Retail steady as she goes, not sinking

Contrary to most of the headlines you see about Australian retailing, consumers are continuing to spend, overall sales figures have been rising steadily (but not spectacularly) all year and good stores with the right offerings are making money. What's really changed is where and how we're shopping.

The latest retail sales figures from the Australian Bureau of Statistics were painted as disappointing by economists who rather wildly guessed there was a pickup in our spending habits in October. In fact, retail sales growth has been remarkably steady all year, ticking along at 0.3 per cent a month.

That's on the more reliable ABS trend series numbers – the seasonally adjusted series jumps around more, but the trend treatment smooths that out to tell us what's really happening. The seasonally adjusted numbers are better at providing headlines though.

But while overall retail sales growth has been steady, there are a couple of marked changes within the sector that dominate reporting of it. Department stores and the clothing, footwear and accessories categories are in trouble with the former in decline for the past two years, and the latter suffering a slide that started just over a year ago. (More from Michael Pascoe: Misinterpreting signals of fear and hope)

The retail lobby would like us to believe it's all the fault of those terrible people who go shopping on the internet, buying stuff from overseas to avoid the GST. Internet shopping is eating some of the shops' lunch, but that's not the real story.

Myer and David Jones are in trouble because they're tired models that haven't moved on. They haven't kept up with the competition, their mark ups are routinely too high, their service levels have fallen and they're simply not entertaining or enjoyable to shop in. The real power of the internet has been to empower consumers with information – we can't be fooled as easily as we used to be, we now have a much better idea of the value of what we buy. Everything is comparison shopped by a couple of mouse clicks or touches of a mobile phone.

Myer and DJs get vastly disproportionate media coverage, partly because they are high-profile listed companies, partly because they have bad stories to tell, partly because they have super models. Total turnover for the department store sector (which includes Kmart, Big W and Target) is less than half the ABS "other retailing" category – but it's the department stores that get all the attention. We're spending more on food, more in cafes and restaurants, more on household goods, more on recreational goods, cosmetics, pharmaceuticals, antiques and other stuff, but less on some other things. (More from Michael Pascoe: Put The Super Guarantee Where It Belongs - In Tax)

While DJs is complaining about the consumer being on strike, I stuck my head in the Sydney Zara store last week. There's no longer a queue of women around the block wanting to get into the shop, but there were still queues at the cash registers, people keen to buy stuff they thought was appealing enough and good enough value to be worth their dollars.

The clothing sector overall is also reflecting the on-going impact of our strong dollar. It's taken time for the savings to be passed on to the consumer, but our currency means we can buy the same number of shirts for fewer dollars. That means retailers' sales turnover can be down despite the number of units sold being up.

It also effectively means Australians are wealthier – we can buy more stuff with fewer dollars. This was highlighted recently by economist Gerard Minack from Morgan Stanley in a graph that showed Australian retail volume growth had actually returned to its long-term average after bubbling before the GFC hit.

The challenge for retailers, like every industry, is to adapt to the ever-changing consumer. Whinging about it and exaggerating what's really happening in retailing doesn't help them at all. Some stores will do better, some will do worse. It's called capitalism.