Australian Retail Outlook 2017

AUSTRALIANRETAIl
OUTLOOK 2017

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AUSTRALIAN
RETAIL
OUTLOOK
2017 CONTENTS
4| Welcome EXPERT FORECASTS

5| Retail predictions: Its 52 | Azurium: Delivering the
time to buckle up for magic
2017.
53 | Azurium: Looking into
11 | 2017 Retailer Survey: the future
Results from Inside
Retails latest reader 56 | Azurium: Nothing
survey. changes if nothing
changes
EXECUTIVE
57 | Michael Page: Always a
11 PERSPECTIVES challenge
22 | Terry White Group:

58 | Retail Doctor Group:
Just what the customer
Dont be left behind
ordered...
59 | NORA: Back to basics
24 | Super Retail Group:
Changing dynamics
60 | Deloitte: Disruption the
new norm
28 | Asian Restaurant
Concepts: Boxing on
62 | GFK: Its all about the
experience
30 | Lush: Change more than
cosmetic
64 | IbisWorld: Tough times
ahead
32 | Oxfam Australia
22 Trading: No exemption
66 | Savills: Elephants and
from turbulence
poachers
34 | Disrupt Sports: Doing it 68 | Mima Design: Keeping

their way
up appearances
AZURIUM 72 | CBRE: Thinking small
38 | 2016 Scorecard: 73 | Neto: Keeping it all in

Winners and losers the family
42 | Trending in 2017: Food

retail and the last mile
50 | Economic update: No
38 improvement in sight

FROM THE EDITOR
AUSTRALIAN Welcome to the 2017 Australian Retail Outlook, a joint effort between
RETAIL Octomedia, publisher of Inside Retail and Azurium.

Last year wasnt easy for retail with several major brands bowing out of the
OUTLOOK industry, including Payless Shoes, Dick Smith, Masters and Pumpkin Patch.
Another wave of global retailers arrived again and we said hello to Debenhams,
2017 John Lewis and Decathlon, while the Chinese market continues to ramp up.
In terms of online retail, Australians are increasingly shopping using their
The Australian Retail Outlook is printed mobile devices and in response, retailers are picking up their game in the
by Octomedia delivery space with the rise of click-and-collect. Perhaps in response, traditional
bricks-and-mortar retailers are seeking creative ways to lure customers into their
stores, through special events, in-store experiences and even one-off pop-up
stores.
HEAD OFFICE Meanwhile, Amazon is hot on the heels of Australian retailers - it will be
Level 3, 51-57 Pitt St interesting to see how our local stores respond to the online giants interest in
Sydney, NSW 2000 our shores.
PO Box R217 I hope you enjoy reading the latest Australian Retail Outlook and it offers you
Royal Exchange NSW 1225 some food for thought for your business for the year.
Tel : +61 2 9901 1800
Fax : +61 2 9901 1800 Jo-Anne Hui-Miller
Editor, Inside Retail
EDITOR
Jo-Anne Hui-Miller
jo-anne.h@octomedia.com.au
JOURNALIST
Zilla Efrat
zilla@octomedia.com.au
ADVERTISING
Amir Engler FOREWORD
amir@octomedia.com.au 2016 certainly was a year that will stand out in recent history. Political upheavals,
Chris Samios the passing of notable popular culture icons and a series of tragic world events
chris@octomedia.com.au left many grateful for its end. And whilst some retailers might also share
this sentiment (as outlined in our Winners and Losers scorecard), for many
GRAPHIC DESIGN operating in the Australian market there are potentially tougher times ahead.
Nguyen Pham The last 12 months were marked by the unfortunate demise of some iconic
nguyen@octomedia.com.au brands such as Dick Smith, Laura Ashley and Payless Shoes. It wasnt all bad
news though. The likes of Dominos, Kogan and JB Hi-Fi were shining examples
of home grown retail successes.
CEO
2016 could also be considered the year of the bricks-and-mortar revival. Whilst
Oliver Ranck online retail is certainly providing a stronger growth trajectory for retail sales,
oliver@octomedia.com.au local brands understand that brick-and-mortar stores still play an integral part
in being able to deliver to the consumer a unique, exciting and seamless retail
FOR MEDIA RELEASES experience. Whilst the shopping centre of the future may look remarkably
irnews@octomedia.com.au different, physical retail is still well and truly alive.
The benchmark for Australian retail has now been set by big name international
brands who have taken to the local market. This is set to continue with the
anticipated arrival of Amazon this year. Rather than a threat, local retailers
Octomedia Pty Ltd accepts no liability for any errors,
should consider this an opportunity to reassess their own business and strive
ommissions, or consequences, including any loss or damage,
to deliver a service and offering which matches the expectations of the now
arising from reliance on information in this publication. The
globally-minded Australian consumer.
views expressed in this publication reflect opinions of the We wish all Australian retailers the very best for 2017.
writers and are not necessarily endorsed by Octomedia Pty
Ltd. We recommend obtaining professional advice from an James Stewart

accredited advisor before relying on the information in this Partner, Azurium
publication. Octomedia Pty Ltd reserves all copyright over the
content included in this publication. No part of this publication
may be reproduced, stored in a retrieval system, or transmitted
in any form, as per the Australian Copyright Act 1968.
4 | AUSTRALIAN RETAIL OUTLOOK 2017 www.insideretail.com.au

RETAIL PREDICTIONS
ITS TIME TO
BUCKLE UP
FOR 2017

RETAIL PREDICTIONS
THE STATE OF PLAY

Buckle up for 2017. With choppy trading conditions ahead and the
possible entry of Amazon and other internationals into the market,
Australian retailers will need to lift their eCommerce game and find
their points of differentiation.

RETAIL PREDICTIONS
2016
was a choppy which lets people design their own support Oxfams fair and ethical retail
year for sports equipment. It smashed its tar- business.
Australias gets and grew its own retail presence On the food side, Asian Restaurant
retailers as different categories faced (see p34). DisruptSports.com has lots Concepts hit its growth targets and
different trading conditions. of new projects planned for this year, now has 107 Noodle Box and Wok in
Despite a slowdown in growth including opening in Los Angeles and a Box restaurants in Australia and
early in the year, Australian Bureau of New York City. Elphick also expects four Noodle Box restaurants in Saudi
Statistics (ABS) figures show that retail to make waves with a game-changing Arabia (see p28). Acting GM Michael
turnover had a 3.5 per cent seasonally B2B integration platform and some Standley says the group is targeting
adjusted year-on-year rise in October. really awesome virtual reality custo- growth of 15 per cent this year and
According to Azuriums James misation tools. hopes to launch a third brand, still in
Stewart, 2016 had its share of retail Mark Lincoln, a director of Lush the Asian space, with two restaurants
winners and losers. Local brands who Cosmetics Australia and New Zea- by the end of the year.
embraced digital (e.g. Dominos and JB land, says 2016 was an exceptionally
Hi-Fi) saw healthy sales growth whilst good year for his business too, with
some retailers who have failed to adapt three stores launched in the region
THE INTERNATIONAL
their business models (e.g. Myer) have and other outlets undergoing refur- INVASION
struggled. Geographically, retail spend- bishments (see p30). And despite ex-
ing in the eastern states was buoyed pecting a challenging retail environ- The continued arrival last year of in-
by the housing boom, while WA and ment this year, he believes his group ternational retailers in Australia was
Queensland faltered amid the slow and is well placed for strong growth. The noted in Inside Retails 2017 Retailer
steady mining bust. beauty category has always been an Survey (see p12). An overwhelming
This patchiness is reflected in the intensely competitive market. The 43.5 per cent of the participants listed
mixed responses to Inside Retails 2017 challenge is to ensure we stay fo- international entrants as one of the
Retailer Survey (see p12). For example, cussed on delivering quality products biggest challenges facing the retail
23.4 per cent of respondents to the an- and the best customer service experi- industry this year. A further 41.3 per
nual poll described trading conditions ence in the industry, says Lincoln. cent said they were worried about
over the past 12 months as solid, 20.7 Meanwhile, Terry White Group these newcomers compared to 28.5
per cent as ordinary and 25 per cent as CEO Anthony White admits the retail per cent last year, and those who
challenging. Likewise, 37 per cent felt pharmacy market is tough, with phar- were not worried slumped from 71.5
that the market was better than last macists further hampered by severe per cent last year to 58.7 per cent.
year, 20.1 per cent said it was worse cuts to the Pharmaceutical Benefits However, many respondents wel-
and a similar amount (20.7 per cent) Scheme over the past year (see p22). comed the heightened competition,
said it was about the same. But he says there are still opportuni- some noting it will improve the retail
Looking ahead, respondents were ties if retailers can evolve and offer mix and enhance the retail experi-
not overly bullish about the prospects value to their customers and thats ence for Aussie shoppers.
for this year, with 35.9 per cent expect- not only on price, but on service and International retailers force local
ing trading conditions to remain the knowledge as well. Whites key focus retailers to improve their game, said
same and 45.7 per cent expecting them this year, however, will be bedding one, while others noted that more
to improve a little. Only 4.3 per cent down his groups merger with Chem- competition was needed in some of
believed conditions would improve a mart, which has created a mega-chain the retail categories that are dominat-
lot, while 14.1 per cent said they would of 500 pharmacies with $2 billion in ed by two large businesses.
become a little worse. annual turnover. In his commentary, Super Retail
This sluggishness, however, is not Julia Sumner, GM of Oxfam Austra- Groups Birtles observed: We have
reflected by all the retailers participat- lia Trading, also describes last years highlighted for many years the
ing in the Australian Retail Outlook retail environment as challenging (see impact that international retailers
2017s executive perspectives, with p32). With lower confidence in both will have on the Australian retail
most participants looking back on last the property market and household market, whether through rolling out
year positively and embracing this finances as well as low wage growth, a network of stores or through an
year with optimism and enthusiasm. we have seen a big impact on discre- online presence. We are now seeing
Peter Birtles, group MD/CEO of tionary spend throughout the year. international retailers come into our
Super Retail Group, is pleased with She says it has been quite a tough segments, and we welcome the chal-
his groups strong sales growth last year for retail in general, with some lenge that brings.
year (see p24) and says its key focusses retailers going into liquidation in the We know we need to continue to
this year will be on understanding its lead-up to Christmas. That said, our lift the standard of our businesses,
customer, building its omni-channel organisation has had quite an exciting which has to be good for the cus-
capabilities, developing its supply year with the opening of two shops in tomer. The strategies we have been
chain and engaging its staff. Looking Sydney, the launch of a new website implementing over the past few years
ahead, we all know the dynamics of and a successful year in our whole- have been developed with interna-
the retail industry are changing cus- sale channel off the back of increased tional competition in mind, so we
tomers have even more information distribution through independent dont see any need to change our
at their fingertips as to who will best supermarkets across Australia. strategic focus at this time. We have
meet their needs, and they have more Off the back of unstable economic the opportunity to turn our deeper
choices than ever before, he says. indicators throughout the past 12 understanding of the Australian
Similarly, Gary Elphick, CEO and months, Sumner says she cannot marketplace, Australian conditions
founder of DisruptSports.com, says make predictions for this year, but is and the Australian customer to our
2016 was a great year for his company, confident consumers will continue to advantage.

