COMPANY PROFILE: Super Retail Group
Brisbane-headquartered, ASX-listed Super Retail Group is one of Australasia’s leading retail groups. Started in 1972 and publicly listed in 2004, Super Retail Group has more than 600 stores and annualised turnover in excess of $2 billion. It has operations in Australia, New Zealand and China and its retail brands include Rebel Sport, Amart Sports, Goldcross Cycles, Supercheap Auto, BCF and Ray’s Outdoors.
Justin Grey: Within Super Retail Group, where do the leisure/sports brands sit in relation to the group’s other leading retail brands, Supercheap Auto and BCF?
Erica Berchtold: Auto and leisure [divisions] are neck and neck. One of us is going to hit the billion dollar [annual sales] mark very soon. Auto is just a little bit ahead of [leisure/sports] in terms of sales at the moment, but I think we’ll probably get there first. We’ll certainly overtake their sales number at some stage in the next 12 months. We have a very friendly rivalry – we look at the total group’s results foremost, but then I’ll be very delighted to overtake the auto division this year.
JG: The Workout World business has been incorporated within Rebel stores; is the Goldcross Cycles business to undergo a similar restructure?
EB: We closed down the standalone Goldcross stores and rolled them in as a store-in-store within the Amart stores. The problem with standalone bike stores is you can’t get sales per square meter high enough to pay the wages and inventory and rent and all of that stuff. We believe in the cycle category, but just within our sport business, not as a standalone business.
JG: How has the newly re-opened Rebel ‘accellerate’ store at Westfield Chatswood been received?
EB: Customers love the new format of the store. The thing with Bondi [first Rebel store to feature the new ‘accellerate’ concept] is it’s a bit smaller than Chatswood, so we were a bit more compromised in terms of space allocation for the categories. Some of the feedback we had on Bondi is customers want some better hard goods options, so I want to tweak that category a little bit – better ranges and bigger ranges of footballs or tennis or things like that. On a whole, it’s been a really positive response. With Bondi, we need to look at the category mix a little bit there and just play around with that, but with Chatswood we were able to take a bit more space on some of those categories. I think what we’ve done with basketball in that store is amazing, and [next Rebel store to get the ‘accellerate’ treatment] Miranda is going to be even better still.
Overall, both stores are trading well up on our expectations. The traffic is great. I don’t get paid to sit there and look at all of the things we’re doing really, really well. I certainly like to recognise those and I do applaud the teams that do them, but my efforts get spent on, ‘what aren’t we doing so well?’ and ‘How do we fix that for the next store?’. I like that sort of challenge. I’d rather identify the things we’re not doing well myself, rather than a customer or a competitor or somebody else.
JG: What was the impetus for redoing the Rebel stores? Were the stores feeling a bit tired?
EB: The centres were re-developing, and those centres in particular were re-developing in a way to attract a different sort of customer. So customers that were shopping in those locations were asking for a different experience and a different product. They wanted a better apparel and footwear offering. If you look at what those centres are doing from a fashion perspective, they’re driving a lot of that sort of customer to those centres, so we need to make sure we’re delivering what that customer wants.
Also when [Super Retail Group] acquired the Rebel and Amart businesses back in November of 2011, we did a whole research piece to look at if we even needed to have two sporting businesses in this landscape. Because if you don’t, then it’s a really expensive, hard way to go to market. Our research showed that actually there were two different customers. One was for someone that wanted to go to a destination location and maybe not spend absolute highest price-point on products. They wanted brand names, but more at a promotional sort of price or at a discount. Whereas, the Rebel customer we identified was more inclined to go to a Westfield sort of center and they wanted new, innovative and exciting solutions – they wanted to be dazzled a bit. We’ve got to deliver to the Rebel customer what it is they want. Equally we’ve got to deliver to the Amart customer what they want.
JG: What sort of investment is Super Retail Group is putting up to redo these Rebel stores?
EB: We set return-on-capital hurdles for the business. Our investment has to be aligned with that. We look to over-deliver on any return-on-capital hurdles that we’ve got. Without getting into specifics by store, last year in our accounts we spent about $12,500,000, I think, in cap-ex for the sports division. And we’ll probably spend about that again this year. They’re not the cheapest fit-out, but I feel that we’re pretty financially responsible in making sure what we spend delivers the return that we require, and that’s why we’re also selective on which centres we put that sort of fit-out in. It’s got to be where the customer is actually going to want that sort of a fit-out and therefore shop with us and give us the return. The great thing with the Accelerate format is you don’t have to put every single element into every single store to be able to deliver a really good experience.
JG: How do Amart and Rebel customers differ and how has that informed store design and composition for each brand?
