In early 2024 the National Retail Association called on the Federal Government to look seriously at the crisis confronting Australian retail, rather than celebrating the Taylor Swift sugar hit to retail sales in February of that year.

National Retail Association Director Rob Godwin said “The ABS figures show that the retail sector is struggling, and can’t simply ‘shake it off’ no matter what kind of spin the ABS puts on the numbers”.

“Businesses are struggling with spiralling overheads, including power prices and insurance, and now they also see the Government pushing for a very significant increase in the upcoming minimum wage review.”

Mr Godwin also said the ABS figures revealed that retail sales in most states were stagnant or went backwards. “When you factor in price inflation, this clearly shows a sector in need of significant help. We simply can’t rely on a US pop star to ensure our retail economy is reaching its potential”.

“The Government needs to start listening to the concerns of businesses, starting with the spiralling cost of wages. Otherwise, the sector will continue to decline and jobs and businesses will simply disappear.”

Fast forward to February 2026. Retail sales have dropped to just 72% of consumer commerce and is falling fast with D2C making up the remaining 28%. D2C is now pushing retailers to the brink. Many experts predict that once D2C hits 30% of consumer commerce, retailers will have no choice than to close stores, shrink store footprints and reduce product ranges to stay afloat. We’ve already seen this in the US and the UK and it’s now playing out in Australia with several chains recently closing up completely or downsizing. The D2C revolution isn’t going away anytime soon either. It’s a permanent change that is gaining momentum, particularly for increasingly value conscious consumers and older consumers that want better products that they need to replace less often.

Some manufacturers are finding this transition challenging – trying to balance their traditional business model of selling via retailers who rely on squeezing manufacturers for the lowest possible price and on “churn” (lower quality products that consumers need to replace more often) – while developing a D2C channel without damaging these wholesale relationships.

AI Assistants adding another layer of complexity

Adding to this challenge is the rise of AI assistants that help consumers answer the question “what’s best for me?”

These AI assistants enable consumers to choose the products that meet all of their needs – offering the ideal value proposition. They also enable consumers to order products easily with flexible fulfilment offering a frictionless D2C commerce experience via platforms such as Onnero.

AI assistants also create another and even more difficult challenge for manufacturers by commoditising every product. Brands become irrelevant. AI assistants are brands agnostic – only showing consumers the products that actually best suit each consumer’s individual needs based on a products ingredients, materials, health, sustainability, quality, value, even its’ manufacturing process and supply chain. This effectively means consumers can no longer be “sold”. Manufacturers must earn each sale by making better products. Failure to do this, means AI assistants will simply ignore your products altogether.

Advertising also must be honest and accurate. Misleading claims or “optimisitic” advertising, tactics such as false urgency, scarcity, premium pricing without matching quality and value are exposed by AI. As are every ingredient, material and process throughout the entire supply chain used to make your product. AI also exposes what your brands stands for, if anything.

Consumers still prefer brands that stand for something. Brands with meaning. Brands that have value.

For manufacturers, managing the transition from retail to D2C can involve some short-term pain. However, the advantages vastly outweigh this pain. Businesses that have already transitioned sell more, have better cash flow, see improved margins, and and have stronger direct relationships with their customers. This helps futureproof their business. And while for some businesses during the transition there can be challenging periods, particularly if the wholesale relationships end earlier than anticipated or abruptly, the upside is obvious.

The D2C model is particularly strong when it comes to cashflow. Computer company Dell began this way driving strong growth by selling decent computers (often built to order) at competitive prices direct-to-consumers and getting paid at the time of order. This enabled it to keep customers payments for an average of 65 days before having to pay its’ suppliers. In fact, Dell has historically maintained a high Days Payable Outstanding (DPO), with some reports showing DPO figures around 88 days or higher.

Compare this to the traditional retail model. The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) found that most SMEs are waiting more than 30 days from the end of the month to be paid.

Analysis by ASBFEO of the data provided by 7000 businesses, many with a turnover of more than $100 million, reveals:

  • 23% of big business take more than 120 days to pay their small business suppliers
  • 9% take between 61 and 90 days to pay
  • 37% take between 31 and 60 days to pay
  • 18% take between 21 and 30 days to pay
  • 13% pay their bills in fewer than 20 days.

Retailers averaged 38 days from the end of the month (so up to 68 days from invoice), though 24% took more than 120 days to pay suppliers (slightly higher than the overall average).

Key takeaways

The longer manufacturers delay adding D2C to their arsenal or transitioning solely to D2C, the more likely they end up invisible to consumers.

  • Consumers are already adding AI assistants to their shopping arsenal
  • 50% of consumers are forecast to use AI assistants for shopping by 2028 (that’s just 2 years away)
  • AI platforms such as ChatGPT will only show relevant ads that directly match each consumers’ enquiry
  • The data from AI assistants is vital for manufacturers so they can make the products consumers actually want
  • Consumers favour D2C brands
  • D2C brands are better equipped to deliver an experience that consumers want – after all it’s the space they live in!
  • D2C provides improved cash flow and higher margins for manufacturers

You can find out more about selling your products D2C via Onnero by checking out our Sell on Onnero page.