Australian Retailers Struggle to Keep Up with Changing Consumer Habits

By Georgie Hewson

Topic: Retail Industry

Sun 26 Jul 2026 at 4:41am

Australians are spending their money differently, and some retailers are struggling to keep up.

Katies, a women's clothing store, once offered fashionable clothes at affordable prices, but it has closed its stores.

Katies' advertising slogan was 'Matchable clothes at an unmatchable price'.

At its peak, Katies was a popular store for women who wanted to look stylish without spending a lot of money.

One of Katies' advertisements said, 'From top to toe, everything is $19'.

The 'Going Places with Katies' campaign was a well-known advertising slogan in the 1980s.

However, at the turn of the century, Katies struggled to attract younger shoppers.

Katies promised affordable fashion that was up to date with the latest trends.

In 2025, Katies closed its remaining stores after decades of declining sales.

Katies was part of the Mosaic brands group, which also included Rivers, Noni B, Rockmans, and BeMe.

Mosaic's collapse was due to fines, court action, and consumers spending less.

An old Katies storefront in Kalgoorlie, Western Australia, is now closed.

Many long-running retail stores have disappeared from Australia's high streets and shopping centers.

Not only clothing stores have been affected.

In June, Lincraft, Glue Store, and Barbecues Galore announced plans to close or scale down their physical stores.

Betts, a shoe store, will close 20 of its 35 stores and focus on online sales.

The Middle East conflict has created a tough environment for Australian retailers, with rising costs and weakening demand.

As a result, many chains are closing their storefronts and focusing on online sales.

The 'Kmart effect' is a major factor in the decline of mid-range retailers.

Caroline Tan, a fashion retail expert, said that retailers like Glue Store, Lincraft, and Barbecues Galore had massive overheads and nothing to differentiate them.

When consumers tighten their spending, they don't shop at generic stores.

They either trade down to budget options or seek something unique.

Mid-range stores with no clear point of view do not survive in this climate.

A Kmart store in Hornsby in the 1990s offered fast-fashion trends at a lower price than traditional mid-market brands.

The 'Kmart effect' has hollowed out the middle market, making it hard for mid-range brands to compete.

Mid-range brands can't match Kmart's pricing, and their branding doesn't justify the premium anymore.

Kmart has captured the facial data of tens of thousands of customers.

The group of brands including Kmart and Target made $11.4 billion in revenue last year.

The middle market refers to middle-income Australians and the value-driven retailers that target them.

Despite economic pressures, consumers continued to spend on retail, with sales increasing 5.8 per cent over the year to May.

However, the stronger-than-expected sales figures may not translate into stronger profitability for retailers.

Retailers face significant cost pressures, including wages, freight, energy, and supply chains, which erode their already tight margins.

The end-of-financial-year promotional period in June was subdued, reflecting consumers' continued caution.

Many consumers are favoring online marketplaces over physical stores.

Brand expert Christine Moody said that people prefer to shop at online mass discount marketplaces like Amazon, Temu, or Shein.

These online retailers offer fast delivery and lower prices, making it hard for physical stores to compete.

Consumers have changed and now expect a unique experience when they visit a physical store.

Australians spent $82.6 billion online in 2025, up 14 per cent from the previous year.

Now, 24 per cent of all retail spend is online, making it essential for brands to have a strong online presence.

Ms. Moody said that brands need to dig into their story and think about who their customer is to create an engaging in-store experience.

The in-store experience is crucial for retailers to attract and retain customers.

Shoppers want an enjoyable and convenient experience when they visit a physical store.

Physical stores are important for touching and feeling products, but they need to offer more than just a showroom experience.

Clothing retailers had a good month in April, with sales up 3.2 per cent.

Mecca is an example of a store that offers an experience, making customers want to buy more.

It's not just about the products, but also about how customers are greeted and the overall layout of the store.

Noni B and other Mosaic group stores closed their doors by mid-April this year.

A survey found that 47.1 per cent of respondents said improved in-store experiences were important.

The same survey found that 24.4 per cent of respondents said lack of in-store assistance or expertise was a challenge.

Some retailers are thriving by changing their approach to physical stores.

Both Ms. Moody and Ms. Tan agreed that the rule book for creating and maintaining a successful physical retail chain has completely changed.

Glue Store announced its permanent closure, becoming the latest Australian retailer to fail this year.

Opening a shop just to act as a point of sale is a high-risk gamble, according to Ms. Tan.

Using physical storefronts as a multi-sensory extension of digital presence is a better approach.

Emerging womenswear brands like LSKD and Fayt have expanded from online stores to retail spaces across Australia.

LSKD has scaled past an estimated $150 million in annual revenue and plans to expand its physical footprint.

When LSKD opens a new location, it hosts community events that draw massive crowds.

Their store isn't just rows of shelves, but curated 'outfit destinations' built around activities and lifestyle moments.

It's not just retail, but community building, according to Ms. Tan.

You've got premium brands building experiential destinations with genuine innovation.

The middle tier is getting wiped out because it's neither premium nor innovative.

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