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How internationals “make it” in Aussie retail

country roadSouth African retailers Pepkor, through Best & Less and Harris Scarfe, as well as Woolworths, through Country Road, have operated in Australia for years. I occasionally get asked whether it is perseverance that really makes the difference between South African retailers who “make it” in Australia and those that don’t.

My usual response is that perseverance is certainly a factor and willingness to learn the differences of which there are many. Regrettably South Africans have a reputation here for being arrogant and “know it alls”. Not only does this not go down well here but it is a recipe for failure.

Another question I am asked is, given the varying level of success, do I think that South Africans retailers have in the past tended to underestimate the Australian market and its consumers? Do South African retailers think that Australia is a somewhat easier market than the US or Europe? Again my response is a yes and I alluded to this above. However I’m not sure whether “underestimate” is the right word.

Perhaps “not understand” is better. It is certainly an easier market in terms of being in the same hemisphere.

For international operators entering Australia (global and South African), the segment that seems to have had the most activity is clothing, which begs the question whether this is because the grocery space is saturated and fiercely competitive. Sure, food is always tough and it’s hard to compete on brands. But Aldi made an entrance here about 10 years ago and is gaining market share daily from the two big operators – Coles and Woolworths. Despite this, Lidl is about to enter the market. They will take some market share from Aldi but those who will also feel the pinch are Woolworths and Coles. Can the two survive? I don’t know.

A year after the DJ’s deal, Woolworth’s influence must be questioned. Has Woolworths created satisfactory progress so far? This begs the question whether given that DJ’s has an assortment of product including hard goods and high-end designer wear – where is the real money to be made? I believe that so far DJ’s is doing all the right things. It’ll take a little time.

Some say homewares are overtraded in Australia (which it isn’t) and the money is in fashion. With the Woolworths RSA input, there is great potential on the fashion side especially.

There is some debate whether there is scope for a premium food offering in Australia, given Woolworths’ view to fix up DJ’s food halls. My view is that the opportunity is small, in fact very small. The upmarket suburbs have speciality food stores catering to elite consumers. Our Woolworths and Coles are about as upmarket as you will get for food in Australia on a wide scale. DJ’s tried mini supermarkets/delicatessens a few years ago to hopefully cater for young time-starved working consumers. It was a dismal failure. Selective DJ stores will succeed with food halls but very few.

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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