How the cost-of-living crunch turned discount retailers into Australia’s new powerhouses

Australian shoppers are increasingly turning to discount retailers rather than high-end shopping as cost of living pressures continue.

Consumers are still spending, as the latest data has shown, however they are opting to make their purchases at budget-friendly retailers when it comes to purchases like homewares, electronics, and furniture.

Bargain-hunters are spoiled for choice these days, with the likes of Costco, Kmart and Amazon all meeting their needs.

This increase in savvy consumer spending has seen Costco continue its rapid expansion, with confirmation a new warehouse will open at Brisbane Airport in late 2029.

The retail giant secured a 6.7 hectare site at the airport, which will span 15,000 square metres and include a petrol station and 870 parking spaces, and will create approximately 250 full-time jobs.

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Costco already operates two sites at airports: one at Perth Airport, which opened in March 2020, and one at Canberra Airport, which opened in 2011.

There are now more than 15 stores across Australia. These include four in New South Wales at Auburn, Marsden Park, Casula and Lake Macquarie; four in Victoria at Ardeer, Moorabbin, Epping, and Ringwood; three in Queensland at North Lakes, Ipswich and the Gold Coast; two in Western Australia at Perth Airport and Casuarina; and one in Canberra.

Costco Australia has active plans to add up to 20 more locations over the coming years, including two that will open in 2027 at Pakenham in Victoria, Alkimos Central (Western Australia), and Brisbane Airport.

Costco has become a cultural icon in Australia, selling everything from fresh food, pantry staples, appliances, furniture, clothing, footwear and even jewellery.

Then there is Kmart’s new K home concept store, which opened its first outlet in Melbourne in June, pitting it against IKEA, which previously owned the affordable furniture market.

Kmart’s K home spans 3800-square metre space and includes immersive room displays and curated furniture collections. It also features large furniture items that were previously only available for purchase online, allowing consumers to touch and test the products.

There will also be home styling ideas and the store will feature items not available in traditional stores.

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This is a trial store only, and if it performs as expected, Kmart’s parent company Wesfarmers will roll the format out to additional locations.

Then there is Amazon, which is in the process of hiring an additional 3,000 workers for the Christmas rush.

Over 7.9 million Australian shoppers use Amazon Australia regularly, representing roughly three-quarters of all online shopping households.

Amazon’s delivery model has improved by leaps and bounds, with same day and next day delivery and additional Amazon Fulfillment Centres built to help keep up with booming trade.

Amazon has committed nearly $490 million to construct two new fulfillment facilities in Horsley Park, NSW.

One is a dedicated 80,000 sqm purpose-built facility designed specifically to store up to 1.6 million bulky items such as large flat-screen TVs, outdoor furniture, and garden tools.

The demise of high-end retail

As the likes of Costco, Kmart, and Amazon continue to thrive, traditional luxury department stores like David Jones and Myer continue to struggle.

Founder and director of Retail Customer Advisory Trent Rigby told Weekend Today their survival depends on making major changes to meet modern customer demands.

“Department stores used to be that place where you’d go in and it was exciting and that was how you used to discover new products,” Rigby explained.

“But so much of the world has changed. We’ve got the internet now. I think, as well, these big department stores are under a lot of financial pressure as well.”

This has seen the closure of David Jones and Myer locations and a reduction in staff.

While both stores are attempting to pivot with improved online services and exclusive deals with popular brands, they have been left playing catch up.

David Jones and Myer will remain, he said, but they will be “smaller and more curated”.