Australian department stores experiencing accelerated growth

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AMERICAN EXPRESS GLOBAL MERCHANT SERVICES Industry Insights DEPARTMENT STORES - AUSTRALIA Australian department stores experiencing accelerated growth American Express Insights Network is pleased to

1 AMERICAN EXPRESS GLOBAL MERCHANT SERVICES Industry Insights DEPARTMENT STORES - AUSTRALIA Australian department stores experiencing accelerated growth American Express Insights Network is pleased to present the American Express Australia department stores Industry Trend Monitor for 2015/16. Processing millions of card transactions every day gives us a unique view across a range of industries and allows us to report on the trends and spend behaviors of millions of consumers. This report focuses on the increased department store spend by Australian Card Members from September 2015 to August 2016 compared to the same time period in 2014/15. The analysis reveals a 13% year-on-year growth in the category. Our analysis shows online spend in the department store category growing by 28% year-on-year. This appears to be due to an increase in the number of spending online as well as an increase in spend by existing. Transaction frequency and online purchase size increased by 6% and 8% respectively. While online department stores are growing at an encouraging rate, in-store still form the majority of the customer base. Only of the shop online and less than 1% of the are online exclusively, whilst purchasing in-store do so 6-times more often than online shoppers. With more major online retailers such as Amazon expected to enter the market in Australia in 2017, these figures highlight both an opportunity and a potential threat to local department stores. We hope you find these insights to be informative and thought-provoking for your business. Business Insights, Global Merchant Services American Express Australia and New Zealand

KEY TRENDS Australian Card Members spent significantly more in 2015/16 than the previous year at department stores, with a high percentage of spending throughout the week, both online and in-store.

2 KEY TRENDS Australian Card Members spent significantly more in 2015/16 than the previous year at department stores, with a high percentage of spending throughout the week, both online and in-store. HEADLINE INSIGHTS department store sales experienced a significant growth compared to the previous 12-months, possibly driven by strategic restructures at some of the major Australian department store brands. Consumer spend increased by and number of transactions grew by 15%. sales grew strongly with a 28% increase in spend, with the number of spending online growing by 11%. It is worth noting the differences in transaction size and frequency between online and in-store: purchase 6 times more often in-store than online, but the average transaction size for online purchases is 1.5 times that of in-store purchases. KEY TRENDS growth is primarily driven by increased spend of existing. stores experienced all round growth compared to the previous year: not only were new acquired but existing also increased their spend. 28% 18% Transactions 15% Spend 11% Customers 6% Transaction frequency 15% Transactions 8% Spend 4% Customers 11% Transaction frequency SHARE OF SPEND BY DAY OF WEEK Share of customer spend between online and in-store is reasonably consistent with approximately 34-36% of spending both online and in-store on weekends and 64-66% of spending in department stores both online and in-store on week days. 34% Weekend Weekday 66% 36% Weekend Weekday 64%

3 SHARE OF SPEND BY DAY OF WEEK Department store spend peaks on Saturday and Sundays both online and in-store demonstrating consumer shopping patterns by channel are fairly consistent across purchase mediums. Tuesdays and Thursdays have a reasonably higher spend share online versus other week days - retailers should consider mid-week timing for online flash promotions to maximise consumer take-up of online offers. 16% 18% Sunday 21% 15% 13% 13% Monday Tuesday Wednesday Thursday Friday Saturday 15% 11% KEY INSIGHTS ONLINE spend is more evenly spread throughout the week with Sundays experiencing the highest (18%) and Mondays the lowest () online sales. Customers are spending around 2.2 times more on a weekend day than they spend on a weekday. KEY INSIGHTS IN-STORE Saturday is the busiest day for bricks & mortar department stores, accounting for 21% of the total sales. Mondays see the lowest activity and contribute to 11% of the in-store sales. on Saturday is 65% higher than that of Monday. Friday, Saturday and Sunday account for 50% of the total sales. MELBOURNE GROWTH DRIVERS For the period September 2015 to August 2016, Melbourne accounted for 27% of and 22% of overall in-store sales at department stores in Australia. This analysis includes in-store sales only. Spend Transactions Customers Melbourne Non-Melbourne 19% 20% 15% 4% 11% 5% 6% Only sales are included in this analysis.

SYDNEY GROWTH DRIVERS For the period September 2015 to August 2016, Sydney accounted for 33% of and 33% of in-store sales in Australia. This analysis includes in-store sales only.

in Melbourne was significantly higher as compared to rest of Australia. It was mostly driven by a 15% increase in the customer base.

4 SYDNEY GROWTH DRIVERS For the period September 2015 to August 2016, Sydney accounted for 33% of and 33% of in-store sales in Australia. This analysis includes in-store sales only. Sydney Non-Sydney Spend Transactions Customers Average Spend per Customer 9% 13% 4% 5% 16% 6% 7% Only sales are included in this analysis MELBOURNE INSIGHTS SYDNEY INSIGHTS Our analysis shows growth in Melbourne was significantly higher as compared to rest of Australia. It was mostly driven by a 15% increase in the customer base. This is backed up by the fact that the growth in transaction frequency was lower than rest of Australia (5% in Melbourne vs. 9% Australia) indicating that the increased spend was due to new customer acquisition. Although Sydney showed growth it was not as high as the rest of Australia. The relative stability could be attributed to maturity within the Sydney market. The growth in spending was primarily driven by an increase in transaction frequency within the existing customer base. BEST ONLINE CUSTOMERS The average spend of the top 10% of online is 6 times more than that of the rest of the population. The top 10% of represents 46% of total spend and 33% of total transactions. Share of spend Share of transactions 54% 46% 33% Bottom 90% of 67% Bottom 90% of

5 BEST ONLINE CUSTOMERS GROWTH DRIVERS The average spend by the top 10% of online is over 7 times more than the rest of the population demonstrating the importance of driving loyalty to retain the highest value. Year on year growth per metric for the top 10% of versus the bottom 90% of are outlined below. Spend Transactions Transaction frequency Top 10% Customers Bottom 90% Customers 32% 24% 11% 18% 24% 16% 4% Share of spend BEST IN-STORE CUSTOMERS The top 10% of represents 41% share of total spend and 31% share of total transactions in this analysis. Share of transactions 59% 41% 31% 69% Bottom 90% of Bottom 90% of BEST IN-STORE CUSTOMERS GROWTH DRIVERS The average spend of the top 10% in-store is much higher at 6 times more than the rest of the population. This presents an opportunity for department stores to focus on driving loyalty within the highest value to maximise incremental spend growth potential. Spend Transactions Transaction frequency Top 10% Customers Bottom 90% Customers 8% 10% 6% 4% 15% 17% 13% 11% American Express Australia Limited (ABN ). Registered Trademark of American Express Australia Limited, 12 Shelley Street Sydney NSW Source: American Express Australia internal data, September 2014 August Data does not represent American Express financial performance. Not to be reproduced without permission from American Express.

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