Inside Retail: Now that the Australian government’s wage subsidy has ended, do you think the retail sector is going to be impacted significantly, or has consumer spending resumed sufficiently to the point where retailers won’t really feel an impact?
Peter Birtles: There are always factors that impact consumer spending, but I think the job of retailers is to make sure that, whatever the circumstances, they’re putting forward their best offer to customers and aspiring to gain market share. I see a lot of focus on external [factors], but let’s make sure we get the internals right.
I’m still positive that good retailers will continue to perform well because, whilst JobKeeper has been a stimulus – there’s no question about that – there are other factors as well. For quite some time, we are going to see the benefits of what Australians previously spent offshore [staying in the domestic economy]. That is linked to $20 billion, $30 billion of additional spending.
IR: How long do you anticipate that spending boost to last?
PB: I think we’re quite unlikely to see the return of international travel at any sort of scale this calendar year, so you’ve got to assume it’s going to [last] into next year. I think it will take a bit of time for everybody to regain confidence in international travel.
IR: As CEO of Super Retail Group, you oversaw the company’s investment in omnichannel, with a major click-and-collect initiative at Supercheap Auto. What do you think about the e-commerce boom of the past year?
PB: I don’t particularly see it as e-commerce versus physical retail, I look at it as retail, which encompasses all of those elements. The customer may choose to shop in a particular way at one point in time, and then shop in a different way at another point in time. Convenience and making life easy for [the customer], however [they] choose to shop is what retailers need to do.
Having an integrated approach across e-commerce and physical is critical, and that’s a challenge because that requires systems and processes to be established that do that, and a lot of the historical systems were architected in a way that support physical retail. That’s where you see one of the big challenges for retailers – creating a true omni organisation that can offer that seamless experience to the customer. Those retailers that succeed in doing so are going to be the most successful because, whilst there is a boom [online], let’s recognise that the majority of retail is still physical. If we get to 30 per cent [online penetration] as is predicted, that’s a big chunk of the business that’s physical, and we can’t forget that. We’ve got to be really great at physical retail.
But the role of the store has changed. It used to be a place that customers would go to see what was available. Browsing and information-gathering in-store used to be a big part of shopping. Now that happens at home, so [the store] becomes much more of a fulfilment exercise. But it also still is an opportunity to surprise the customer, and I think that’s what retailers need to recognise. They need to give the customer something unexpected in that physical environment. It’s got to be a place of experience, inspiration and great service.
IR: I hear a lot of retailers talk about experiential and immersive store environments, but most stores, when you walk into them, are still just showcasing products for purchase. What’s the disconnect? Is it cost?
PB: Absolutely, there’s an investment cost to establish that type of environment, but not all stores can be all things to all customers. There needs to be segmentation of stores that are there as brand showcase stores, and those that aren’t.
Nike has done a great job of having a few stores that are really ‘wow’ and the rest are more of a base representation. I think that’s what we’ll see in other retailers as well. We’ll see a small number of stores that are draw cards, and people will travel to them, and others will be more fulfilment operations. We need to think carefully about our portfolio of stores and what role they play.
IR: Another major trend in the last few years has been the rise of direct-to-consumer (DTC) brands. It strikes me that you’re mostly involved in multi-brand retail businesses. What are your thoughts on the rise of DTC?
PB: There are segments of customers who shop by brand and have product and brand loyalty, but there’s also a segment of customers that very much want to shop across a range of brands. It comes back to what’s your offer, what’s your relationship with the customer, what role are you playing?
I’m a great believer in [providing] a solution, not just product. In my old role, we used to talk about the fact that we don’t sell somebody a fishing rod, we actually try to help them catch the fish. How you position that is a very different mindset to selling someone a fishing rod.
At Universal Store, for example, there’s a very strong view that they’re part of a customer’s experience. Many of their customers are socialising with friends, they’re going to concerts, or nightclubs and so on. They want to have a great time, so how do you make that selling experience about helping the customer have a great time? There’s a lot of showcasing of the latest trends and ideas in the online environment, which gives them authority as a place that customers want to come to. Where they go, ‘If I buy from here. I’m getting something that’s pretty cool.’
It’s being very clear as a retailer about [asking] what’s your role? What’s your purpose? What are you trying to achieve and what’s your relationship with your customer? And continuing to focus on that.
IR: Speaking of Universal, I know they had a campaign with Champion to collect old textiles to be recycled and kept out of landfill. That makes a lot of sense, given their customer demographic, but do you think it’s going to become more of a focus across the industry? Where you might see an electronics retailer educating their customers about how to responsibly dispose of their products?
