Retail challenges on a small continent

It’s a tough environment in Australian retailing at the moment. The fact that two CEOs have left their roles mid-way through their contracts is clear evidence that our publicly quoted, traditional, Australian domiciled and single market retailers are struggling.

Australia’s high unemployment rate, more cautious shoppers who have greater choice with global and new physical entrants, is taking its toll. Not in any dramatic way, just in a grindingly constant loss of a few more shoppers and a few more dollars per store per day.

Lower prices, more choice, increasing labour and energy costs always play havoc with large, very high volume, very low profit margin companies. Retailers, airlines and courier companies all face the same issues. Lose a few customers, increase key large cost areas by a little and hey presto we’re trading dollars or making a loss.

For the avoidance of doubt, Tjeerd Jegen and Bernie Brookes are both very accomplished retailers. They’ve both had successful careers over a long period of time.

However, when you run a retailer that has exposure to only one country, and you are competing with larger, global store based, omni-channel and pure online retailers, you have very little wriggle room. You can’t draw on your expertise in the US or Europe, or your global buying power. You can’t balance off a poor month’s quarter in Brazil with a pleasing strong month in Spain. Your market dynamics are Australia, and that’s it. Have three poor quarters back to back and it hurts your business, your suppliers, employees and shareholders. And that’s what’s happening in Australian retail right now.

So what? Well as with our car factories, so with our retailers. We can’t compete all on our lonesome in Australia with global retailers. There will be more change in our major retailers over the coming 24 months. Changes in ownership, collaboration, sourcing and cost.

Oh and a lot of money invested in specialist retail technology in three key areas:  to lower labour costs, to improve shopper engagement and to improve online capabilities. 

I don’t know where and I don’t know when. But it is coming. Why? Because it’s already happening in Europe and the US. And that’s where our Australian retailers’ new competitors, and potential acquirers, are based.

Might be worth buying some real shares again. And being patient.

Kevin A Moore is a retail expert and the chairman of Crossmark Asia Pacific Holdings and Mirador Retail Technology. He is also the founder of TheRoadToRetail.