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Why Australian retailers are heading for disaster and what they can do about it

Retailers seek the safety of Singapore rather than China and large emerging markets

There is much media attention on the imminent arrival to these shores of Amazon and the devastation it will have on Australian retailers, especially in the fashion, consumer electronics, computers, music and book categories. Amazon while a threat is only one of many, they are queuing up in a tsunami of retail anarchy. Here are three more threats:

Tsunami one: Lefties

If you’ve never heard of it you soon will, a division of Zara at about half the price that started out as a clearance outlet for Zara. They purchased a mall in Spain and filled it with clearance stock BOOM!

It was such a success they are now producing their own ranges. Australian mid-price range fashion retailers and the likes of Target and Big W have in our estimate less than two years to get ready.

Tsunami two: Alibaba and T-Mall

It is inevitable that this Chinese powerhouse will back-end the world and go head-to-head with the likes of Amazon and eventually our local retailers. With a large  percentage of the world’s consumer goods manufactured in China it has the natural advantage of proximity to their supply chain – a competitive advantage for a pure play e-commerce business.

If you’ve never heard of Lefties, you soon will

Tsunami three:

The globalisation of retail will continue as the likes of Aldi, The Iconic, Zara and H&M amongst others continue their never-ending expansion adding additional stores and concepts. H&M announced a change in strategy recently from constant store expansion to a more considered expansion and consolidation and ramping up their multi-channel offering. Prepare for continued pressure from new retail concepts to arrive on our shores as well as enhancement of established brands. In addition these brands are expert at seeking out niche Australian Brands that have so far avoided attention and producing special ranges to target the niche.

Australian retailers have not had a great track record of anticipating changes in the retail environment, for example they have been late in getting on board with e-commerce, underestimated globalisations impact, focused inwardly rather than looking to take advantage of overseas expansion opportunities and when they do targeting traditional markets of the UK and USA or the safety of Singapore rather than China and large emerging markets.

So who is to blame? You can’t go past the CEO’s, boards and other retail executives who have continually lacked vision and courage to step outside their comfort zone. Here is a list of reasons for  past failures, perhaps retail executives can learn from to future proof their business.

Complacency – derived from originally being a protected and small market. You only have to look at Woolworths and Coles who haven’t really coped with Aldi and Costco’s onward expansions let alone the threat of other European supermarket entrants and of course Amazon. Add to that the debacles of Masters, Big W, Target, Dick Smith. Of course there are many other examples of retail categories where isolation has bred complacency, those days have gone.

Thin layer of experienced executives – you only have to look at the number of senior British retail executives in our top ranks to see that the industry doesn’t develop or attract the best talent. One of the results of this lack of experience is  rather than “rock the boat “and highlight needed change,  senior management stay quiet preferring to keep their job rather than “stick their neck out” to implement needed change.

Lack of strategic thought – looking “over the horizon” at overseas trends and threats and developing a detailed strategy is not part of our retailer’s DNA and going on a Westfield Tour doesn’t qualify as detailed research of competitors and overseas trends nor do buying trips. The other favoured tactic of boards and executives is delegating responsibility for their retail strategy to a global consultancy firm, they can support the effort not drive the effort, that is the senior executives and boards role. Again it is the responsibility of retailers to develop internal strategic capability.

Use of analytics and benchmarks – numbers don’t lie however you need to be able to compare your numbers to industry best practise to ascertain how you are travelling. The focus today is on tactical measures rather than predictive analytics, big data, trend analysis, non-financial measures and lead indicators.

Fear of change inhibiting innovation – Digital disruption is changing retail and is providing numerous opportunities to grow revenue and reduce costs. However Australian retailers are slow to be aware of what’s possible, slow to adapt (despite overwhelming evidence) and reluctant to change. Below is a list of apps and technology designed to assist retailers to improve their performance. It would be great to see retailers take a strategic and considered approach to adapting some of these technologies.

Tech list


So what can retailers do to learn from past mistakes

  1. Get on the Leftie website if you are a fashion retailer and get a dose of reality. Likewise for different categories be inquisitive and seek out the future by committing quality time to the exercise.
  2. Determine if I have a point of difference with your brand and then develop a business strategy that takes into account changes to the industry, anticipates competitive forces and take corrective action. If you have no natural advantage, then sell down or wind down your business before you go broke. The recent spate of insolvencies didn’t just happen, they had several years of warning signs to get to where they landed.

Be nimble, embrace change and seek out the best of digital disruption technologies. There are several technologies that will enhance the customer experience and at the same time reduce cost. Most of these technologies face internal resistance from management stuck in the old ways. A great CEO and a committed team is critical to championing change and override internal resistance. This resistance takes the form of “we already know this and are taking action”. In 2007 we set up an e-commerce practise in anticipation of retailers adopting the success of overseas retailers and after spending two years with little success realised they (retail executives) were all talk no action.  This has been repeated again with globalisation and I dare say will continue.

“It is impossible for anyone to begin to learn that which he thinks he already knows”

Epictetus Philosopher

Take the stance that the business will be broke in 18 months if ‘I don’t take action and work to that timeline to enact necessary meaningful change’. When we talk to large retailers they often talk in terms of 3-5 years to implement a transformation. Times have changed, great leaders now take time out to plan, communicate their vision and intent, move decisively, are willing to try things and fail fast. Guy Russo at Kmart is a case in point. We were talking to a retail executive of one of the largest fashion retailers in China and their attitude was the opposite of Australian retailers, embracing change and seeking out innovation and differentiation, you see in China you don’t survive unless you change.

Develop a strategy and plan to effect change. Great leadership is about balancing short term tactical priorities against longer term planning. You need to do both. In Australia we do too much rowing and not enough steering.

I expect the retail industry will not learn from past lessons and the spate of insolvencies will continue to accelerate. In truth, there are quite a few old school retail executives, boards and owners that will resist change and should think about standing down and or turn over their businesses to the younger generation.

Charles Darwin was misquoted, what he said was “It Is Not the Strongest of the Species that Survives but the Most Adaptable” – ask the dinosaurs.

I say bring on the revolution.

Bill Rooney is CEO of 6one5 Retail Consulting Group, specialists in retail strategy, consulting and retail training. He can be contacted at

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