The sore foot factor: Retail sector set for more capital expenditure

I have spent time with senior executives from retailers, manufacturers and technology suppliers over the past two weeks. Some were from within Australia and others who were visiting having spent time with UK, European and US retailers and technology companies on their journey.

During those two weeks we had the report of the 10% drop in business capital expenditure (CAPEX) investment in Australia this year, with a corresponding 10%-ish increase in Australian home purchases. The business CAPEX drop is being balanced by the consumer CAPEX increase as we reach into our savings, and take on low interest loans to buy bigger homes or acquire a new investment property. A good balancing act.

However, the really scary number was the forecast 25% drop in business CAPEX going into next year, as our miners and factories back off on investment, and retail and distribution hasn’t yet picked it up. I’m not sure we consumers can bridge that big a gap by buying more property!

I then read Sue Mitchell’s piece in The Australian Financial Review about falling retailer margins, another piece about falling consumer income and falling prices at retail.

So what does it all mean? Well, I still believe that our CAPEX and employment growth will come from the retail sector. The need to improve productivity, whilst lowering prices and delivering a better shopper experience, is at the core of our national economic well-being. And it’s a natural progression for everybody who works, invests and shops in retail.

Here’s the thing. The process of retailing is still a fundamentally manual process. Not the shipping of pallets from factories to distribution centres into stores, but that last 50 meters of stock coming out of the store’s loading dock and onto the shelf. Other than an Amazon pick and pack warehouse, where staff apparently walk 11 kms a day picking individual books and items (!), the average retail associate in a large grocery or big box retailer still walks for a large part of their day.

They are cutting open cases and outers (I still have scars on my fingers from box knife cuts working in Tesco and Royal Doulton stores as a youngster) then walking or pushing trolleys of product to fill shelves. They are walking to and from printers and shelves changing price tickets. They are walking between loading docks, shelves and large display areas carrying stock to build, update or replace appetising displays for shoppers. And they are walking from shelves to checkouts to assist shoppers with queries.

It is no wonder that Marks & Spencer in the UK has had a shoe allowance for the retailer’s staff for decades. Ever wondered why the greeter at the front of Kmart, Bunnings, Home Depot or Walmart stands on a rubber mat? It’s not because they need to know just the right place to stand to greet us, it’s because they have sore feet!

My prediction is that just like Europe and the US, we are in for a wave of very focused capital expenditure within all parts of our major retail sectors. To lower prices at shelf, by removing the costs of manual handing and walking from the process of retailing. This investment will improve the shopper experience, improve our overall economy and help the army of foot-weary retail associates across our great nation.

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.