RETAIL PREDICTIONS
tial for major market disruptions is

huge. We are already seeing retailers
setting up task forces to assess the
potential impact of an Amazon mar-
ket entry, but its not yet clear what
exactly the company has planned for
Australia.
What we do know is that where
Amazon has entered new markets,
the impact on local retailers has been
seismic and has impacted almost all
categories and channels. So retailers
cant afford to wait and see what Am-
azon does they need to be develop-
ing strategies and taking action now.
In his commentary, Azuriums
Stewart says Amazon is likely to be
a game-changer in the Australian
market and accelerate the pace of
online growth. It could perhaps
also be the catalyst that brings the
Australian eCommerce economy up
to international benchmarks. We
doesnt believe he has seen anything expect retailers in all sectors to invest
revolutionary from any of the inter- heavily in securing their marketing
"Retailers cant national players. Whatever we learn
from the overseas brands influence
channels in an attempt to fend off
the American heavyweight, which is
afford to wait and on the local retail scene, one rule that
never changes is that if you simply
expected to undercut prices through
cost efficiencies.
see what Amazon stand still and watch, you are going
backwards, he warns. POINT OF
does they need In response to the trends created
by the overseas arrivals, he expects DIFFERENCE
to be developing smaller, bespoke and more person-
alised fashion brands to pop up, keen
To withstand the many threats com-
strategies and to offer something different that will

not be found in the malls.
ing their way, retailers will need to
work on standing out from the pack.
taking action now." Zelman Ainsworth, head of retail

brokerage leasing at CBRE Mel-
As Anthony White notes, one of the
biggest challenges for retailers and
also one of the biggest opportunities
bourne, says that if 2016 was the year
in the coming year will be to have
of the international retailer, 2017 will
Deloittes David White expects a clear point of difference and to be
be the year when domestic players
the influx of international retailers to highly responsive to the ever-chang-
rise to the challenge, with the emer-
continue this year and beyond (see ing needs of customers.
gence of micro-stores helping to even
p60) on the back of Australias strong Similarly, Birtles says: Our job
the playing field between local and
economic conditions, high consumer is to ensure we stand out from the
offshore brands (see p72).
demand for international brands and crowd with an offer that inspires and
This trend is good news for
relative proximity to Asia. engages at a broader level than prod-
everyone, he says. Not only do
One of the key differentiators uct and price. As long as we continue
micro-stores promote a more rich and
international retailers have brought to to provide the solutions and expe-
diverse retail sector, characterised by
Australia is in their store design and riences that help our customers to
boutique and independent stores, this
customer-experience model, lever- make the most of their leisure time,
concept also offers fiscal perks. These
aging their experience from larger we are confident we can continue to
include lower capital outlay costs,
markets. However, we are seeing achieve growth.
lower overheads and the opportunity
Australian retailers slowly starting This theme is echoed by Brian
to have multiple tenancies in different
to fight back, with investments rising Walker, founder and CEO of the Re-
locations opposed to just one large
in store design, and concept and tail Doctor Group, who predicts that
store.
flagship stores. So these new entrants successful retailers this year will be
will find Australian retailers better heavily focussed on the uniqueness
prepared and skilled to take on this ELEPHANT IN THE of their offerings and will increasing-
new challenge compared to five years ly turn to fields such as neuroscience
ago.
ROOM to understand consumers with far
Mark McConnell, design director Deloittes David White says that more alacrity and accuracy (see p58).
at Mima Design, acknowledges that if Amazon is not on the agenda To create a buzz with customers
the internationals are bringing new at board meetings for Australian this year, Paul Greenberg, executive
store experiences for us to engage retailers, then it should be. With the director of Nora.org.au, expects to
with (see p68). Think what Apple rumoured arrival of the US giant to see more retailers using new apps,
did and now Tesla, he says. But he Australias shores this year, the poten- trials, promotions and technolo-

RETAIL PREDICTIONS
gy, given that many shoppers are tor of retail services at Savills, forecasts retail sales are still only marginal
itching for innovation and change that local malls will increasingly em- compared to those of traditional
(see p59). brace things that cannot be replicated bricks-and-mortar sales. Analysis
Myer and eBays virtual reality online or delivered by drone. by Citibank suggests Australias 10
store last year was a fine example What we will we see be things largest retailers derive not quite 6 per
of this. Did it change the world? that are experiential, personal, or cent of all sales from online channels.
No, but it was a lot of fun for the of a service nature. The space will That number is almost double in the
teams of both businesses to develop, respond uniquely to the trade area US at 11 per cent.
customers had a fantastic play, and demographic instead of the one Stewart from Azurium notes that
the media went into meltdown with size fits all current model of shop- the strong growth shown by the eCom-
excitement. No losers here, and my ping-centre leasing and develop- merce sector and the enormous shift in
prediction is that this could quite ment, he says. consumer behaviour in the US toward
well develop to be a significant nee- mobile eCommerce is a warning
dle mover. bell for Australian brick-and-mortar
Similarly, in her forecast, Norrelle
ONLINE GROWTH retailers.
Goldring, APAC region shopper lead In his commentary (see p38), Azuri- Roy Morgan reveals that 16.5 mil-
at GFK, advises retailers to focus on ums Stewart discusses the exponen- lion Australians (85 per cent) shopped
creating experiences, not just selling tial growth of Australian retailers at one or more shopping centres in
stuff. Tell a story, provide a theme through online channels over the an average four-week period in the
for example, by apportioning a part past five years, noting that this has financial year to June 2015. So while
of your store to themes and seasonal been largely spurred on by the in- some people proclaim physical retail
items. Ensure your experiential mar- creased consumption of online media is dead, Stewart says these figures
keting activities are shareable, and (music, movies, e-books and so on). show that bricks-and-mortar are still
that sharing is encouraged, she says This growth was also picked up truly alive and well.
(see p62). in the 2017 Retailer Survey (see p12). However, Ryan Murtagh, CEO of
Our experts say that shopping Here, 31.5 per cent said their sales Neto, says retailers need to stop fo-
centres also need to work on their from eCommerce grew over the cussing on sales channels as separate
points of difference. Azuriums James past year as a percentage of overall businesses with separate strategies
Stewart and Denis Carruthers warn revenue while 17.9 per cent expe- (see p73). Instead, they should recog-
that while model innovation will be rienced no change. Interestingly, nise the value of all customer contact
key for centre operators in the future, most retailers polled only earned in-store, online or mobile as part
success will also rely on a trait that up to a quarter of their total revenue of a continuous shopping flow. But
has never changed (see p53). Every from eCommerce. Only 10.3 per cent he says that a key part of an effective
shopping centre needs to stand for earned more than that with 3.8 per omnichannel strategy is to rethink
something its unique selling prop- cent earning more than 50 per cent. the bricks-and-mortar outlet.
osition needs to be clearly under- According to Azuriums Stew- Its not just a point of sale any
stood by customers in its main and art, Australian retailers lag behind more its anything you want it
secondary trade areas. the rest of the world in adapting to be. Its a service base. Its a user
Likewise, Leighton Hunziker, direc- to omni-channel sales, and online experience lounge. Its a fulfilment

RETAIL PREDICTIONS
centre. Its a pop-up shop that spends in the short term with the longer-term Australian retailers remain relatively
a month in each city around the coun- outlook being uncertain. positive while many are expecting
try. Its a boutique mart. Theres no While interest rates are at re- to be able to grow and expand their
script to follow it doesnt even need cord lows, consumers continue to be businesses. However, competition
to be in a shopping mall, he says. impacted by some of the lowest levels will be fiercer than ever and, even if
of wages growth in recent times, even Amazon doesnt enter the market this
though unemployment continues to year, Australian retailers need to be
RENTAL ease. Adding to wages pressure has planning for change - disruption is
Again, rental overheads emerged as been the continued domestic and glob- now the norm, not the exception.
the major issue keeping retail execu- al economic uncertainty, particularly However, White says the wealth
tives up at night. In this years Retailer in the past 12 months. factor created by rising house prices
Survey, 44.6 per cent respondents cited Most of the retailers in Inside Retails in New South Wales will slow down
it as among the biggest challenges fac- 2017 Retailer Survey expect trading as house price growth is expected
ing the retail industry slightly down conditions to either stay the same this to moderate. Therefore, retail sales
from 50.3 per cent last year. year (35.9 per cent) or improve a little growth in 2017 in New South Wales
In a similar vein, Leighton Hun- (45.7 per cent). A far smaller group (14.1 will more likely match rather than
ziker, director of retail services at per cent) expected things to become exceed the national average.
Savills, reckons it is not sustainable a little worse. Yet in its 2016 Retailers He says potential over-building
for landlords to keep driving specialty Christmas Survey (see p60), Deloitte of apartments and the closure of car
store rents at CPI + 2 per cent increases found that 64 per cent of respondents manufacturers could slow down
a year in an environment where sales expected their earnings to increase by 5 growth in Victoria this year. Western
growth has not kept pace (see p66). per cent or more this year, with levels of Australia continues to feel pressure
Investors desire for never-ending optimism at their highest since it started from the downturn in the mining
rental growth has meant that special- this survey five years ago. sector, and trading conditions are
ty rental growth has outpaced sales We can expect a steady improve- expected to be challenging there this
growth, leading to a combination of ment in retail sales through this year, year. Queensland has a more positive
retailer margin erosion, higher prod- which is likely to coincide with a mod- outlook, with its retailers expected
uct prices and now, courtesy of access est improvement in wage growth over to benefit from a rise in tourists and
to information and macro-economic time, says Deloittes David White. students across the state, thanks to a
forces, customers reaching a point-of- As we head into 2017, prospects for lower Australian dollar.
purchase resistance.
The result? Retailers are stressed
because they are being squeezed by
unsustainable cost escalations on one
end and tapering sales growth at the "As the Australian economy
other end, says Hunziker.
remains sluggish, the
THE ECONOMY
Looking ahead, the outlook for Aus-
expectation is that the retail
tralian retailers does not appear too
rosy in the near term, but could im-
sector will stay tough in the
prove later in the year. In its economic
update (see p50), Azuriums Stewart
short term with the longer-term
observes: As the Australian economy
remains sluggish, the expectation is
outlook being uncertain."
that the retail sector will stay tough
1 0 | AUSTRALIAN RETAIL OUTLOOK 2017 www.insideretail.com.au

RETAILER SURVEY 2017
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RETAILER SURVEY 2017
NOT SO TOUGH
Trading conditions are less tough now than last year, according to our
annual retailer survey. However, higher rents and inflexible landlords are
listed as the main grievances.
T
here is good news in Inside Retails 2017 retailer survey - trading condi-
tions are reportedly not as tough as they were last year.
Here is an overview of the results from the 15-question survey.
Q.1
WORST I HAVE EXPERIENCED
BEST I HAVE EXPERIENCED HOW WOULD YOU

DESCRIBE TRADING
CONDITIONS IN THE
PAST 12 MONTHS?
CHALLENGING
Fewer respondents to the survey

describe trading conditions as
ORDINARY
challenging than they did last

year 30.9 per cent compared to 31.8
SOLID
POOR
per cent. Yet only 28.9 per cent saw

the market as solid, compared with
25.8 per cent in last years survey.
That said, there has been a rise in the
number who say the market is the
2 8. 9%
2 5.5 %
3 0.9 %
3. 4%
3.4%
8 .1%
worst they have experienced 8.1 per

cent versus 3.97 per cent last year.
Respondents to this question only includes retailers
Q.2
47.5 %
BETTER
THAN
20 15
HOW DID YOUR FULL YEAR
COMPARE TO 2015?
25.9 %
WORSE
47.5 per cent of respondents believe they will have done THAN
better last year than in 2015. Last year, 47.6 per cent 20 15
believed they had turned in a better performance than
in 2014. However, only 25.9 per cent of retailers expect to
26.6 %
have fared worse last year, down from the 27.15 per cent ABOUT
who predicted a drop in earnings in last years survey. THE
SAME

R E T A I L E R S U R V E Y 201 7
Q.3 45.7 %
IMPROVE
A LITTLE
35.9 %
IN THE YEAR AHEAD, REMAIN
THE SAME
HOW DO YOU
EXPECT TRADING
CONDITIONS TO
CHANGE?
14.1 %
On a brighter note, most of the GET A
retailers polled expected trad- LITTLE
ing conditions to either stay the
same this year (35.9 per cent) or 4.3 % WORSE
improve a little (45.7 per cent). IMPROVE

Only 14.1 per cent expected things A LOT
to become a little worse.
44
.6%
RENTAL OVERHEADS
43
. 5%
INTERNATIONAL ENTRANTS
41 .
8%
41 . OFFSHORE ONLINE RETAILERS
8%
ENDEMIC DISCOUNTING
41 .
3%
LOW CONSUMER CONFIDENCE
41 .
3%
HIGH LABOUR COSTS
28
. 3%
GLOBAL ECONOMIC TROUBLE
2 7.
7%
VALUE OF THE AUSTRALIAN DOLLAR
16.
8%
TAXES AND OVERHEADS
14.
7%
THE RISE OF PRIVATE LABELS Just like last year, rental overheads emerged as the major is-
10. sue keeping retail executives up at night. In notable swings
3%
this year, concern among retailers about international en-
GOV. RESTRICTIONS
8.7 trants, offshore online retailers and global economic trouble
% was higher than last year, but anxiety about the value of the
OTHER
1.6 Australian dollar and high labour costs eased.
% Some of the other worries retailers listed were a drop
NO CONCERNS
in Chinese tourism dollars, political incompetence at both
state and federal levels, and higher energy costs.
Q.4
One retailer bemoaned the trend for landlords to in-
crease the food/retail tenancy mix, therefore diluting that
sector and decreasing turnover on a store-by-store basis.
Another worried about the upsurge of selling on a pleth-
ora of Facebook sites by individuals rather than businesses,
while yet another fretted about the growing number of
WHAT ARE THE BIGGEST Australian online sales, such as Black Friday, where suppli-
ers were undercutting retailers.
CHALLENGES FACING THE Grocery deflation and the duopoly of the supermarkets
RETAIL INDUSTRY THIS YEAR? driving down pricing were also seen as causes for concern.

