As an independent, we spend considerable time in the marketplace understanding where retail is heading and what brands are delivering in the market. The marketplace is basically unrecognisable from five years ago.
The lightning fast changes in how people consume information and product has continued to challenge all of us over recent times. It’s fair to say that this change will continue and at an even greater pace. We will all need to be vigilant to watch, learn and act accordingly if we are to remain relevant in this business.
Consolidation has been a very visible theme of more recent times with landmark brands disappearing at an alarming rate. Many more are under pressure to survive. We have lost from the retail landscape; Dick Smith, Masters, Amart Sports, Purple Pumpkin, Howard Storage and Payless Shoes. The bottom line is that they did not react to what the consumer was telling them.
There is little doubt that the consumer is more focused than ever on value for money and being able to purchase what they want, when they want and to have access to that purchase virtually immediately. This mindset changes the game for everyone. The market must now figure out a new approach to retailing in the future. Amazon has recently launched its Amazon Go platform in Seattle. It boasts no staff and no registers. The consumer is instantly billed via their mobile device. It is interesting to learn that Apple have already been offering this service for some time now.
Lets look for a moment on some of new global retailers who are entering the market. Kaufland (4th largest retailer in the world and owner of Lidl) they already own two sites in Australia. Decathlon, the large German sports retailer is also here and competing with Rebel and the like. Many other global brands including UNIQLO and Zara have been here for some time.
Coles and Woolies have always dominated the 100 billion dollar supermarket segment. They own the lion’s share. Aldi now have 470 stores and are approaching 8 billion dollars in turnover, Costco are also expanding and are taking well over a billion dollars. And then there is Amazon!
The big two will need to be vigilant and keep their eye on customer satisfaction to retain their share. What will define the market in 2018… It’s clear that Kmart continues to dominate the mass segment, but can they sustain growth. Target is 18 months into a rebuild and moving to a new home North of Melbourne in Williams Landing. Will this be the spark that they need to re-establish their business? Big W is also working on new plans and looking to secure their position in this segment.
The more interesting development is the entering of the market of TK Maxx. They have purchased the business known as Trade Winds here in Australia and will re-brand these 35 stores progressively. The model operates around the world. It is unique in that they do not buy seasonal merchandise and trade on the basis of scarcity. The consumer is conditioned to buy as the item may be replaced with something else when they next shop!
Department stores are struggling and larger conglomerates such as the Super Retail Group are assessing their current footprints looking for economy of scale. The largest fashion group in the country has also appointed a new CEO, Daniel Bracken (ex-Myer executive) to head up their business. There has been strong suggestion that they will rationalise their Rivers stores network?
All of this provides opportunity for the independent retailer. The consumer is also looking for an experience and good customer service when they do go shopping. It is an ideal time for smaller retailers to look at offering something better to their customer.
Traditionally online retailing has moved at a slower pace in Australia than in other parts of the world. Now that Amazon has launched, it will be interesting to see how this will affect the purchasing habits of the Australian consumer. Both Catch of the Day and Kogan continue to make ground. From all reports Catch of the Day ship in excess of 10,000 items per day now and are heading toward $500 million in turnover.
The commentary in the market has largely been about price, however quality must surely form part of the conversation. In a global market system there are many moving parts which impact on the final price of a product for the consumer. Let’s hope that price, quality and value for money are all considered equally as new ranges hit the market in 2018. It’s a very competitive market and whether you are trading online, bricks and mortar or both, one thing is certain, you need to be reviewing your methods and trading patterns on a daily basis, that’s how fast the industry is evolving.
Article by Tony Bugg
