Australian retail is entering a period in which generating more sales will not be enough. Retailers are also being challenged to produce stronger results from every employee, square metre of floor space and dollar invested in inventory.
Recent industry figures reveal a complicated operating environment. Retail businesses are generating more nominal value per worker, yet the number of active retailers has barely grown. Online expenditure continues to expand, while rising wages, inventory costs and other expenses place pressure on profitability.
Together, these trends suggest that the future of Australian retail will be shaped less by expansion alone and more by operational productivity.
Australian Retailers Are Generating More With Fewer Workers
Data from the Australian Bureau of Statistics shows that retail employment declined by approximately 0.5% in 2024–25. However, sales and service income increased by 2.8%, industry value added rose by 3.2%, and EBITDA increased by 4.4%.
Further calculations presented in the Australian retail productivity report found that nominal industry value added per worker increased by approximately 3.8%, while nominal EBITDA per worker rose by approximately 4.9%.
These figures do not represent inflation-adjusted labour productivity, but they still reveal an important shift. The Australian retail industry generated more nominal economic value despite employing fewer people.
This may reflect several changes happening across the sector. Retailers are adopting better inventory systems, automating routine tasks, improving staff scheduling and using data to make faster commercial decisions. Employees may also be taking on broader responsibilities as businesses attempt to operate with leaner teams.
The future retail workforce is therefore unlikely to be measured only by headcount. Businesses will increasingly focus on the value each role creates and whether employees have the systems, training and physical environment needed to work efficiently.
Growth Is Coming From Existing Retailers
The number of actively trading retail businesses increased by only 0.1% in 2025–26, compared with growth of 3.1% across the entire Australian business population.
This followed a 0.4% decline in retail business numbers during the previous financial year. According to ABS data, the sector recorded 24,222 business entries and 24,838 exits in 2024–25, resulting in a net decline of 616 businesses.
These movements suggest that industry growth is being generated predominantly by the existing retail business population rather than by a large influx of new operators.
For established retailers, this creates opportunities to increase market share, expand product categories or improve the performance of current locations. However, it also means that competition is likely to become more concentrated. Retailers with efficient systems, recognisable brands and established supply chains may be better positioned to absorb increasing costs than smaller or less productive operators.
New entrants will need to be particularly disciplined. Opening a shop without a clear understanding of labour requirements, inventory turnover, occupancy costs and realistic sales volumes creates significant risk. Future retail businesses will need a commercially sound operating model from the beginning, rather than assuming that customer demand will compensate for inefficiency.
Rising Sales Do Not Necessarily Produce Higher Profits
One of the clearest warnings from recent industry data is the separation between sales activity and profitability.
During the June 2026 quarter, retail sales of goods and services increased by 0.4%. At the same time, wages and salaries rose by 1%, inventories increased by 1%, and company gross operating profits declined by 5.2%.
These measures are not directly equivalent because they include a combination of current-price and chain-volume indicators. Nevertheless, the direction of movement demonstrates why retailers cannot judge performance from revenue alone.
A store can achieve higher sales while becoming less profitable if labour, stockholding, rent, energy, freight and promotional expenses rise more quickly. Aggressive discounting may also increase transaction volumes without delivering a meaningful improvement in margin.
Retailers will consequently need to examine a broader range of performance indicators, including:
- Gross profit by product category
- Inventory turnover
- Sales and profit per square metre
- Labour cost as a percentage of revenue
- Average transaction value
- Stock availability and markdown rates
- Cost to serve each sales channel
The most successful operators will not necessarily be those that sell the greatest volume. They will be the businesses that understand which products, customers, locations and channels create sustainable profit.
Ecommerce Will Reshape Rather Than Replace Physical Retail
Australia’s ecommerce market continues to expand. Australia Post reported that consumers spent $82.6 billion online during 2025, representing 24% of total retail expenditure. Approximately 9.8 million households participated in online shopping, accounting for 82% of Australian households.