R E T A I L E R S U R V E Y 20 1 7
Like last year, the top priority of respon- 30.5 %

dents by a long shot was increasing sales, INCREASING SALES
followed by improving margins and
raising stock turnover.
The percentages of those wanting to
prioritise new markets, expand their store
Q.5
networks, build an eCommerce presence
or implement an omni-channel structure
all dropped from last years survey.
No respondents expected to focus on
rebranding, compared to nearly 6 per cent
last year. Only 1.9 per cent saw closing
WHAT WILL BE stores as an important activity this year,
THE TOP PRIORITY down from 9.93 per cent last year.
Other priorities listed included inter-
12.4 %
INCREASING MARGIN
OF YOUR RETAIL national expansion, improving the supply
chain, finding new distribution channels,
BUSINESS THIS running a more efficient business and
YEAR? reducing store locations and size.
10.5 %
INCREASING STOCK
TURNOVER
Q.6
DO YOU PLAN TO CHANGE
YOUR NUMBER OF STORES
THIS YEAR? 9.5 %
BUILDING AN
ECOMMERCE PRESENCE
As with last year, most retailers polled intended to maintain store numbers at
last years levels. More planned to add stores (42.5 per cent compared to last
years 17.2 per cent) and far fewer expected to reduce store numbers (9.2 per
cent compared to a whopping 11.26 per cent the year before). 9.5 %
IMPLEMENTING AN
47.1 % Maintain store numbers OMNI-CHANNEL STRUCTURE
1.1% Pure-play retailer

8.6 %
EXPANDING THE STORE
NETWORK
5.7 %
NEW MARKETS
2.9 %
EXPANDING
PRODUCT RANGE
42.5% Add more stores 1.9 %

CLOSING STORES
1.0%
REDUCING PRODUCT
RANGE
9.2% Reduce store numbers 0.0 %

7.6 % REBRANDING
OTHERS
Respondents to this question only includes retailers Respondents to this question only includes retailers

Q.7
DOES THE INFLUX OF
INTERNATIONAL RETAILERS
TO AUSTRALIAN SHORES
WORRY YOU?
With international retailers increas- to be better - the best retailers (local
ingly eyeing the lucrative Austra- or international) will continue to
lian market, there has been a prosper"
surge in concern about their "The competition provided by
presence. This year, 41.3 per international retailers with a global
cent said they were wor- perspective, who are constantly
41.3 % ried compared to 28.48
per cent last year. And
evolving the use of technology to
improve their business and engage-
SAID THEY
WERE the number who were ment with consumers, will push
WORRIED not worried slumped those Australian retailers who have
from 71.52 per cent last not felt the need to improve their
year to 58.7 per cent. businesses as rapidly."
However, many "International retailers give shop-
58.7 % respondents welcomed pers diversity and put pressure on
SAID THEY the heightened competi- Australian retailers to deliver the
WERE NOT tion. Some said it would experience shoppers expect and
WORRIED improve competition and that shoppers in other markets
enhance the retail expe- already enjoy"
rience and mix for Aussie "As a shopfitter, I welcome it."
shoppers.
NEGATIVE COMMENTS
POSITIVE COMMENTS INCLUDED:
INCLUDED: "They take shoppers away from
"More variety and competition can other areas"
expose new customers to other "The influx creates a skills shortage
offerings" with big-box retailers paying more
"The market needs competition. for the talent pool. The recruitment
Some categories are owned by two of good people is difficult"
large businesses" "It leads to margin pressure"
"This cuts both ways. There is no "Customers flock to what"s new,
reason why Australian retailers abandoning retailers who, in our
should not compete internationally" case, have indented stock six to
"International retailers force local nine months prior"
retailers to improve their game" "It has a potential impact on local
"Locals who can"t compete should retailers and the Australian econo-
not be operating to begin with" my locals pay adequate taxes."
"This will challenge local retailers
Q.8
Like last year, opinion was closely Australias competitiveness.
split on how the Australian retail
market is placed compared to other TOP COMMENTS
international markets 26.1 per cent
saw it as better placed, 26.6 per cent INCLUDED:
said it was the same, and 25 per Its very expensive to buy pretty
much anything when compared
HOW DO cent said it was worse placed. With
to London, where I lived previ-
opinions being so closely divided, its
YOU BELIEVE THE probably not surprising that 22.3 per ously. Retailers rely on higher
margins at the expense of volume.
AUSTRALIAN RETAIL cent were not sure.
Offshore and online retailers will
Some respondents noted that
MARKET IS PLACED Australias small population was a change that dynamic with Aus-
tralian retailers having to rely on
COMPARED TO OTHER limiting factor. Most of our suppliers
higher volume at lower margins
say we are negligible, maybe 2 per
INTERNATIONAL cent of the global market, said one. to compete.
Others noted that higher rents, la- Australia is the second most
MARKETS? bour and other costs of business limit retailed market after the US.

A U ST R A LIA N R E T A IL OU T LOOK 20 17
Q.9
25.3% 68.1%
YES, LANDLORDS NO, LANDLORDS DID
WERE MORE NOT OFFER MORE
HELPFUL FLEXIBILITY OR HELP
DID YOU FIND THAT YOU

RECEIVED MORE FLEXIBILITY
AND HELP FROM LANDLORDS
LAST YEAR?
Like last year, most retailers (68.1 per cent of
respondents) said their landlords did not offer more
flexibility or help over the past year. Only 25.3 per
cent found that their landlords were more helpful. A
few noted that they owned their premises.
TOP COMMENTS INCLUDED:

"Our landlord is totally inflexible, refusing to
6.6% acknowledge the difficulties we face at this time."
"Most landlords are not cognisant of industry or
I AM AN ONLINE
RETAILER government pressure."
There is too much floor space.

As eCommerce increases and
retailers invest in technology and 25% 26.6% 26.1%
THE SAME
in in-store experience, we will
see a shrinking of retail stores
22.3% WORSE BETTER
UNSURE
in favour of a better outcome for
shoppers and retailers. This is not
a particularly good situation for
landlords, who need to catch up
by remixing and improving their
customer proposition for both
retailers and shoppers. Australia
is effectively two to three years
behind other major markets such
as the UK, US, Singapore, France,
the UAE and South Korea.

Q.10
HOW DO YOU 9.6%
GET BETTER
EXPECT LEASING
TERMS TO CHANGE
THIS YEAR?
Moving into 2017, only 9.6 per cent
25.0%
of retailers expect leasing terms to GET WORSE
change for the better down from
12.58 per cent last year. While 25
per cent say leasing terms will
become more challenging, that is 65.4%
lower than the 21.85 per cent who STAY THE SAME
said so last year. We try to re-
main positive, but dont have our
fingers crossed, one respondent Respondents to this question only includes retailers
observed.
"If a retailer is seeing decking online

sales at this point, it's because there
is a problem with its eCommerce
infrastructure and marketing."
Q.11
HOW WILL THE VALUE
OF THE AUSTRALIAN DOLLAR
IMPACT YOUR BUSINESS 13%
THIS YEAR? POSITIVELY
Almost half of the retailers surveyed, our margins"

47.8 per cent, believe fluctuations in "A mixed bag. Retailers who import
the value of the Australian dollar will will have to pay more to buy stock.
have no discernible impact on their Locally made stock will be cheaper"
business this year. In contrast, 39.2 "A declining Australian dollar
per cent expected to be hurt by the tends to see our eCommerce in-
value of the Australian dollar. That crease, which we interpret to mean 39.2%
NEGATIVELY
is a big improvement from last year its more expensive to source from
when 58.28 per cent said the impact our overseas competitors"
would be negative. "Current conditions favour Austra-
lian-made"
"It depends on which way it goes.
TOP COMMENTS For retailers who mainly import
"I expect the Australian dollar to
their finished product from China,
fall further, which will help tour-
a rise in the dollar will be good
ism in particular"
and a decline will be bad"
"I buy in US dollars from overseas
suppliers, so a lower Australian
"As our products are from overseas 47.8%
this changes the costings per prod- NO DISCERN-
dollar hurts my margin big time" IBLE IMPACT
uct, which depend on the Aussie
"We are an importer, so any drop
dollar being competitive."
in the Australian dollar will affect
Q.12
Respondents sales from eCommerce grew 31.5 per cent
over the past year, as a percentage of overall revenue.
Only 2.7 per cent of retailers experienced a drop, which
is a better outcome than last year when 6.62 per cent saw
sales from eCommerce fall.
There is a clear trend in consumer behaviour with a pro-
HOW HAS YOUR REVENUE FROM pensity to buy online for convenience, said one survey
ECOMMERCE CHANGED IN THE participant. If a retailer is seeing decking online sales at
this point, its because there is a problem with its eCom-
PAST 12 MONTHS? merce infrastructure and marketing.
31.5% 42.9%
SALES FROM I DO NOT SELL
ECOMMERCE ONLINE
ARE UP AS A
PERCENTAGE
OF OVERALL
REVENUE
17.9%
NO
CHANGE
2.7%
4.9% SALES FROM
ECOMMERCE
I AM A PURE- ARE DOWN AS
PLAY RETAILER A PERCENTAGE
OF OVERALL
REVENUE

R E T A I L E R S U R V E Y 201 7 3.8%
MORE
5 0 P E RT H A N
CE NT
89.7%
0 -2 5
PE R CE N
T
6.5%
Q.13 25 -5 0
PE R CE N
T
WHAT PERCENTAGE Australian retailers continue to lag behind the rest of the world in adopting
eCommerce, with online retail sales remaining only marginal compared to
OF YOUR TOTAL those of traditional bricks-and-mortar sales. Almost nine out of 10 retailers
REVENUE COMES FROM polled earned a quarter or less of their total revenue from eCommerce. Only
10.3 per cent earned more than that, with 3.8 per cent earning more than 50
YOUR ECOMMERCE per cent. The expected arrival of Amazon, however, is likely to shake things
CHANNEL? up and accelerate the growth in eCommerce.
Australias top brands:

Q.14
BUNNINGS WHAT IS THE BEST AUSTRALIAN
ALDI RETAIL BRAND FOR 2016?
COLES/KMART
Wesfarmers has emerged as the owner of three of
Australias four top brands: Bunnings, Coles and
Kmart. But Target, a strong
COTTON ON/JB HI-FI/MYER

performer last year, didnt get a
look in this year.
Bunnings rose from third
WOOLWORTHS place last year to scoop our

top slot as Australias best brand. Aldi was voted the
DAVID JONES/PRICELINE second most popular, while Coles slipped from last
years top spot to equal Kmart in third place and, like
last year, outstrip Woolworths.
AESOP/CHEMIST WAREHOUSE/CUE/ Myer, which did not feature strongly last year, made
DAN MURPHYS/SMIGGLE a huge leap to overtake David Jones this year.
Q.15 70.1% FACEBOOK
43.5% INSTAGRAM
WHICH ARE THE MOST EFFECTIVE

19% LINKEDIN
SOCIAL MEDIA CHANNELS YOUR
RETAIL BUSINESS USES? 11.4% TWITTER
Yet again, Facebook emerged as the most effective social-media 11.4% ONLINE BLOG
channel, used by 70.1 per cent of retailers. Instagram was a poor
second, used by 43.5 per cent, followed by LinkedIn with 19 per
1.6% PINTEREST
cent. Twitter tied with online blogs in effectiveness. Only 1.6 per
cent of retailers used Pinterest, compared to 13.25 per cent in last
15.2% DONT USE
years survey. And surprisingly, given how vital and cost-effective
SOCIAL MEDIA
social media is in retail marketing, 15.2 per cent didnt use it at all.

