Winning in a Competitiveand Rapidly ChangingRetail Environment

The Australian retail industry is undergoing a profound restructure driven by the influences of northern hemisphere retailers entering our market, which, coupled with the rapid growth of digital marketing, has had a material impact on consumer knowledge and access. Today’s customer can well be referred to as the “Consumer in Control”.

Peter Wilkinson

Australian Retail: Challenges or Opportunities

Never before have Australian retailers faced the challenges presented to our industry today. Interestingly, all of these challenges bring with them real opportunities for those retailers that lead on the real issues and have the organisational capability, including people, processes and knowledge based systems in place to do so. Retailers that recognise this and develop focused, fast and flexible system support will retain their capacity to perform effectively in the market.

The most successful retailers that are entering the Australian market will build and sustain an edge in five key areas. Unfortunately, those that do not will at best sub-optimise their potential and at worst, submit to competition and cease to exist. Without doubt, we are entering an era where the gap between retail winners and losers will ever widen and where there will be an industry consolidation that includes mergers, takeovers and a material failure rate of “also ran” retails. In the long run, shedding low competency retailers will be positive for the industry, but the transition period will be disruptive, as those that are not dealing with current market developments bludgeon price to clear poorly selected and unwanted product to customers who have no lasting relationship with them.

Know, Respect and Serve your CustomerThe old adage that everyone who enters your store is a potential customer will always have some substance. But targeting a particular customer strengthens your capacity to provide for and service that customer in a manner that is meaningful to them. This is far more likely to generate both an immediate sale and to build a long term relationship with that customer. Given the ever growing range of retail choice available to customers, it is increasingly unlikely that you can be all things to all people ever again and should focus on customers whom you deeply understand and for whom you can provide a tailored service offer. Solution based selling will be the most successful way in which to engage customers and to win a positive share of their wallet.

Deliver your Brand Promise Every Hour of Every DaySustaining a consistent “five pillar brand proposition” is key to your company’s future wellbeing. The effectiveness with which you harmonise your product offer with the service and selling proposition, your level of store theatre and ambience, your communications to the market and your position on social responsibility on a 24/7 basis, will decree your level of performance excellence, in terms of customer satisfaction and financial outcomes as well as long term sustainability.

Let your Customer Choose the Channel That They Wish to Trade with youBuild a comprehensive multi-channel capability and be agnostic as to how your customer chooses to shop with you. Deciding how you measure and reward staff across the channels that you choose to service, be they brick or digital, is an internal matter and not of any interest to customers. Attempting to direct customers to a preferred channel can, in fact, damage the way of making it easy for customers to shop with you and therefore increasingly less likely for them to choose your store as a preferred option in both the immediate and long term.

Get Fresh and Value Based Stock Fluidly to your CustomerA fundamental flaw in the past practice of Australian Retail past practice has been to rely on the seasonal timing difference that allowed us to follow the product direction in Northern Hemisphere seasons, applying their product leadership to the following Southern Hemisphere season here in Australia. In the case of apparel, Australian average critical time path to get new fashion from the catwalk to the shop takes around twice the time taken by the best practice operators now entering our market. They make us look “fashion-slow”, lacking in newness and freshness and often price uncompetitive. This is an uncomfortable position to be in and needs urgent attention by Australian retailers who want to compete effectively.

Manage your Property Portfolio with Demographics, Store Size, to Drive Site SelectionThere is no doubt whatever that the rise in market share of digital retail market share will impact both the size and location of our brick and mortar portfolio. While walking down Bridge Road in Richmond, Melbourne, one would encounter 46 empty retail outlets, some 21% of total store in the previously bustling street. “A” shopping centres and shopping strips will continue to grow and thrive, provided that they too maintain their brand and recognition that we, the retailers, are their customers. The future for “B” and “C” retail precincts is far less certain and retail space should not be considered simply because their occupancy costs are favourable. Blending your geographic portfolio with your digital footprint will now be the key to a profitable and sustainable future, both in terms of your revenue generation and system infrastructure.