PB: Being involved with Good360, it’s something I’ve got a personal passion for and it’s not just used products, we actually have a challenge in terms of first-life products, which is unsold products ending up in some form of waste management system. That’s a terrible situation. I think we are going to see an increasing awareness of the impact that we have on the environment, waste of resources and how they can be put to much better yet better use.
Customers will have a view [on sustainability], but actually I think even more importantly, employees and team members will have a strong view. We’re increasingly seeing that team members want to work for organisations that are doing more than just making money, that are actually making a positive contribution to society. Having those types of programs that find a life for a first-life product, but also manage second-life, third-life products as well, will be something that retailers absolutely need to spend more time thinking about.
IR: But what about actually changing the processes that create waste to begin with? I know many brands in the fashion industry are calling for a rethink of the traditional fashion calendar because of the way it contributes to textile waste.
PB: I think that’s really interesting, and we are seeing organisations like David Jones look at their promotional calendar, because they’re recognising some of the inefficiencies that are created for the whole industry through that.
It’s an important move, but it’s one where retailers need to be steadfast and brave because many retailers are judged on their like-for-like sales performance. If you’re a publicly-owned business, investor scrutiny of what’s happening with your like-for-like sales is significant, and promotional activity and events can be important factors that drive like-for-like sales.
To change your program, you have to take a whole community of stakeholders on the journey with you as to why that’s happening because you may see that it has a negative impact on like-for-like sales for a period of time. You have to ensure there’s enough confidence in the business that it’s not seen as an underlying weakness. It needs to be properly planned, thought through and explained in advance as opposed to explained afterwards. It’s a big piece of work. It’s communication, planning, systems processes, all of those elements.
IR: You’re on the board of several ASX-listed retailers, so what are your thoughts on the number of women on boards? Do you support quotas to increase female representation?
PB: The good news is that Universal Store has a female CEO and 50 per cent of the non-executive directors on the Metcash board are women. It’s an area that I’ve personally invested in. I was a Male Champion of Change at Super Retail Group, and we made some big moves in terms of female representation – on the board as well as the management team. I was fortunate to work with Erica Berchthold, who led Rebel and now leads The Iconic and is a great female leader. Nobody was forcing us to do it, but there was a recognition that it was going to benefit the business.
I’ve told this story many times, but the moment for me was when we were doing some work with our format Rays Outdoors. We had all this product that was about the family, but we were not attracting female customers, so I put a working group together. About a month later, I was invited to a session to hear how we were going to attract more female shoppers to the business, and when I walked into the room of 15 people there were just two females. I thought, ‘We’ve got a real problem in terms of who actually understands the problem we’re trying to solve’. Once you get that kind of recognition, you’re clearly going to do something about it, rather than someone beating you over the head, saying you must have 40 per cent [women] or whatever the figure is. But I’m coming from a position of being a believer, so it’s easy for me to say that.
In an environment where it’s being forced, do you have a culture being created that is going to enable people to be at their best? Just having a quota or a target and putting people in positions – unless you’re actually addressing the underlying culture and way that you operate – I don’t know that you’re necessarily going to get the benefits. You’ve got to create an inclusive culture
IR: In the last year, a lot of retailers have become a lot more vocal and aware of the need for greater racial diversity and inclusion too, when it comes to their campaigns and staff. With your insight into retail management, do you think businesses are having serious conversations about this, or is it mostly an external marketing conversation?
PB: Like with gender diversity, you have to be inclusive to be diverse because you have to embrace all these different elements, you have to welcome them. In creating an inclusive culture, you start to embrace diverse gender, race, sexuality, whatever element it is.
One of the keys to Universal’s success is that it is a very inclusive business. For a business that is focused on youth fashion, it is as comfortable having a 70-year-old grandmother shopping in the store as a 20-year-old hip person because of that focus on inclusivity. And therefore as a business, it’s embracing race, sexuality, gender throughout the business.
And ultimately, we want to attract customers to our business. We want to be inclusive with our customers and attract a broad base. To me, that’s the conversation. How do we be inclusive and welcoming [because] then we’ll be successful. You get more talent, you get more capability, you attract more customers – it builds on itself
IR: I wonder whether it’s easier for businesses like Metcash and Super Retail Group, that are corporations and can dedicate the resources to developing a diversity and inclusion policy and setting benchmarks, compared to a medium-sized business. Do you think it’s a size problem, where some retailers struggle to make real change?
PB: I don’t think so because there are larger businesses that might have policies, but does their behaviour actually follow those policies? Ultimately, it’s who we are as people. The way we behave. Are we respectful? Do we welcome alternative views and perspectives? I think that can happen in small companies, medium-sized companies, large companies if you’ve got the right leadership in place that encourages that and sets the benchmark. Leadership is the key.