EXECUTIVE PERSPECTIVE

EXECUTIVE PERSPECTIVE: TERRY WHITE GROUP
Anthony White
Chief Executive Officer
Terry White Group
JUST WHAT THE

CUSTOMER ORDERED...
After more than doubling in size through its merger with Chemmart and
enduring severe cuts to the PBS, community pharmacy group TerryWhite
has had a big year. Now it hopes its extensive marketing plans and ambitious
growth strategy will further cement it as a household name in Australia.
WAS 2016 A GOOD ing a highly sophisticated retail model ers, and significant scale advantages.
YEAR FOR YOUR RETAIL to provide our pharmacy owners with We were also focussed on ensuring
BUSINESS? a solid, diversified revenue stream to we had a highly competitive retail
help offset the impact of the ongoing pharmacy business model through
It was a great year for our company, reforms. As a result, we reported an systems that increased in-pharmacy
both operationally and financially. above-market increase in like-for-like efficiencies, freeing up our phar-
It was the most significant in our retail sales across the pharmacies macists to spend more time with
almost 60-year history, and through within our network last year. customers. This enabled the group to
our merger with Chemmart, we have achieve strong financial performance,
more than doubled in size and now DID YOU GROW OR above-market sales growth and a
work as 500-strong group of commu- CONSOLIDATE YOUR RETAIL strengthened market position.
nity pharmacies. We also announced
PRESENCE?
our new brand, TerryWhite Chem- HAVE YOU NOTICED ANY
mart, which has already started roll- We completed our merger with Chem- INTERESTING SHIFTS IN
ing out across our national network. mart during the year, which provided
CONSUMER BEHAVIOUR
us with a truly comprehensive national
OVER THE PAST YEAR?
WHAT WERE YOUR BIGGEST footprint and significant scale. This fur-
CHALLENGES? ther increased the competitiveness of Much has been said about the growth
all of our pharmacies within the retail of online shopping, but what I have
Over the next decade, the pharmacy marketplace. We are now Australias found interesting is the move by
and pharmaceutical sectors are set largest pharmacy network. online stores to start opening up
to deliver more than $20 billion in bricks-and-mortar shopfronts, be
savings via reforms to the Pharma- WHAT STRATEGIES DID YOU it a pop-up or a permanent shop.
ceutical Benefits Scheme (PBS). Last This shows that consumers are
USE TO GROW OR MAINTAIN
year our industry was impacted by the still looking for a traditional retail
most severe round of funding cuts to YOUR BUSINESS?
experience, but in a 21st-century
the PBS ever. This placed significant Over the past 12 months we contin- environment. This has never been
pressure on our pharmacy owners. ued to execute our growth strategy more true than now for pharmacies,
As an organisation though, we to achieve a more competitive market as customers increasingly look to
have invested significantly in develop- proposition for our pharmacy own-

EXECUTIVE PERSPECTIVE: TERRY WHITE GROUP
pharmacists to provide trusted health marketing and let us be much more to consumers. Thats how we manage
advice and patient-centred healthcare competitive. to consistently stay ahead.
services in a highly accessible way. Our new brand, TerryWhite Chem-
mart, stands for value and health, and WHAT IS YOUR TOP
HOW DO YOU BELIEVE we will be pushing hard into further OVERALL PRIORITY AS
THE RETAIL MARKET WILL expanding the important role our A RETAIL BUSINESS THIS
PERFORM THIS YEAR pharmacists play in the delivery of
YEAR?
frontline health services to consumers,
COMPARED TO LAST?
to deliver a really strong and differ- We will continue to focus on integrat-
There's no hiding the fact that the re- entiated value proposition within our ing the two businesses following our
tail market is tough, but there are still industry. We will roll out our new merger with Chemmart, and rolling
opportunities if retailers can evolve brand and concept stores this year. out our new brand across about 500
and offer value to their customers pharmacies to ensure we have strong
and that's not only on price, but on ARE YOU FACING ANY brand recognition, supported by a
service and knowledge as well. In THREATS FROM NEW significant investment in above-the-
the pharmacy space, that has never MARKET ENTRANTS, AND IF line marketing. We will continue to
been more accurate. People are living pursue consolidation with like-mind-
SO, HOW DO YOU PLAN TO
longer and looking to lead healthier ed pharmacy groups as we work to-
lives, and these factors, combined FIGHT BACK? ward continuing to grow our national
with the expansion of chronic health Community pharmacy is highly footprint.
conditions and an ageing population, competitive and fragmented. We
are contributing to the strength of the have competing banner groups and WHERE DO YOU HOPE YOUR
sector and offer prospects for future competition from both supermarkets BUSINESS TO BE THIS TIME
growth and industry expansion. and new market entrants. Given the NEXT YEAR?
already high levels of competition
WHAT DO YOU EXPECT within our industry, any new en- Twelve months from now, wed like
TO BE THE BIGGEST trants will need to have an incredibly to see TerryWhite Chemmart as a
strong offer to be able to compete household name with high levels of
CHALLENGES FOR
with the established groups. We are brand recognition and a national net-
RETAILERS OVER THE NEXT work of pharmacies that has contin-
focussed on supporting our members
12 TO 18 MONTHS? ued to grow.
to achieve success by having a highly
As retailers, we need to have a clear competitive and differentiated offer
point of difference and be highly re-
sponsive to the ever-changing needs
of our customers. Consumers are very
savvy they want more from their
shopping experience. In my view, one
of the biggest challenges for retailers,
and one of the biggest opportunities,
will be tapping into that sentiment
and providing that experience.
We have designed our pharmacies
to ensure the pharmacist is front and
centre, and highly accessible. Also,
in response to increased customer
demand for the delivery of frontline
health services, by far most of the
pharmacies within our network have
a clinic room, which has been a great
success in supporting the delivery of
preventative health services, includ-
ing heart health, asthma, weight
management and flu vaccinations.
HOW DO YOU EXPECT TO

CHANGE YOUR BUSINESS "We were focussed on ensuring
STRATEGY TO STAY AHEAD
THIS YEAR?
we had a highly competitive retail
Knowing where we want to go, and pharmacy business model through
why, is what inspires us every day
and drives us as a company. We have
a really ambitious growth strategy
systems that increased
and want to continue to aggressively
increase our network size and market
in-pharmacy efficiencies, freeing
share. The scale we achieved last year
will allow us to significantly increase
up our pharmacists to spend
our investment in above-the-line more time with customers. "
EXECUTIVE PERSPECTIVE: SUPER RETAIL GROUP
Peter Birtles
Group MD/CEO
Super Retail Group
CHANGING DYNAMICS
After strong sales growth last year, Super Retail Group will this year focus
on understanding its customer, building its omni-channel capabilities, devel-
oping its supply chain and engaging is staff.
WAS 2016 A GOOD new Rays brand and store format, at PRESENCE, AND WHAT
YEAR FOR YOUR RETAIL the same time as converting some FACTORS PLAYED A ROLE IN
BUSINESS? Rays Outdoors stores to BCF Boating THIS?
Camping Fishing Stores.
We have been pleased with our per- At the same time, BCF has been We are always looking for ways to
formance through the year. We have working to broaden its customer base optimise our store portfolio and
generated strong like-for-like sales from passionate fishermen to a much strengthen the groups overall foot-
growth across all our retail business- wider cross-section of participants print. This year we grew the network
es and have made good progress with in outdoor leisure activities. So far so of stores in our Amart Sports, BCF
our key strategic initiatives: building good with the new-format Rays stores Boating Camping Fishing, Rebel and
our omni-channel offer, developing attracting tremendous feedback from Supercheap Auto businesses. Notably,
our supply chain, reinvigorating our customers, and both businesses gen- that included extending our brands
leisure business, which includes the erating good underlying like-for-like into new geographies, such as launch-
BCF Boating Camping Fishing and growth and improved profitability. ing BCF Boating Camping Fishing
Rays brands, and seeing real progress Looking ahead, we all know the in Tasmania and Amart Sports in
in building customer-centricity and dynamics of the retail industry are Western Australia. At the same time,
safety awareness across our team. changing customers have even we achieved strong growth in online
more information at their fingertips sales across all brands.
WHAT WERE YOUR BIGGEST as to who will best meet their needs We continue to see opportunity to
CHALLENGES OVER THE and they have more choices than ever open stores across all our brands, as
YEAR? before. Our job is to ensure we stand there are many areas in the country
out from the crowd with an offer that in which not all of our brands are
We started the year recognising that inspires and engages at a broader present. There are many oppor-
we needed to reinvigorate the perfor- level than product and price. As long tunities for retail space growth in
mance of the two businesses in our as we continue to provide the solu- large-format retail locations that suit
leisure division: BCF Boating Camp- tions and experiences that help our many of our businesses.
ing Fishing and Rays Outdoors. We customers to make the most of their
accelerated the major transformation leisure time, we are confident we can DID ANYTHING SURPRISE
underway for the division, which continue to achieve growth both this YOU ABOUT YOUR BUSINESS
included a significant repositioning year and beyond. OR THE RETAIL LANDSCAPE
and refurbishment program for the
old Rays Outdoors business. This LAST YEAR?
DID YOU GROW OR
meant accelerating the roll-out of the Across the retail landscape there
CONSOLIDATE YOUR RETAIL

was nothing necessarily surprising. really embraced our focus in two which is based around understand-
However, you have to be impressed areas: safety and customer-centricity. ing the customer, building a great
with the way retail businesses are We have seen a significant reduction omni-channel experience, developing
adopting advances in technology to in our lost-time injury frequency a highly effective supply chain and
provide a better customer experience. rate, but, as importantly, the team building strong operating founda-
It is a challenge for all of us to de- has recognised the importance of tions.
termine how, where and when but being safety aware and we have Each of our brands has a clear
more particularly why we will use seen an exponential increase in our pathway to growth ahead our
technology. It is important to never be reporting of near misses. We have strategic focus continues to be in
complacent about the market or cus- also seen our net promoter score realising the potential for profitable
tomer expectations. The only constant for all our brands improve through growth across the group. Our brands
in retail is constant change, and the the year, and we were particularly have a range of growth levers at their
key to success in retail is being able pleased that every brand recorded a disposal, including our continued ex-
to identify and respond to market score of more than 50 toward the end pansion into Do It For Me services,
changes and new developments as of the year. optimising our online channels, and
they occur. expanding our private labels, exclu-
Within our group, I have been WHAT STRATEGIES DID YOU sive partnerships and so on.
very surprised at the strong growth USE TO GROW OR MAINTAIN In Australia, the sectors we work
we have generated in the sales of car YOUR BUSINESS LAST YEAR, in are still highly fragmented in
audio products, despite the declin- many cases. We see significant po-
AND WHAT WERE YOUR KEY
ing market. This just shows what tential to bring to bear our scale and
can be done when you have a great
AREAS OF FOCUS? maturity, and the advantages that of-
merchandise team that really un- The core focus across each of our fers in terms of supply chain, capital
derstands the customers and builds businesses is to move from being resources and marketing, to continue
strong relationships with tremendous a product provider to a solution to grow our business.
trade partners. provider. This means engaging and
inspiring our customers around their HAVE YOU NOTICED ANY
WHAT DID YOUR BUSINESS passions, whether that be tuning the INTERESTING SHIFTS IN
DO REALLY WELL LAST performance or maintaining the look CONSUMER BEHAVIOUR
YEAR? of their Monaro, catching the biggest OVER THE PAST YEAR?
barra of their life or beating their
I always take the biggest pride in lifetime best for the half-marathon. As I go around the stores, I sense that
our team, and in the past year it has This underpins our strategic focus, customers are becoming ever more