However, these figures also show that most retail expenditure still occurs outside online channels. Physical stores continue to serve an important commercial purpose, particularly when customers want to inspect products, receive advice, make an immediate purchase or avoid delivery costs and delays.
The distinction between online and offline retail will continue to weaken. Stores are increasingly supporting click-and-collect, local fulfilment, returns and exchanges, digital product research and personalised customer service.
This gives physical locations a wider role. A store is no longer simply a place where transactions happen. It can also operate as a showroom, collection point, fulfilment centre and brand experience.
Retailers will need systems that provide accurate inventory visibility across every channel. Customers who see that an item is available online expect it to be present when they visit the store. Poor coordination between digital platforms and physical inventory can create frustration, lost sales and unnecessary work for employees.
Physical Stores Must Produce More From the Space Available
As rent, wages and operating costs rise, every section of a retail store must contribute to its commercial performance.
Productive selling space should make merchandise easy to see, compare and purchase. It should also allow employees to replenish stock efficiently and respond to changes in product ranges without requiring an expensive fit-out each time.
Based on experience supporting Australian retailers, Mills Shelving has observed that store productivity is often influenced by practical decisions about layout, product positioning, stock capacity and replenishment access. These operational details may appear minor individually, but together they affect how efficiently employees work and how easily customers can navigate the store.
A poorly planned layout can create hidden products, congested aisles, underused corners and unnecessary movement for staff. Excessive stock on the floor may make a store feel cluttered, while insufficient capacity can lead to empty shelves and missed sales.
Modular fixtures can help retailers adjust shelf heights, product facings and category locations as demand changes. This flexibility will become increasingly valuable as stores accommodate seasonal ranges, promotional displays and evolving customer preferences.
Efficiency Will Define the Next Phase of Retail
According to Neil Webster, CEO of Mills Shelving, the future of Australian retail will depend on how effectively businesses use the resources they already have. Retailers cannot rely on sales growth alone when labour, inventory and occupancy costs remain under pressure. Stores that make products easier to find, simplify replenishment and adapt their layouts as demand changes will be better positioned to improve productivity without continually increasing their physical footprint or staffing levels.
This does not mean retailers should pursue efficiency entirely through cost cutting. Reducing staff, inventory or floor space without understanding the customer impact can damage service quality and restrict sales.
Sustainable productivity improvements should remove unnecessary work while protecting the elements customers value. This might involve improving stockroom organisation, simplifying repetitive processes, using sales data to refine product ranges or redesigning displays so customers can shop more independently.
Technology will assist with these changes, but it will not replace the need for practical retail judgment. Data can identify slow-moving products or periods of low demand, but businesses must still decide how to act on that information without weakening the customer experience.
What Productive Retailers Will Do Differently
The next generation of high-performing Australian retailers will manage productivity as a complete operating system rather than as a single financial metric.
They will connect staffing decisions with customer demand, inventory levels with actual sales patterns, and store layouts with measurable commercial outcomes. Physical and digital channels will be planned together so that inventory, fulfilment and customer service operate consistently.
Productive retailers are also likely to:
- Measure profit rather than focusing exclusively on revenue
- Review the performance of individual categories and locations
- Reduce unnecessary handling and replenishment work
- Use flexible infrastructure that can accommodate changing ranges
- Improve inventory visibility across online and physical channels
- Test operational changes before applying them across multiple stores
- Balance efficiency with accessibility and customer experience
These practices allow retailers to improve output without automatically adding more employees, stock or selling space.
Preparing for a More Demanding Retail Environment
Australia’s retail industry is producing more nominal value through a relatively stable business population and a slightly smaller workforce. At the same time, the recent divergence between sales and profits demonstrates that increased activity does not guarantee stronger commercial outcomes.
Ecommerce growth will continue to change customer expectations, but physical stores will remain central to the industry. Their role will simply become more varied and demanding.
The future belongs to retailers that can make better use of their existing resources. By improving how employees, inventory, technology and floor space work together, businesses can build a more productive operating model without compromising the experience that keeps customers returning.