How to Win in Today’s Market

A five pronged approach to developing a sustainable retail business model, market position and organisational capability will be the foundation of successfully and sustainably achieving outcomes and objectives:

People and CultureRetail is the quintessential “people” industry, as we are internally labour-intensive and externally customer-dependent. Adverse labour turnover results, recruitment difficulties, executive retention and development of management talent, sufficiently capable and flexible to deal with the rapid changes to our market, have held back retail capacity to be fully effective. Additionally, the speed of change that our industry is undergoing is threatening many executives who have been effective in years gone by. Unless they are prepared to develop new skills, change and be flexible, they will simply become baggage of little use in today’s retail environment.

A Well Branded Multi-Channel CapabilityNo material retailer will survive and grow over the next decade without building a robust, integrated and consistently branded multi channel capability. Decisions on multi-channel technical infrastructure and supporting software are complex, and errors are potentially costly in terms of capital expenditure, market penetration and customer satisfaction. Equally difficult is the means by which we take our store based staff with us as we transform into a multi-channel facility recognising that knowledge on product, price and accesability are in the hands of our customers at the click of a laptop or mobile phone. The era of the “Consumer in Control” is with us and we need to stay with them in our service offering.

Smooth End-to-End Core ProcessesThere are a number of core processes that drive the effectiveness and productivity of most retail business models. As a general rule, Australian retailers have been lethargic in building seamless “end-to-end processes” across these core elements. Hence, as a result, they are not achieving the productivity benefits, in the case of product, speed-to-market, that are available to them.

• Our supply chain performance underscores our best practice global competitors. Mapping and developing an “end-to-end” process that aligns each supply chain step and allows the development of systems, driving support a smooth product movement through planning manufacturing allocation and distribution processes, and finally into the hands of our customers is yet to be recognized at par. Effective application of this will have the added benefit of removing a lot of the hack work from otherwise labour intensive tasks and it will have a material impact on revenue generation and costs.

• Our human capital process is complex and again the mapping and development of an aligned “end-to-end” process including recruiting, retaining, rewarding and talent management will have the potential to significantly reduce costs, improve labour productivity and drive sustainability.

• Our store portfolio management process will need to recognize not only the inexorable occupancy cost increases being imposed on the industry by our landlords, but also the reducing importance of ‘B’ and ‘C’ grade centres and shopping strips. Closing non- performing stores is as important today as opening in new markets. These elements, coupled with the growing share of digital retail market share make decisions on the value of sites, be they new or lease renewals, a key deliverable of economic value.

• Our selling process where the choice of service model, consumer communications, system support and performance monitoring needs be driven by the attitudes of our customers, product segment and the behaviour of our competitors. Given the degree of customer knowledge today, solution-based selling will increasingly become the dominant service model.

Current and Effective Systems and TechnologyHaving a clear view of core process maps, positions you extremely well to provide the most relevant and cost efficient technology and system support. Our industry is filled with legacy systems that we have held on to, given the cost and change management associated with updates and upgrades. This is no longer an option as we have a wide array of extraordinary software available to assist in ensuring that our capabilities are better than, or at least equal to those of our competitors and that these systems can speed up and improve executive decision making and reduce costs.

Knowledge, Not Just Data and InformationGiven the speed of change and assuming relatively time poor executives, moving to knowledge based information above simple information and data management will be a strong lever to improve the speed and quality of management decision making. Currently available advanced systems allow for a level of sophisticated analytics previously not available to us, be it knowing our customer, managing inventory, managing store performance, managing finance or managing company assets.

This is a short overview of a number of key issues that will separate winning retailers from the “also rans”. Clearly more detailed analysis and understanding is required to establish a change agenda capable of maximising your capacity to build positive and profitable relations with your customers and ensure that your company is one that wins in the long term for both your customers and your shareholders.

About Peter Wilkinson

Mr. Wilkinson brings over 40 years of experience in the Retail industry, having led some of Australia’s largest retail brands like Target, Myer, Coles Myer, David Jones and Just Jeans, in Australia. He was the inaugural President of the Australian Retailers Association and was a Fellow of the Australian Institute of Directors. He is currently the Chairman of Forever New, a leading multi-country fashion retail chain. Peter also advises companies on strategy, structure, market positioning and multi-channel integration in retail.

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