mission focussed. They have al- We have a clear vision set out for the leisure time, we are confident we can
ready made their mind up about what business and we are not anticipating continue to achieve growth across
they want to buy, they know what any significant changes to our strate- our business.
they are prepared to pay for it and gy this year. Our focus will continue
have generally chosen where they are to be on understanding our customer, ARE YOU FACING ANY
going to buy it. I think the amount of building our omni-channel capabil- THREATS FROM NEW
time spent browsing is going to keep ities, developing our supply chain, MARKET ENTRANTS, AND IF
reducing, and retailers are going to and engaging our team to be able to
SO HOW DO YOU PLAN TO
see even less footfall but a contin- deliver inspiring and engaging solu-
ued increase in average customer tions for our customers.
FIGHT BACK?
spend per visit. Our challenge as As we head into a period of low We have highlighted for many years
retailers is to engage the customer inflation, it will be our ability to the impact international retailers
when they are deciding what to buy embrace the changing dynamics of will have on the Australian retail
and where to buy it before they the retail industry that will enable us market, whether through rolling out
come to our stores. to outpace the markets in which we a network of stores or online. We are
work. The macro trend toward solu- now seeing international retailers
HOW DO YOU BELIEVE tions and services leaves our business coming into our segments, and we
THE RETAIL MARKET WILL well-placed to capture the revenue, welcome the challenge that brings.
PERFORM THIS YEAR? customer and margin growth offered We know we need to continue to
by the shift from products toward lift the standard of our businesses,
Consumer sentiment appears to be the solutions-centric offering that is which has to be good for the cus-
generally positive across Australia, already well underway across the tomer.
but what were focussed on as a group. The strategies we have been imple-
business is continuing to work hard menting over the past few years have
to better inspire and engage our cus- ARE THERE ANY EXTERNAL been developed with international
tomers. At the end of the day, its our FACTORS STRAINING YOUR competition in mind, so we dont
relationships and connection with see any need to change our strategic
BUSINESS, SUCH AS STAFF
our customers that will drive our focus at this time. We have the op-
success as a retail business. COSTS, THE AUSTRALIAN
portunity to capitalise on our deeper
DOLLAR, TAX, RENT,
understanding of the Australian
WHAT DO YOU EXPECT AVAILABILITY OF SUITABLE
TO BE THE BIGGEST LOCATIONS?
CHALLENGES FOR As a major importer, we have seen
RETAILERS OVER THE NEXT the cost of our products increase as
12 TO 18 MONTHS? the Australian dollar has weakened
against the US dollar. However,
I see the biggest challenge being the through a combination of our hedg-
need to evolve the traditional retail ing programs and fine-tuning our
business model to accommodate the pricing and promotions strategies,
full impact of digital across all areas we have been able to manage the
of the organisation, and to evolve the impact on our business. We are not
traditional retail culture from being seeing other factors have a signifi-
predominantly product-centric to be cant impact on our business its all
truly customer-centric. about connecting with customers and
meeting or exceeding their expecta-
HOW DO YOU EXPECT TO tions. As long as we are continuing to
CHANGE YOUR BUSINESS provide the solutions and experiences
STRATEGY TO STAY AHEAD? that help them make the most of their
"We as retailers
must earn the right to be invited
by our customer to fulfil one of
their needs how, when and where
it best suits them, and unless we
can do this well, our customers
have plenty of other choices."
marketplace, Australian conditions leisure passions. We have a really Over the past few years, we have
and the Australian customer. exciting app we will be launching been continuing to update our stores
We still see plenty of potential around Easter in one of our business- to create a more engaging and inspir-
for continued growth across our es stay tuned for more on that later ing experience for our customers. It is
brands. At a macro level, revenues in the year. a continual process of evolution that
are expected to continue to benefit will continue this year. We are par-
from a greater focus on healthier, HOW ARE YOU EVOLVING ticularly excited by the next iteration
more active, outdoor lifestyles, and YOUR IN-STORE LAYOUT, of Supercheap Auto stores, which we
the strong results from across our SERVICES, PAYMENT will test this year. We see the pro-
business is reflective of that. The vision of services and information
OPTIONS AND SO ON TO
Australian market remains relatively becoming increasingly important, and
fragmented, and we still see signif-
ENHANCE YOUR CUSTOMER we continue to look to merchandise
icant potential to bring to bear our EXPERIENCE? our products to provide customer
scale and maturity, and the advan- In the digital retail reality of today, we solutions, rather than basing them on
tages that offers in terms of our as retailers must earn the right to be category hierarchies.
deep local knowledge, supply chain, invited by our customer to fulfil one
capital resources and marketing, to of their needs how, when and where it ARE YOU EYEING
continue to grow and strengthen our best suits them, and unless we can do ANY INTERNATIONAL
national network. this well, our customers have plenty EXPANSION?
of other choices. That means being
HOW DOES SOCIAL MEDIA wherever the customer is and offering Our priority is growing our business-
FIT INTO YOUR MARKETING a seamless, frictionless service solu- es within Australia and New Zealand.
tion, regardless of how they prefer As a matter of course, we actively
STRATEGY?
to research, purchase or pay. For us, consider all opportunities to grow our
We are very excited about the oppor- its not about the bricks-and-mortar business, be it organic or otherwise.
tunity that digital and social pro- experience versus the online experi- However, our immediate focus is on
vides. We see our relationship with ence - its about starting first with the realising the upside potential we see
our customers moving to a whole customer and what their expectations ahead of each of our core brands and
new level as we use digital to develop are, then working tirelessly to deliver achieving profitable growth through
social communities that share similar on that. the strategic priorities we have set out
for the group.
WHAT IS YOUR TOP

OVERALL PRIORITY AS A
RETAIL BUSINESS MOVING
AHEAD?
Digital will remain an ongoing focus
for the business this year, as well as
continuing to build on our long his-
tory of digital innovation. We were
one of the first retailers in Australia
to offer click-and-collect, and our lat-
est innovations include a 90-minute
click-and-collect guarantee in our Su-
percheap Auto business, and offering
Apple Pay in some brands. Online
sales continue to grow strongly we
achieved 84 per cent growth in auto
and more than 60 per cent growth in
sports this financial year, and there
is significant potential for further
growth. We will continue to invest
in being able to deliver a seamless
omni-channel experience for our
customers and what they want.
WHERE DO YOU HOPE YOUR

BUSINESS TO BE BY THE END
OF THE YEAR?
Delivering great outcomes for our
customers, our team and our share-
holders, and continuing to grow
our business through providing the
solutions and engaging experiences
that enable our customers to make the
most of their leisure time.

EXECUTIVE PERSPECTIVE: ASIAN RESTAURANT CONCEPTS
Michael Standley
Acting GM
Asian Restaurant Concepts
BOXING ON
Asian Restaurant Concepts had a big year in 2016, integrating competitor
Wok in a Box, which Noodle Box acquired in October 2015, then taking the
franchise route. This year is shaping up to be equally as big with the group
set to launch a third brand and embrace the demand for delivery.
WAS 2016 A GOOD YEAR OR THE RETAIL LANDSCAPE WHAT STRATEGIES DID YOU
FOR YOUR BUSINESS? DURING THE YEAR? USE TO GROW OR MAINTAIN
It was indeed a good year for Asian Something that really surprised us YOUR BUSINESS LAST YEAR?
Restaurant Concepts. We added the throughout the Wok in a Box inte- WHAT WERE YOUR KEY
Wok in a Box brand and divested our gration journey was the passion our AREAS OF FOCUS?
own Noodle Box restaurants, becom- franchise partners have for their busi- We put our greenfield acceleration
ing a 100% franchise business. We hit nesses and the brand. We were really program into action, which was
our growth target and now have 107 impressed with their abilities, love and aimed at driving restaurant openings
Noodle Box and Wok in a Box restau- pride, and how protective they are of in new markets. The program gave
rants in Australia, and four Noodle Wok in a Box. It is a strong and active- incentives for people already in our
Box restaurants in Saudi Arabia. ly growing brand, and were looking networks managers, chefs and other
to continue this path this year. employees and encouraged them to
WHAT WERE YOUR BIGGEST invest in their own franchise. Weve
CHALLENGES OVER THE WHAT DID YOUR BUSINESS also been using new training infra-
YEAR? DO REALLY WELL LAST structure platforms to bring Wok in a
YEAR? Box franchisors and employees up to
Integrating the Wok in a Box brand
date with Noodle Box.
was a big challenge it was a lot We were really happy with all of
of hard work, but ultimately very our restaurant openings and overall
rewarding. growth last year. We achieved econo- HAVE YOU NOTICED ANY
mies of scale by bringing in the Wok INTERESTING SHIFTS IN
DID YOU GROW OR in a Box brand and its franchisors, CONSUMER BEHAVIOUR
CONSOLIDATE YOUR RETAIL and theres a great synergy across our OVER THE PAST YEAR?
PRESENCE? network of restaurants. We success-
We noticed that customers are looking
fully worked with our Wok in a Box
We opened five restaurants for Noo- for a consistent and good-quality
franchisors to implement our ARC
dle Box last year and three Wok in a offering, and are still very much inter-
systems and streamline across all
Box restaurants. ested in transparent cooking being
restaurants. Were really proud of the
able to see the ingredients and the
new products we developed last year,
food as its being made. There has cer-
DID ANYTHING SURPRISE including a new range of sides as part
tainly been an increase in consumer
YOU ABOUT YOUR BUSINESS of our menu.
demand for more convenient options,

EXECUTIVE PERSPECTIVE: ASIAN RESTAURANT CONCEPTS
and delivery is growing through to find chefs who already have the Box restaurants open there and plans
third-party aggregators like Delivery right skills. Were looking at training to double this number this year. Were
Hero and Uber Eats. Were seeing programs and giving employees the also looking at signing a new market
more people looking for a more con- chance to upskill. entry for Noodle Box in Asia toward
venient way to access restaurant-qual- the end of the year. Its a big market
ity food, and this is an area that will ARE YOU FACING ANY we can do really well in, and it is well
continue to grow. THREATS FROM NEW suited to our product.
We give our customers the oppor- MARKET ENTRANTS, AND IF
tunity to rate our restaurant in store, WHAT IS YOUR TOP
and are receiving 90 per cent positive OVERALL PRIORITY AS A
feedback. Customers who are order-
FIGHT BACK?
RETAIL BUSINESS THIS YEAR?
ing deliveries also can rate us through Noodle Box is the leading noo-
the third partys websites, and were dle-based QSR in the market, and Wok Were working on developing a third
seeing similar levels of positive feed- in a Box is second. For us, it is about al- brand, still in the Asian space, and
back there as well. ways enhancing the guest experience. hoping to finalise these developments
and open two restaurants by the end
HOW DO YOU BELIEVE HOW DOES SOCIAL MEDIA of the year. Well also be focussing on
THE RETAIL MARKET WILL enhancing our technology and em-
FIT INTO YOUR MARKETING
bracing the demand for delivery.
PERFORM THIS YEAR STRATEGY?
COMPARED TO LAST?
Social media is an area of focus for WHERE DO YOU HOPE YOUR
We are expecting positive things for us this year, and our marketing team,
BUSINESS TO BE THIS TIME
Asian Restaurant Concepts this year lead by group marketing manager
with a target of 15 per cent growth. Pooja Marathoo, is looking to im- NEXT YEAR?
prove our existing channels. As we Were looking to have developed our
WHAT DO YOU EXPECT increasingly work with third-party third brand and launched two restau-
WILL BE THE BIGGEST aggregators in the delivery space, rants, and were looking at having
CHALLENGES FOR were noticing a real need for quality seven new restaurants open across
content, and thats something we can Noodle Box and Wok in a Box.
RETAILERS OVER THE NEXT
push through our social media.
12 TO 18 MONTHS?
Mining tapering off in Western Australia HOW ARE YOU EVOLVING
will impact the north and south corridors YOUR IN-STORE LAYOUT,
in Perth and affect restaurants in those ar-
eas. The increase in consumers demand-
SERVICES AND PAYMENT "Were also
ing delivery is a welcome challenge. QSR
is competitive, and you have to work
OPTIONS TO ENHANCE YOUR
CUSTOMER EXPERIENCE? hoping to increase
to stay ahead and meet the consumer
demand for good-quality food.
Were bringing in a new generation
of self-ordering kiosks and looking
the theatre of our
at where they are positioned in the
restaurants. Were also hoping to
restaurants and are
CHANGE YOUR BUSINESS increase the theatre of our restaurants
and are looking at ways to include
looking at ways to
STRATEGY TO STAY AHEAD?
Were looking to leverage our technol-
our chefs in the customer experience. include our chefs
ogy, like improving the self-ordering
kiosks in our restaurants and integrat-
ARE YOU EYEING
INTERNATIONAL EXPANSION?
in the customer
ing these into Wok in a Box. Were
looking to make all touch points, We have a master franchise agreement experience."
in-restaurant and online, as seamless in Saudi Arabia, with four Noodle
and streamlined as possible, and well
certainly be embracing the convenience
factor consumers want and demand.
WHAT EXTERNAL FACTORS

ARE STRAINING YOUR
BUSINESS, SUCH AS STAFF
COSTS, THE AUSTRALIAN
DOLLAR, TAX, RENT,
AVAILABILITY OF SUITABLE
LOCATIONS?
We are facing a challenge with the
availability of chefs following the
restrictions on 457 visas. The chefs we
hire are specialists, and these changes
have hit hard and are making it hard

