New research has found that just over half (51 percent) of Australian small retailers are performing below or significantly below their financial expectations.

In comparison, the latest Small Retail Index from the Australian Retailers Association (ARA) and American Express found that almost half (49 percent) are meeting or exceeding their financial expectations.

According to the study, the four biggest concerns for small businesses over the next six to twelve months are a decline in consumer spending (59 percent), lower labor costs (46 percent), lower costs of goods and services (42 percent) and reduced cash flow management (32 percent).

Small retailers are also looking for creative ways to grow their business: around two-thirds (67 percent) are looking for innovative ways to acquire new customers, more than half (57 percent) are focusing on promoting customer loyalty and almost a third (30 percent) are primarily looking to improve online communication with their customers.

According to ARA Managing Director Paul Zahra, the study confirms that many small businesses are struggling but are still looking for growth opportunities.

“Small businesses are an important part of the retail community and an indicator of the health of our sector,” said Zahra. “This study shows that the small business cohort is resilient despite difficult times. Unfortunately, many of them are struggling with rising inflation, high interest rates and the cost crunch.

“While not surprising, it is worrying that concerns about labor costs are increasing.”

Most (89 percent) of survey respondents said they had higher costs in the past 12 months. Small retailers said they are using a combination of measures to manage these increased costs, such as passing costs on to consumers (51 percent), reducing margins (47 percent), looking for savings in other areas (37 percent) and reducing staff (37 percent).

Zahra said the ARA will continue to advocate for federal government relief efforts for small businesses.

“We must act urgently to ensure Australia’s $420 billion retail sector not only survives, but thrives,” Zahra said.

Robert Tedesco, vice president of global commercial services at American Express in Australia, said supporting small business owners was critical to maintaining vibrant communities.

“Small businesses are the backbone of the local economy,” Tedesco said.