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We have to fight back

 

ZARAmelbourneYesterday there were two stories in these columns. One referred to Noni B closing seven stores, and the other referred to Zara opening its ninth store.

Noni B’s CEO, David Kindl, said that 30 per cent of their leases come up for review this year and unless reduced rents are negotiated, there will be further closures.  This could mean in excess of 60 stores closing.

Meanwhile, Zara’s owners have seven other brands waiting in the wings.

While Noni B and Zara are not really comparable, you will have spotted the trend – foreign retailer expands and local retailer contracts.

In these columns on January 10 I wrote about the dilemma that local retailers face in light of the big overseas players, and on January 24 I wrote about the loss of Australian retail as Australian retailers go offshore and 27 of the world’s largest 250 retailers settle here.

The usual hobbyhorses spring to mind – rent and wages.

But the foreign entrants have these to contend with too. The high Aussie dollar making imports cheap? Again we are all in the same boat (because in Australia we have been successfully self destructing on all kinds of manufacturing for decades).

Did I say a few weeks ago that Toyota would be the next to go? Not exactly rocket science. And so another Australian industry may rest in peace.

Let us assume that David Kindl is successful in negotiating lower rents. There is no reason why he should not succeed because there appears to be some sanity emerging among the landlords. Will that slow the gradual shrinkage of Noni B? Maybe for a while. But volume will always continue to be an issue for Australian retailers.

The crux of the matter is that many Australian retailers are simply unwilling or unable to compete while others take up the fight.

The ones that are successful in taking on the international giants rely on their knowledge of the landscape, just as the Vietnamese did during the Vietnam war. They are nimble and tactical. They are street fighters.

Here is one example. A fashion retailer at the lower end of the market.  They have a couple of competitive, but more expensive retailers under constant surveillance.  They monitor daily what is selling off the racks. They purchase a good selling garment, DHL it to China, have it knocked off with a few shortcuts to bring the price down, fly the goods in and have it on the floor within a few weeks at 80 plus per cent margin. Parasitic – maybe.  Successful – absolutely.

Twenty years ago we manufactured garments in Australia, today we hardly manufacture any.  Twenty years ago we manufactured cars in Australia, soon we will have none. Twenty years ago there were hardly any foreign retailers, today we have many.

Where will we be in 10 years time?

Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702

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