EXECUTIVE PERSPECTIVE: LUSH
Mark Lincoln
Director
Lush Cosmetics Australia and New Zealand
CHANGE MORE
THAN COSMETIC
With 30 stores across Australia, Lush Cosmetics is part of a new breed of
companies championing corporate activism. After adding three stores last
year, it plans to continue refurbishing the stores in its portfolio, improve its
in-store customer experience, and campaign on marriage equality and asy-
lum seekers in Australia.
WAS 2016 A GOOD YEAR DID YOU GROW OR lian government on the issues of
FOR LUSH? CONSOLIDATE YOUR people seeking asylum, as well as
RETAIL PRESENCE, AND protection for the Great Barrier Reef.
It was an exceptionally good year for
the business. The focus on building WHAT FACTORS PLAYED A
ROLE IN THIS? WHAT DID YOUR BUSINESS
strong teams throughout the business
DO REALLY WELL LAST
and a continued use of social media An extra three stores were added in
channels alongside more traditional YEAR?
the region. The business also em-
forms of marketing achieved strong barked on a refurbishment program We are extremely proud of the success
engagement with customers. This as well as relocating key sites, which of the campaigns we ran during the
resulted in an increase in visitor included our stores in QVB in Syd- year. Whether it be LGBTI equality,
numbers of more than 30 per cent ney, Rundle Mall in Adelaide and people seeking asylum, environmental
year on year. the Perth CBD. The bespoke design issues or supporting hard-working
elements and layout of these larg- not-for-profit organisations, our teams
WHAT WERE YOUR BIGGEST er-format stores has enhanced the have been instrumental in using our
CHALLENGES? customer experience. business as a tool to affect the change
we all want to see in the world.
The biggest challenge last year was
managing the supply chain. In- DID ANYTHING SURPRISE
YOU ABOUT YOUR WHAT STRATEGIES DID
creased international demand and
poor harvests caused shortages in BUSINESS OR THE RETAIL YOU USE TO GROW OR
key materials. Staying true to our eth- LANDSCAPE LAST YEAR? MAINTAIN YOUR BUSINESS,
ical-sourcing policy meant we were AND WHAT WERE YOUR
We continue to be surprised by the KEY AREAS OF FOCUS?
unable to produce several products.
positive response and support we
Our success has also caused growing
receive from our customer base when There were a number of facets to the
pains that some sectors of the busi-
we campaign on difficult issues. This business strategy last year, the key
ness struggled to cope with.
year we campaigned to the Austra- being the focus on the customer and

EXECUTIVE PERSPECTIVE: LUSH
ensuring that customer service and conditions and maximise opportuni- photographic and video content has
products exceed expectations. ties identified in the review process. enabled us to showcase our products
The key to this process is ensuring and manufacturing processes in a new
HAVE YOU NOTICED ANY we listen to the feedback provided by and engaging way, highlighting the
INTERESTING SHIFTS IN staff and customers. handmade nature of our products. We
CONSUMER BEHAVIOUR have started to see a shift to platforms
WHAT EXTERNAL such as Instagram and Snapchat, with
OVER THE PAST YEAR?
FACTORS ARE STRAINING customers engaging with us multiple
We continue to see awareness YOUR BUSINESS, SUCH times a day on these channels.
growing among consumers about
AS STAFF COSTS, THE
the importance of understanding the HOW ARE YOU EVOLVING
story behind where their products AUSTRALIAN DOLLAR, TAX,
RENT, AVAILABILITY OF YOUR IN-STORE LAYOUT,
come from and how they are sourced. SERVICES, PAYMENT
The number of customers willing to SUITABLE LOCATIONS?
OPTIONS TO ENHANCE
buy products and services from busi- The availability of the raw materi-
nesses committed to social change YOUR CUSTOMER
als we need to make our products EXPERIENCE?
continues to grow and is becoming provides constant strain on the
an important consideration in the business, especially as the demand This year will see the brand
purchasing decision. for our products continues to grow at continue refurbishing its stores
a breakneck speed. as part of a strategy to improve
HOW DO YOU BELIEVE the customer experience. There
THE RETAIL MARKET will also be a focus on
WILL PERFORM THIS improving the customer
YEAR? experience at checkout.
Technology options will
The challenging retail envi- be comprehensively
ronment will continue this
year. However, we believe we
"Retailers who focus reviewed to ensure we
meet expectations.
are well placed to continue
the strong growth we have
on a strong customer ARE YOU
experienced over the past
24 months. Retailers who
experience, whether EYEING ANY
focus on a strong customer
experience, whether it be
it be online or in store, INTERNATIONAL
EXPANSION?
online or in store, will negate
the impact of uncertainty
will negate the impact Lush globally continues to
look for new markets and
caused by economic, social or
political factors.
of uncertainty caused opportunities. December
saw the brand open its
WHAT DO YOU
by economic, social first store in Thailand.
EXPECT TO BE
THE BIGGEST
or political factors." WHAT IS YOUR
TOP OVERALL
CHALLENGES FOR PRIORITY AS A
RETAILERS OVER RETAIL BUSINESS
THE NEXT 12 TO 18 THIS YEAR?
MONTHS?
ARE YOU FACING Our top priority this year is to
Political events in the past 12 months, ANY THREATS FROM NEW harness the energy of the passionate
including the local election, the Brexit MARKET ENTRANTS, AND IF individuals within the business and,
vote and the US presidential election, by working alongside like-minded
have created considerable uncertain- experts, use our business to affect
ty domestically and globally. These FIGHT BACK? real social, environmental and polit-
events may have an impact on con- The beauty category has always been ical change. With the support of our
sumer confidence, and retailers will intensely competitive. The challenge customers we hope to achieve real
need to be able to adjust their strategy is to ensure we stay focussed on de- influence and help shape the world
and campaigns quickly to maintain livering quality products and the best into a better place for all.
growth and profitability. customer service experience.
WHERE DO YOU HOPE
HOW DO YOU EXPECT TO HOW DOES SOCIAL MEDIA YOUR BUSINESS TO BE
CHANGE YOUR BUSINESS FIT INTO YOUR MARKETING THIS TIME NEXT YEAR?
STRATEGY TO STAY STRATEGY? We hope to continue to grow the
AHEAD? business and meet the expectations
Social media is an integral part of our
Every January, all aspects of the communication with our customers. of our staff and customers, and be
business in the previous 12 months It is fast becoming the main point of celebrating real change on the issues
are reviewed. From this review the contact, especially through the use of marriage equality and asylum
strategy is adjusted to meet market of Facebook and Twitter. The use of seekers in Australia.

EXECUTIVE PERSPECTIVE: OXFAM
Julia Sumner
General Manager
Oxfam Australia Trading
Photo: Lara McKinley/OxfamAUS
NO EXEMPTION
FROM TURBULENCE
Oxfam shops have undergone many changes since the first one was
opened in Gays Arcade in Adelaide in 1965 after the arrival of a tea-
chest of products from India. Its outlets now help thousands of artisans,
farmers and their communities lift themselves out of poverty, but there
are still continuing challenges.
WHAT INSIGHTS CAN YOU tion had quite an exciting year with en impression they are supporting
SHARE ABOUT TRENDS AND the opening of two more shops in an ethical brand.
CHANGES IN THE NOT-FOR- Sydney, the launch of a new website
PROFIT RETAIL MARKET? and a successful year in our whole- WHAT DID YOUR BUSINESS
sale channel off the back of increased DO REALLY WELL LAST YEAR?
Retail in general has had a challeng- distribution through independent
ing year, and ethical and not-for-prof- supermarkets across Australia. Each of our physical shops have be-
it retailers are not exempt from this come real hubs for public engagement
turbulence. Consumer confidence DID ANYTHING SURPRISE throughout the past 12 months, with
is falling, and November saw the staff attending markets in the lead-ups
YOU ABOUT YOUR
CSI index drop from 1.1 to 101.3 per to Easter, Mothers Day and Christmas.
BUSINESS OR THE RETAIL Our network of retail volunteers be-
cent. With lower confidence in both
LANDSCAPE LAST YEAR? comes stronger throughout the year.
the property market and household
finances, as well as low wage growth, We continue to be surprised by the During the past 12 months, our
we have seen a big impact on discre- steady increase of retailers using Adelaide-based warehouse volunteers
tionary spend throughout the year. ethical messaging to sell a product packed more than 20,000 boxes for our
One of the trends that we have or service when the organisation online shop alone, and 524 volun-
noticed, though, has been the ev- itself is not necessarily ethical. We teers from our shops and warehouse
er-growing importance of an integrat- have competitors in both our retail selflessly gave our organisation 38,492
ed digital strategy. and wholesale channels who are hours of work. That is the equivalent
aligning themselves with other not- to 22.9 full-time employees.
WAS LAST YEAR GOOD for-profit organisations as a selling As well as selling our range of
FOR YOUR BUSINESS? point, without looking into the ethi- handcrafted ethical products, our
cal qualifications of their own supply shops have also raised $901,325 in do-
It was quite a tough year for retail in chains. nations to support Oxfams life-sav-
general, with some retailers going This ethical washing has had a ing work around the world.
into liquidation in the lead-up to big impact on the retail landscape, as
Christmas. That said, our organisa- consumers can be under the mistak- HOW DO YOU EXPECT THIS

EXECUTIVE PERSPECTIVE: OXFAM
YEAR TO BE? It takes into account an artisans HOW DOES SOCIAL MEDIA
skills, techniques, culture, histo- FIT INTO YOUR MARKETING
Off the back of unstable economic ry, quality, raw materials, and the
indicators throughout the past 12 STRATEGY?
personal stories that are part of the
months, we believe this year will creation of each of our products. As we are a not-for-profit organi-
be unpredictable. However, with the sation with a limited advertising
opening of two more Oxfam shops budget, social media and digital
WHAT DO YOU EXPECT
in Sydney and a new website, were advertising play a huge part in our
confident consumers will continue to YOUR BIGGEST CHALLENGES
marketing strategies. Not only is so-
support Oxfams fair and ethical retail TO BE THIS YEAR?
cial media a great way to let people
business - whether it be in store, online We are expecting the instability we know about new products and pro-
or through Australian supermarkets have seen in the retail market to con- motions, but it also allows us to tell
with the purchase of coffee, tea and tinue throughout the year, which will the beautiful stories of our producer
chocolate from our Oxfam range. be our biggest challenge. partners from around the world cost
effectively.
WHAT WERE YOUR BIGGEST IN GENERAL, HOW WILL Live video is a growing trend
CHALLENGES LAST YEAR? RETAILERS IN THE ETHICAL weve seen emerge, and something
MARKET PERFORM THIS well be looking to use to start
We have seen lower-than-expected
conversations around issues that
retail spending throughout the three YEAR?
are important to our customers. Its
months leading into retails busiest
As consumers become more savvy a trend we will be looking to capi-
time of the year. This is a reflection of
about marketing tactics in regards to talise on this year. We hope to use
increasing consumer caution as wage
ethical washing we are expecting social media to drive conversations
growth hits record lows. This has
consumers to start questioning the and increase awareness on issues
led to a high proportion of retailers
ethical credentials of retailers and to such as ethical washing and living
leveraging discounts to increase foot
start seeking out those that provide wages, and as a way to provide an
traffic into their stores. This seems to
transparency and accountability extra point of connection between
be leading to a trend where con-
throughout their entire supply chain. our producer partners and Australian
sumers are becoming conditioned to
consumers, while also driving sales
discounts, and actively seek them out.
WHAT DO YOU EXPECT for our retail channels.
While this may be a short-term
fix for many retailers, we do not see TO BE THEIR BIGGEST
heavy and frequent discounts as a CHALLENGES? WHERE DO YOU HOPE
sustainable business practice. Instead, YOUR BUSINESS TO BE THIS
Living wages are becoming a big is-
we prefer to promote the value that TIME NEXT YEAR?
sue within in the ethical market, with
each and every one of our products organisations such as Oxfam, the This time next year we hope to see
provides. While we understand that World Fair Trade Organisation and our organisation flourishing pro-
discounting is necessary at times, Fairtrade Labelling Organisation all viding not only financial support, but
we try to keep our sale and discount calling for organisations to start mov- product development, marketing and
periods to a minimum. ing to pay living wages as opposed to export help to the producers we work
Value is about more than just price. minimum wages. with around the world.

