to be coming to an end.  The signs are everywhere. Firstly, CEOs, not just Scott but also other CEOs, like Anthony Heraghty at Super Retail Group have been talking up their fitness to survive any softening of conditions. When multiple retail groups are bracing for impact publicly, we should take note. Secondly, recession bellwether retail verticals have underlying stress. Take consumer electronics, where sales are softening concerningly. Alongside this, there are some big inventories being carried. The combination will lead to a price fight and margin erosion. Thirdly, at the top end of town, luxury retail is chugging along just nicely with its core consumers, which proves the point. Societal inequality means there is a significant proportion of our population immune to financial distress. Look a little deeper and the middle-to-mainstream shoppers are no longer spending in luxury but instead focused on covering their mortgage. Interest rates may now be normalising against historical averages but it’s an eye-watering squeeze if your mortgage of $600K is now costing you $14K extra in interest a year. That will ultimately affect where you spend your hard-earned cash. It is this middle cohort of consumers who will drive what happens next. End-of-year sales may be strong, but they will also have the effect of emptying out the last of the savings people squirrelled away during Covid lockdowns. The new financial year will be challenging. The rubber hits the road If July is when the rubber hits the road, what can we expect over the next 12 months in retail?  The retailers that have prepared will continue to prosper. This is where Wesfarmers’ investments in productivity enhancement will prove sound. On the other hand, retailers that have failed to reinvest will be in trouble. The middle-to-mainstream shoppers are going to drive a race toward value as they feel increasing mortgage pain. Which is no bad thing for some of Australia’s best homegrown retailers.  Bunnings and Chemist Warehouse are in verticals that should come through any downturn unscathed. While JB Hi-Fi is in a vertical under pressure, the brand is remarkably robust. This strength, allied with loyal customers, will pay dividends. Shopping like the Germans Even in the good times, Australian consumers are value-driven, more so than in comparable markets like the US and UK.  Australian consumers have a lot more in common with German shoppers, not only in value-seeking traits but also in slower uptake and scepticism of e-commerce.  There has been a notable post-Covid rebound of shoppers from e-commerce back into physical retail. We can expect this to continue. The strength of a physical retail footprint is going to be important in the next 12 months. Super Retail Group’s investment in upgrading its store experience with Rebel Sports could well prove inspired. The spending danger zones Pressure is developing on fashion, international travel and eating out while pet, DIY and grocery are expected to remain strong, albeit with more value-seekers and price battles to come. The retailers set to benefit most from the ‘lipstick effect’ of the downturn could well be in food delivery. Getting a delivery from your local eatery has tipped over into habit for many, moving from a luxury to a must-have discretionary spend. As Australia’s clear number one, Uber Eats is well positioned. Despite the travails of MilkRun and Voly, Uber Eats is poised to come out strong as it extends its fast-delivery retail proposition into new verticals. Whilst the post-Covid honeymoon may be coming to an end, retailers that have prepared well, those in luxury or value-driven should come out of the next 12-to-18 months in good shape.