ECON6001 - Economic Principles: Australian Retail Industry Analysis

This presentation analyzes the Australian retail industry, focusing on the food retail sector as a prominent example of an oligopoly market. It examines the market structure dominated by companies like Woolworths and Foodland, and discusses the impact of the COVID-19 pandemic on the industry, including consumer behavior, producer decisions, and the government's response. The presentation highlights the economic downturn, the decline in consumer spending, and the government's fiscal measures to support the retail sector. It also explores the effects of the pandemic on international trade and the need for expansionary fiscal and monetary policies to stabilize the economy. The analysis includes statistical data and references to support the arguments, offering a comprehensive overview of the challenges and opportunities facing the Australian retail industry during the pandemic.

Economic Principles : Australian Retail Industry

• Australian Retail Industry is one the prominent diversified
industries exhibiting 5.5% year-over-year growth on an average.
• More than one million retailers are associated with the retail
sector.
• Around 4% of country’s GDP is accrued from this sector.
• Retail sector is the significant employment source of the country.
Approximately 11% of total employment level is generated by this
sector.
Australian Retail Industry

Market structure of Retail Industry
• By definition, oligopoly market is dominated by a group of small industries.
• Price.
• No firm can individually influence the market structure through its price
structure.
• The market share of individual firms is measured by the concentration ratio.
• The selling products are almost homogeneous or different in nature.
• Most of the firms under oligopoly works through collusion and partnership
strategy.

• P1 denotes to the product price.
• If the firm lowers the price below D2,
the firms attain to match the market
demand to retain the market position.
• The kinked demand curve denotes to
gap between marginal revenue (MR1
– MR2).
• Here, profit level of the oligopoly firms
are maximized when marginal
revenue gets equal to marginal cost.
Source: (Choudhury, 2020)

• The current assignment is focused on the food retail sector of Australia..
• Total revenue of the food retailing industry is worth of $ 124 billion.
• Australia’s food, grocery and beverage sector holds one-third market
share of the entire manufacturing market.
• Supermarkets and grocery stores are the important retail chain shops of
the food retailing industry.
Australian Food Retail Industry: a prominent example
of Oligopoly market

• Foodland and Woolworths are considered as two biggest companies in the
Australian food retail industry.
• These two companies own largest retail chai n the sales section.
• Woolworths supermarket occupies 80% of the Australian market and its
stores are located over on e thousand locations (roymorgan.com, 2020).
• In contrast, Foodland supermarket operated through approximately one fifty
locations across Australia.
Retail companies: Foodland and Woolworths supermarket

Figure 2: % of share of Woolworths and Foodland in the Australian retail sector
Source: (roymorgan.com, 2020)

COVID-19 virus pandemic impacts on the Australian economy
• COVID-19 virus initially outbreaks in China in the and then it stars
spreading across the world.
• In this context, the Australian retail market has received severe impact
from this pandemic.
• The Australian government has declared for the economic shut down in
March 2020 (Apps.fas.usda.gov, 2020).

COVID-19 virus pandemic impacts on the Australian consumers
• Most of the retailing shops have been closed due to the economic
emergency.
• Citizens are advised to live in isolation and are requested to avoid
social gathering.
• This results in the sharp decline in the purchasing volume.
• Meanwhile, falling income is another impediment for the Australian
consumers.

Figure 3: Consumers responses to coronavirus
Source: (Statista, 2020)

• From figure 3, it can be stated that the Australian citizens are worried
about the future suffering from anxiety due to growing financial
insecurity.
• Consumers prefer to save more rather than spending on consumer
goods.
• Since the outbreak of the coronavirus, millions of people have lost their
jobs.
• Unemployment level has reached the highest level over the last decade.

Decisions of the retail producers amid coronavirus
impacts
• The producers will attain to reduce the price level to clear the stock of
inventories of the food retail shop.
• Most of the goods are perishable in nature. Therefore, clearance of the
stock would be the highest objectives of the retail owners.
• The departmental stores has experienced a fall of 2.2% within just
one month after COVID-19 break out (Abc.net.au, 2020).