EXECUTIVE PERSPECTIVE: DISRUPTSPORTS.COM
Gary Elphick
CEO/founder
DisruptSports.com
DOING IT THEIR WAY

Launched at Sydneys Bondi Beach in late 2014, DisruptSports.com aimed to
enable mass customising options for sports equipment. It has expanded its
product line from surf to skate and now yoga and snow, and has plenty of
projects planned for this year.
WAS 2016 A GOOD YEAR PRESENCE, AND WHAT WHAT DID YOUR BUSINESS
FOR YOUR RETAIL BUSI- FACTORS PLAYED A ROLE DO REALLY WELL LAST
NESS? IN THIS? YEAR?
We had a great year. We smashed our We grew our own retail presence. We Our team members have really come
targets. It felt like consumer confi- operate via a concession model in oth- into their own. They run a lot of the
dence was good internationally. Ex- er peoples stores, as well as own over business, fail fast and are always learn-
ports were easier, and there was more Christmas. We are seeing an increase ing, often freeing me up to spend more
awareness around customisation and in demand from our partners, espe- time on our strategic growth planning.
where goods are coming from (ours cially as they realise the advantage
are made locally). of not having to hold stock, and the WHAT STRATEGIES DID
available stock-keeping units (SKUs) YOU EMPLOY TO GROW OR
WHAT WERE YOUR BIG- we offer with a small footprint. MAINTAIN YOUR BUSINESS,
GEST CHALLENGES? AND WHAT WERE YOUR
DID ANYTHING SURPRISE KEY AREAS OF FOCUS?
Were a new proposition. We let people
YOU ABOUT YOUR BUSI-
design their own sports equipment. Last year we focussed on increasing
It takes time for our retail partners NESS OR THE RETAIL LAND-
SCAPE THIS YEAR? our customised product offering,
to understand what we do and the opening up internationally and
advantages of on-demand manufac- Yes - that doing business in Australia increasing the capacity of our produc-
turing. Thats just part of the process, is expensive and the wage bill can put tion through new systems.
and being early to market. But as the a strain on a business. We learnt that
market matures, it gets better and not only were we solving challenges HAVE YOU NOTICED ANY
better each year. for end customers but also for eCom-
Weve also seen an increase in
INTERESTING SHIFTS IN
merce retailers, traditional retailers
demand from our UK office, which CONSUMER BEHAVIOUR
and brands such as Coca-Cola, Her-
services Europe. As a result, keeping mes, Red Bull and Rockstar, which all
OVER THE PAST YEAR?
up with time zones and managing crave high-quality custom-designed Many more people are asking about
the increase in production has been sports equipment. For eCommerce, its product origins and materials, and
interesting. about increasing their offering while more people are getting involved in
not increasing their ranging risks. the maker movement and up-cycling.
DID YOU GROW OR CON- Were going to see a lot more in these All seem to be on trend.
SOLIDATE YOUR RETAIL areas over the coming year.

HOW DO YOU BELIEVE
THE RETAIL MARKET WILL
PERFORM THIS YEAR
COMPARED TO LAST?
It really depends on how you define
the retail market. I believe retail is
going through a significant shift. Of
course, there is talk of Amazon and
other same-day/low-quantity super-
fast retailers coming to Australia that
will change peoples expectations
about convenience, both from online
and bricks-and-mortar retailers.
I also believe were going to see a lot
being spent on retail as an experience
rather than just a transaction, as well as
on virtual retail, customisation, hybrid
community and retail space I am
sure there are many others.
WHAT DO YOU EXPECT

TO BE THE BIGGEST CHAL-
LENGES FOR RETAILERS
OVER THE NEXT 12 TO 18
MONTHS?
Adapting to the above. Many retailers
will have to tread lightly with new
concepts and technology. They havent
been forced to move that fast in the
We have a game-changing B2B
past, and its about to shift.
integration platform that is going
CHANGE YOUR BUSINESS
to let many others access our on-
STRATEGY TO STAY AHEAD? demand manufacturing in a very
We have many new projects coming
up, but were also focussed on our simple plug-and-play approach.
long-term strategy. We are looking to
open in both Los Angeles and New
York City by the end of the year.
ARE YOU FACING ANY HOW ARE YOU EVOLVING
We also have a game-changing B2B
integration platform that is going to THREATS FROM NEW MAR- YOUR SERVICES, PAYMENT
let many others access our on-demand KET ENTRANTS, AND IF OPTIONS AND OTHER SYS-
manufacturing in a very simple plug- SO, HOW DO YOU PLAN TO TEMS TO ENHANCE YOUR
and-play approach. FIGHT BACK? CUSTOMER EXPERIENCE?
In the research and development
There are a few, and Im sure well see We are forever trying to remove fric-
space, weve developed some really
more over the year. We always keep an tion, automate processes, de-risk the
awesome virtual-reality customisa-
eye out for new entrants, but we dont purchase decision and then back it all
tion. This allows customers to design
let it distract us. Its all about staying up with incredible guarantee policies
in virtual reality and meet the person
focussed. and customer service.
making their equipment, as well as a
few other things we are keeping up
our sleeve. HOW DOES SOCIAL MEDIA ARE YOU EYEING ANY FUR-
FIT INTO YOUR MARKETING THER INTERNATIONAL EX-
WHAT EXTERNAL FACTORS STRATEGY? PANSION?
ARE STRAINING YOUR BUSI- Social media can take on a number of Yes, into the US. The aim is to hedge
NESS, SUCH AS STAFF COSTS, roles. We use social media not only currencies and grow a bigger custom-
THE AUSTRALIAN DOLLAR, as customer proof of things they have er base. Plus, we already have strong
TAX, RENT, AVAILABILITY OF designed, but also to interact with demand for our products.
SUITABLE LOCATIONS? customers and to show them how and
where things are made. Its about be- WHAT IS YOUR TOP OVER-
All of the above. This coming year will ing less we are over here and you are ALL PRIORITY AS A RETAIL
be about cash flow as well as fuelling over there and more about lets join BUSINESS THIS YEAR?
and maintaining both sales growth together and create some awesome
and equally production. sports gear. To achieve sustainable, explosive
growth.

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Azuriums James Stewart, Dr Ian Tho,
Neeraj Sharma, Mark Tippet, Denis
Carruthers and Ben Kite look back
at the winners and losers of 2016 and
predict the big trends of 2017.
James Stewart Dr Ian Tho Neeraj Sharma

Partner, Retail Practice Leader Executive Director Partner
Azurium Analytics
Mark Tippet Denis Carruthers Ben Kite

Business Consultant Retail Property Specialist Business Consultant

2016 SCORECARD
2016
SCORECARD
&
MYER THE IRON SHIP by celebrity chef Neil Perry. Zizo (previously Wayfair) purchases
ENDURES We are cautiously optimistic about shortly before the IPO.
Myers return to brand excellence and What went wrong? Some commen-
We likened Myer last year to an iron- anticipate big things from David Jones tators believe the business model of
hulled sailing vessel struggling to foray into food. selling items online that consumers
keep up with a turning tide. But in typically want to touch and explore
the space of 12 months, CEO Richard TEMPLE & WEBSTER in store may not be sustainable. This
Umbers is proving to be the lifeline scared off many investors. As well
the department store needed to bring
WHAT GOES UP MUST
as that, the corporate structure was
it up to speed. COME DOWN overweight and spending was out of
After a year into the brands When Temple & Webster, Australias control.
five-year transformational journey, largest furniture and homewares In a bid to turn things around,
customers seem to be getting on board eCommerce site, made its IPO in De- original co-founder Mark Coulter
and embracing the greater focus on cember 2015, its share price went only has returned to the business as CEO
customer service and training. Sales one way down. to lead the execution of a revised
grew by almost 3 per cent to $3.2 bil- Just two months after listing, full- business plan, along with Mark Taylor
lion in FY16, while Q1 results for FY17 year revenue targets were downward- as new CFO. The management team is
continue to improve with comparable ly revised, and Temple & Websters confident it has rectified the issues that
store sales up 1.6 per cent. share price was sitting 82.3 per cent led to the massive cost blowouts and
Myers renewed strategy was lower than its listing price of $1.10 at revenue shortfalls of last year, forecast-
launched in September 2015 - a $600 just $0.195. By the time the reporting ing a return to profit by 2018.
million investment to deliver four stra- season for FY16 had wrapped up, the Early signs for the first half of the
tegic priorities: an optimised customer group reported losses including signif- current financial year show that sales
offer, experience-led destinations, a icant write-downs of intangible assets have rebounded and some major
stronger omni-channel presence and a acquired with the Milan Direct and cost-cutting has taken place. The com-
review of the store portfolio.
Competitor David Jones, two
years after acquiring Woolworths,
has consolidated its market position,
recording profits of $168 million in
FY16. The year was not without its tri-
als, however. An unseasonably warm
winter hit sales and left DJs with
excess stock. The closure of the Dick
Smith concession stores also hurt the
top line.
With David Jones now in a strong
financial position, Woolworths chief
executive Ian Moir has announced
further transformation plans and
warned of an upcoming period of
substantial losses as the brand
looks to develop the best top-end
food business in Australia, centered
around the Elizabeth Street store in
Sydney which will house a restaurant

earnings guidance for FY17 NPAT
between $6 million and $6.6 million.
It all sounds neat, but lets not
forget the electronics retailing
heavyweight who has taken a liking
to the whitegoods market and could
be poised to further erode Godfreys
already diminishing market share.
JB Hi-Fi HOME
APPLIANCE BOOM
Everything but the kitchen sink
- but theyll sell that, too! JB Hi-Fi
has continued its expansion into the
home-appliance and white-goods
market, now running 59 JB Hi-Fi
Home Superstores.
pany is also considering a move into Tom Krulis. This follows its $870 million acqui-
physical retail with the newly acquired John Hardy, a former CEO of the sition of the white-goods giant The
Milan Direct Brand after some show- group, has stepped back into the role Good Guys in September a strategic
room testing last year. to get the business back on track. His move to strengthen its presence in the
Although the wind has well and recent involvement with Fusion Retail, home-appliance market and take on
truly been knocked from its sails, Barbeques Galore and Super A-mart rival Harvey Norman.
Temple & Webster has swallowed the plus his previous experience inside While The Goods Guys continues
bitter pill, acknowledged its missteps the business suggests he has the track as an individual brand with an execu-
and appears fully focussed on a turn- record to lead a turnaround. tive management team, the acquisition
around. In FY16 sales flat-lined and net means the JB Group now has a greater
profit fell by 20 per cent to $9.2 million. market share than Harvey Norman.
The underperformance is linked to
GODFREYS GROUP the brands failure to identify the
The unfortunate demise of the
SOMETIMES RETAIL iconic Dick Smith stores has also been
market shift from barrel vacuum a windfall gain for JB, and sharehold-
SUCKS cleaners to stick vacuums, and keep ers continue to reap the benefits of
up with changing consumer shopping continued growth and dividends, with
Tainted by downgraded earnings fore-
behaviours. total dividends in FY16 of 100 cents a
casts and replacing a second CEO in 12
The plan? Shift the business toward share. Recorded sales growth of 8.3
months, the board of Godfreys Group
a franchise model and convert up to per cent saw sales reach $3.95 billion in
has recognised the need to restore the
60 corporate stores to franchise stores FY16, with net profit after tax of $152.2
business.
over a three-year period. Cash gener- million.
The shock departure of Kathy Co-
ated from this restructure is expected JB looks to be on a winning strategy
covski, who cited personal reasons for
to improve EBITDA and the balance in what is now almost a duopolis-
her resignation just five months after
sheet position of the group. Upon tic market, and the only potential
taking over the CEO role, raised signif-
completion of the restructure, 62 per competitive upset could be a move
icant concerns. She had taken over at
cent of the current store portfolio will from an international online or brick-
a time when the groups trading per-
be franchisee owned. and-mortar retailer into the domestic
formance was bogged down under the
Results from this restructure are market. So watch out for Amazon it
direction of former CEO and owner
not expected in the near future, with

