Retailers say a structural shift in consumers' savings habits and weak department store sales are weighing on their struggling sector.
Retail spending fell 0.1 per cent in June, with department store sales suffering the biggest monthly fall for all industry groups, dropping 3.2 per cent in June and 4.9 per cent over the year.
In Western Australia, retail spending grew by 0.6 per cent in June.
"I don't think this is the worst space department stores have ever been in, but there is no doubt that consumers have changed and the market is changing," Australian National Retailers Association (ANRA) chief executive Margy Osmond said on Wednesday.
Poor quarter on quarter retail sales results were "around one third" of what the industry would normally expect, Ms Osmond said.
Asked whether she accepted a structural shift was occurring among consumers, with savings rates returning to levels experienced over past decades, she said: "Yes".
"Australians are saving more than they have for 20, perhaps 30 years. It's now become part of their psyche.
"I don't think that what we're looking at is a consumer that is just going to bounce back into former behaviours. This is a changed consumer."
Smart retailers were acknowledging the altered behaviour and changing their business models to meet the needs of customers.
Following a succession of recent earnings downgrades across the sector, major retailers are bracing for a tough earnings season as they prepare to release their full year results this month.
But rather than identifying any possible profit trends, ANRA says it is "a matter for individual businesses" and "individual business models".
The association said innovation would be need to be part of any recovery and online retailing was expected to experience "significant growth".
"It's not a case of either or, it's going to be a multi-channelled future," Ms Osmond said.
However, she declined to speculate on whether Australian retailers would follow Myer's lead by offering free shipping to online customers.
Nomura chief economist Stephen Roberts said consumers had altered their habits markedly, with department store sales falling almost five per cent over the year.
"I think it's one of those areas where some people are changing the way in which they shop," he said.
"That is very much the weakest point of retail sales at the moment."
ANRA is hoping a Productivity Commission review of the retail sector will recommend a national review of trading hours, reduced compliance for retailers, changes to tariffs on clothing and textiles and a reduction of the GST threshold for online shopping.
The review will be released tomorrow.