EB: Amart has more of a family customer and also more of a male customer because a lot of blokes don’t want to go to a Westfield centre to go shopping. They like the idea of being able to drive up to the front door. There’s a customer that wants to spend $80 on the latest technical Nike t-shirt with the tiny little swoosh on the right-hand side, and then there’s a customer that still wants a Nike shirt, but they want the bigger Nike logo and they want to spend $40.
It’s not about [Amart customers] wanting private brands; we actually got that wrong a little bit at the beginning. We thought that people who were more promotionally price-point driven didn’t care about brands, that they just wanted private brands, and we got that wrong. They actually care just as much, if not more, about brand. They just have a different kind of quality/price ratio and style requirement than what a Rebel customer has.
Our Amart stores look better than sports stores I look at overseas. It’s only that with Rebel we’ve taken it even to the next level again. We’re always looking at Amart in comparison to Rebel. If we put a lot of those treatments in an Amart that we put in a Rebel, they’d be turned off by that. Likewise, if we only put an Amart fitout into a Rebel location, that customer wouldn’t be excited enough. It really was customer-led on what they’re wanting.
JG: Not that it’s a poorer cousin to Rebel, but for Amart to do what Super Retail Group needs it to do, it doesn’t require as much of an investment in terms of capital for store design…
EB: That’s exactly right. When you’re in a shopping centre up against big, international brands, it’s really obvious if you don’t look inspiring or innovative. You’ve got to have a fitout that fits I guess, but I look at some of those big international brands even and the fitout that they do in the CBD is very different to the fitout they do out in the suburbs. On the surface they look the same, but you can see the treatments or the actual fixtures that they’re using are a little bit different. Also I like to say that Amart is the yang to Rebel’s yin. Without Amart, Rebel loses; Amart is like Rebel’s anchor. I don’t mean anchor as in dragging it down – I mean it allows Rebel to stay focused on what it needs to be in the market.
JG: How do Amart and Rebel compare in terms of performance?
EB: Amart is actually growing more rapidly in terms of store numbers than what Rebel is. In Victoria, for example, we’ve now got 13 Amart stores that are showing really big like for like growth and Rebel is still showing like for like growth down there as well. It just shows, in the marketplace, there’s a Rebel customer and there’s an Amart customer, and you’ve just got to give each of those customers what they want.
Without Amart, Rebel swings in the wind and one minute wants to take on discount department stores on value lines and then on the other hand wants to take on Athlete’s Foot in terms of service footwear. Having Amart really own that space in that more promotionally driven section of the market, Rebel has been able to stay focused on its end of the market. We kind of own both ends now.
JG: What’s the latest progress on incorporating the Workout World brand into the Rebel business?
EB: We’ve closed, or will close by the end of the year, about half of the portfolio – 10 stores. But then we’re keeping the other half of the portfolio. We’re renaming Workout World to ‘Rebel Fit’. It’s going to be our whole holistic fitness story. The reason we’ve got to change the Workout World name is a lot of people think it’s a gym when they see the sign out of the front. We’re going to rebrand those 10 remaining stores to Rebel Fit, change the product mix in them so there’s more accessories and nutrition and fitness wearable devices and things, and actually talk about that more holistic sort of story. You can’t rely on foot traffic just on big-ticket items because people don’t buy treadmills every year. We want [Rebel Fit] to be a destination that anything you want to do from a fitness perspective you can come to us. What we’re going to then do is create a Rebel Fit store-in-store inside our Rebel stores and pull all of that fitness and accessory stuff together as a complete Rebel Fit story. We’ll do 10 of those in the next four months. We’re finalising the store design at the moment, and will then rebrand those 10 existing standalone stores. I think of the standalone stores as almost being an extended range of what’s inside the Rebel store. I don’t want to have to put 10 treadmills and 10 exercise bikes and 10 cross-trainers inside a Westfield store, where actually people are asking for a lot more apparel and footwear and things like that.
JG: What’s in store for the sports brands for the rest of the year?
EB: We’re looking to further Amart sites, particularly in Sydney. I need more Sydney sites for Amart. I’ve got some more Rebel refurbishments to happen and a couple of new stores that we’re looking at for Rebel. It’s getting harder and harder to find new sites for Rebel because we’re in most of the centres that we want to be in. Amart is more about new stores; Rebel is more about refurbishments and how we can deliver a better experience in those stores.
I’m looking at how we can deliver an even better apparel and footwear experience for our customer and ramping up that digital and online presence. I think that might be an area where we could do a much better job with apparel and footwear. As a total organisation, this whole customer-centric journey is something that we’re really focused on.
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