will rise affect wages growth negotiations and how firms set prices.

Why is inflation finally picking up?

After almost six years of low inflation, underlying price pressures started to intensify midway through 2021.

The increase in inflation has been broad-based across the CPI basket and reflects a combination of factors.

A tight labour market, spurred on by low interest rates and record amounts of government spending, has boosted household demand for goods and services.

The prices of goods have increased strongly as retailers pass through the costs associated with supply chain disruptions and higher shipping prices.

Meanwhile, the cost of building a new house – the largest component of the CPI basket – is increasing at its fastest rate in more than a decade due to a boom in construction activity and record inflation in building material prices.

Is inflation necessarily bad?

It is generally agreed that a low level of stable, positive inflation is desirable.

If inflation is too low, or negative, then households could delay non-essential purchases in expectation of further price declines. Why buy a new television today if you expect it to be cheaper next month?

This would in turn lead to lower spending, which would cause businesses to lower wages or headcount.

What about high inflation?

But while a small amount of inflation is good for the economy, rapidly rising prices can be damaging.

High inflation erodes a worker’s purchasing power over time if prices are increasing faster than their wages.

Rapidly rising prices also alter decision-making. Households and businesses may bring purchases forward if they expect prices to be higher in the future. Businesses may also need to change their prices more regularly.

High inflation can lead to a wage-price spiral, where workers demand higher wages to cope with an increase in prices, which in turn leads to further price increases as firms try to recoup costs.

What can the federal government do about inflation?

While politicians often talk about cost of living pressures, the federal government has limited scope to directly influence how fast prices are rising.

Just one-fifth of the items in the CPI basket by weight are considered “administered prices”, which are goods or services like health, education and utilities for which the government plays a dominant role in price setting.

In many cases, state governments rather than the federal government are the relevant price-setters for these items.

The federal government can indirectly influence inflation through how much money it spends and how much money it collects in taxes, since these decisions impact the economy more broadly.

Why does the RBA target 2-3 pc inflation?

The RBA adjusts interest rates to achieve a medium-term average inflation rate of between 2 and 3 per cent, under a monetary policy framework it calls flexible inflation targeting.

The RBA was one of the first advanced economy central banks to adopt inflation targeting.

When inflation is too low, the central bank lowers interest rates to encourage consumers and businesses to spend money, pushing inflation higher. Interest rate cuts also cause the Australian dollar to fall, which makes imports more expensive and puts additional upward pressure on inflation.

When inflation is too high, the RBA raises interest rates to cool the economy.

Then governor Bernie Fraser announced the 2 to 3 per cent target in 1993, and it was formally endorsed by the federal government in 1996.

While inflation is currently above the RBA’s target band, the bank has held off raising rates over a concern price pressures could be short-lived. This is because one of the drivers of higher prices has been supply disruptions, which are expected to be temporary.

The bank has also said it wants to see evidence that wages are growing fast enough to keep inflation sustainably within its target range. Wages growth remains weak, though the bank expects it to pick up over the coming year.

Before inflation targeting, the RBA tried alternate monetary frameworks, which failed to deliver stable prices or acceptable macroeconomic outcomes, and throughout most of the 1970s and 1980s, inflation was higher in Australia than in the rest of the developed world.

The central bank’s former deputy governor, Guy Debelle, said in 2018 the 2 to 3 per cent range balanced the trade-offs between inflation being too high and inflation being too low.

“We know that some number higher than a 2 to 3 per cent rate of inflation will materially enter decision-making, because we have had plenty of experience of higher rates of inflation that demonstrates that. How much higher though, we don’t really exactly know,” he said.

Not all prices will grow within the 2 to 3 per cent range. Some goods will become more expensive relative to other goods over time due to structural changes in demand and productivity. These relative price shifts provide a signal to the economy about how to allocate resources efficiently.

What you need to know about inflation right now

• Expect the price of milk, yoghurt and other dairy items to spike, cheesemaker Bega warns, as local manufacturers face the worst labour and material shortages since the 1970s.
• Logistics companies are hitting customers with fuel surcharges of around 20 per cent after the national price of diesel soared to more than $2 per litre.
• In the rental market, tenants are being forced to compete from a smaller pool of properties and as a result rents are expected to surge by 15 per cent this year, which will also stoke inflation.
• Frustrated workers will no longer accept pay rises of 3 or 3.5 per cent a year, unions say, as consumer price inflation heads towards 5 per cent.