Dominos continues to show off its
panache for technology and has deliv-
ered strong financial results, reporting
an EBITDA increase in FY16 of 23.6 per
cent to $91.6 million.
Continued investment in digital
technologies demonstrates the busi-
nesss innovative culture and desire to
stay ahead of the game. Innovations
lately have included:
The more than just pizza cam-
paign Dominos dropped Pizza
from its name last year in an effort to
be recognised as more than just that
Project 3-10 a trial around baking
and delivery-time efficiencies (pizza
ready to take away in three minutes
or delivery in less than 10 minutes).
Dominos robotic unit testing
tional low-price retailer such as Lidl or autonomous delivery methods such
Kaufland (also German), plus there is as drones and robots to deliver hot
the threatened entry of Amazon. food and cold drinks directly to the
The traditional duopoly is coming customers door.
to an end. Frankly, Dominos doesnt sound
like a fast-food chain.
HARVEY NORMAN A International growth also appears
SHOW OF FORCE to be on the agenda, with the acqui-
sition of Germanys largest pizza deliv-
Harvey Normans FY16 financial
ery chain, 212 Joeys Pizza, for $120
results show that the brand can flex
million early last year. In the mean-
its muscles, with sales revenue and
time, the brand continues to fend off
profits before tax increasing by 11 and
take-away food-delivery services such
30.6 per cent respectively.
as Deliveroo, Foodora and UberEats.
This success in an underwhelming
environment has been credited to its
integrated retail, franchise, property 7-ELEVEN FAIR SUCK
and digital strategy. Basically, along OF THE SAUCE BOTTLE
with a consolidating omni-channel of- At the forefront of a wage scandal,
fering, owning the property on which compliance failures left 7-Eleven red
would likely be a game-changer in the
franchises operate allows Harvey Nor- faced last year. The convenience-store
Australian market.
man to chose a complementary tenant chain that is a feature of many city
mix to increase traffic to stores. street corners has been the subject
ALDI THE PRICE WARS Growth is expected to continue of an investigation by the Fair Work
CONTINUE this year with seven stores set to open, Ombudsman into ongoing reports of
and results remain strong. Expertise, underpaid wages. Since the investiga-
Amid the duopoly of the supermarket
service and products are at the top of tions started, $26 million in back pay
price wars, Aldi remains the quiet
its strategic priorities. has been repaid to past and present
achiever. With 444 stores nationwide,
Harvey Norman has, however, been workers, with further claims still
Aldi has spread to South Australia and
the subject of some negative media under review. Also, 7-Eleven has estab-
Western Australia, and has plans to
attention lately for the way it chooses lished a wage repayment program
open further stores.
to present its group financial accounts. to help with any wage concerns and
While it commands about 8 per
The contested issue lies in the groups encourage claimants to come forward.
cent of the supermarket market, its
Australian operations, where all stores How could this happen? The fran-
go-forward plan is to open 25 stores
are franchised. There is concern that chisee model and poor store perfor-
a year, aiming to hit 120 outlets in SA
the support for some franchisees is mance is blamed for creating cash-flow
and WA.
not traditional, lending an opaque pressures for struggling franchisees,
With its low overhead structure and
view of the performance of individual with employees being underpaid to
employee costs, Aldi continues to win
franchisees. cover costs. There are clear compli-
the low-price race against the majors.
One thing is certain: Harvey Nor- ance failures in play here that have let
But the race to the bottom must end
man and JB Hi-Fi are on a collision down employees and tarnished the
somewhere as it becomes increasingly
course and also face increasing com- brand. Underpaid employees include
hard to source products at competitive
petition from the local (Kogan) and international students who allegedly
prices locally. Also, the supermarket
international (Alibaba and Amazon) received threats of deportation should
industry cannot escape criticism for
online players. they report underpayment to the
forcing prices down and hurting Auss-
ie farmers. authorities.
Again, Aldis success may be upset DOMINOS In a bid to mitigate further repu-
only by the entry of another interna- POWERING ON tational damage, 7-Eleven has estab-

lished a strategic reform program to online market. Amazon remains a surf shop Surf Hardware.
ensure the franchisee model is in- potential great white shark. The disastrous unwinding of the
dustry competitive, with franchisees business has been met with a degree
profit share increasing and minimum ALIBABA PRODUCE ON of antagonism from major sharehold-
profit guarantees in place. Technology OFFER ers. One, Crown Financial, which
initiatives have been introduced to previously made a takeover bid of 20
record and monitor employee atten- Alibaba is seriously big, with online cents a share), posed pointed questions
dance records. platforms that provide B2B, B2C and to the Surfstitch board ahead of the
The wages scandal has been a C2C commerce. It generated nearly $20 AGM in a please explain moment.
major blow to 7-Elevens image, which billion last year. To put this in per- At the time of writing, the way out
is typically associated with quirky and spective, Forbes says Alibabas latest for Surfstitch seemed unclear and the
fun promotions such as its infamous Singles Day, which is likened to Black brand was in a stand-off with share-
BYO Slurpee Cup day. It remains Friday in the US, generated more sales holders as it refuses to accept takeover
to be seen how much of a financial than Brazils total projected eCom- bids, and shareholders have rejected
impact this will have. merce sales for the entire year. the companys remuneration report.
Reports suggest that Alibaba met The surf forecast looks choppy.
DICK SMITH THE END with Austrade, the Australian gov-
ernment trade commission, last year WOOLWORTHS NOT
OF AN ERA to talk about promoting Australian
In an unfortunate ending to an iconic meat, dairy, seafood and other fresh
THE MASTERS OF ITS
Australian brand, the last Dick Smith food in the Chinese consumer market DOMAIN
Electronics store closed its doors for through its online trading platforms. Brick by brick, Woolworths has unrav-
the final time on April 30 last year. What does this mean for Australia? elled its interests in the home-improve-
A trading halt in the first days of Potentially, Alibaba is great news for ment industry with the Home Timber
the New Year were troublesome signs Australian brands, opening online & Hardware Group sold off to Metcash
for Dick Smith. As administrators and trading opportunities with more than early last year, followed by the Masters
then receivers and managers were 434 million online shoppers in China. Home Improvement business closing
appointed over the group. Despite Expansion opportunities should its doors at the end of the year.
Dick Smith representing 9 per cent of further become available upon the No surprises here though - as
the Australian consumer electronics signing of the Australia China Free we predicted last year, Masters was
market, the administrators report Trade Agreement. No doubt many unable to gain a competitive market
and subsequent public examinations domestic producers are waiting with share and produce the necessary
suggested much deeper issues at play bated breath. profits to keep its local and overseas
than simply a tough retail market. investors happy.
The collapse has been linked to SURFSTITCH.COM The realisation of inventory during
issues around corporate governance, TREADING WATER the controlled closure of Masters is
inventory management, buying prac- expected to recover proceeds well
tices/treatment of rebates, cash-flow Like many other retail IPOs of recent north of $500 million, but this will
constraints and restrictive supply times, Surfstitch has fallen short of provide little compensation against
arrangements. the mark, failing to meet its ambitious the combined losses from discontin-
growth targets and floundering a ued operations, which exceeded $2038
KOGAN.COM WHEN $154.7 million loss for FY16. million last year.
Expenses shot up by 33 per cent in
ONE DOOR CLOSES FY16, many of which were attributable
Woolworths finally emancipated
itself from the ball and chain weigh-
When one door closes, another opens, to business acquisitions including online ing it down with promising results
it is said. Following Dick Smiths surf-forecasting site Magic Seaweed, expected in the coming year, only to
demise, Kogan acquired its IP and Stab Magazine, adventure sports-film li- discover another one on the other foot
online business and wasted no time brary Garage Entertainment and online Big W.
in capitalising on the hole left in the
market. Kogan launched a renewed
site on May 4 and has leveraged a
growing customer database to expand
its market share and buying power.
By June 30, Kogan reported having
more than 3.7 million active subscrib-
ers, and after its IPO debut reported
revenue exceeding its prospectus fore-
casts by 5 per cent. Kogan is expecting
to continue strong sales growth by
building on its private-label offering
and third-party domestic product
divisions, which make up about 37 per
cent of gross sales.
Success will ultimately come down
to maintaining active subscribers and
finding more while competing against
any new entrants to the Australian

T R E N D I N G I N 20 1 7
TRENDING
IN 2017
TREND 1:
FOOD RETAIL AND THE LAST MILE
Subject to significant disruption, the for about 30 per cent of the total pur- received is yet to play out.
delivery of food is gaining a lot of in- chase costs. Therefore, to succeed in However, a major advantage for
terest in the media as well as traction this market, businesses need to create Uber is the ease of use of its smart-
from investors. And rightfully so. platforms that will enhance the po- phone app. The interface is simple yet
Before the current saturation of tential for economies of scale as well logical, and the real-time element is a
delivery services, providing meals as being cost efficient and transparent game-changer that has kept custom-
for consumers was the sole domain with consumers. All these factors ers returning. In Richmond, Victoria,
of suburban take-away shops. How come with time and exposure within Hugh Hindle of Homeslice Pizza
quickly things can change. In the the marketplace, but if improvements notes that he has had to hire more
space of 12 months, multi-national in technology, such as digitisation, are staff as 50 to 60 orders a day are
companies such as Deliveroo, Foodora slow or not user friendly, businesses attributed to UberEats clientele while
and Uber have all set their sights on may struggle to stay viable in this other food-delivery services manage
capturing the imagination of Austra- highly competitive environment. only about three or four orders a day.
lian foodies. Here are the four brands at the
In Melbourne, Australias top forefront of last-mile food delivery DOMINOS TO
foodie destination, hundreds of services in Australia. INFINITY AND BEYOND
restaurants such as Jimmy Grants,
Kong, Supernormal and even Gelato UBEREATS THE Similarly, it is not the first time the
Messina have jumped on the food-de- Dominos pizza chain has been
WEALTHY POSTER commended for its innovation in
livery bandwagon.
Restaurant and Catering Australia BOY food retail. Its share price has risen
chief executive John Hart sums it up As described in last years Retail by about 60 per cent over the past 12
perfectly when he says consumers Outlook, Uber is the rock star of the months, and its store expansions and
now have more sophisticated tastes show in this space. It has diversified innovations should boost its value.
and are seeking opportunities to beyond its core business of transpor- It is not new to the delivery scene,
enjoy restaurant-quality takeaways at tation, with UberEats launching last and is credited as being the first
their own convenience. This senti- April. No doubt this move was made Australian pizza maker to offer home
ment is evidenced by a Menulog. possible by the large amounts of ven- delivery, in 2005. Since then, CEO
com.au survey of 2000 Australians ture capital funding at its disposal. Don Meij and his team have been
in which 51 per cent of respondents This allowed Uber to offer promo- at the forefront of retail technology
disliked eating out as it entails too tional codes for free initial meals, or through programs such as the GPS
much effort. discounts based on users ability to Driver Tracker, which aims to give
This is where the notion of the last refer contacts to the service. How- customers peace-of-mind over the
mile comes into play. Simply put, the ever, Uber cannot shield users from whereabouts of their orders.
last mile is a term that describes the the real costs of delivery forever, and Meij constantly preaches about ef-
last leg of a products journey before it in early November it attached a $5 ficiency, saying time is the enemy of
reaches its final destination. Typically, fixed fee for each delivery in order to food. He has made it his mission to
this leg is also fairly costly, accounting maintain margins. How this will be create a model around reducing pe-

T R E N D I N G I N 2017
riods of inactivity in order to deliver a app and the help of data analytics, Firms competing in the last-mile
superior product. A new service called Deliveroo gathered insights into topics food-delivery market may extend their
On-Time Cooking means pizzas will such as popular lunch times and days. services to delivering freight such as
start cooking only once the customer is This approach has helped the company parcels and even pharmaceuticals.
en route to pick up their order. refine its service and ensure its resourc- Uber has already introduced UberRush
Furthermore, the use of robotics is es are used efficiently at peak times. It in Manhattan, New York City. Messen-
the expansion into the artificial intelli- realised that people start ordering at gers pick up parcels and deliver them
gence space that Dominos is longing midday, and that professionals in the promptly for a base fare of $3 plus $4
for, and will feature heavily in its financial and technology sectors make a mile (1.6 km). As messengers are on
transformative phase. Drone delivery up around 40 per cent of their corpo- bike or foot, parcels can weigh no more
has also been trialled in New Zealand rate orders. Deliveroo for Business than 30 pounds (13.6 kg). Listed as
and will most likely be pitched toward provides food options for busy profes- prohibited items are animals, alcohol,
more rural customers, if regulations sionals around lunch or dinner time, or fragile and expensive items, and dan-
allow for it. If successful, Dominos will who want catering for client meetings. gerous and stolen goods.
yet again be first to capitalise on this Whereas Deliveroo was able to Last-mile freight companies such
foray into aerial delivery. secure $275 million in its latest funding as DHL, Fastway and Startrack are all
Finally, with Project 3/10 (the ability round, Foodora (meaning food now) successful in the market as they focus on
to deliver in less than 10 minutes) is quite secretive with its management goods that would typically be delivered
to provide the biggest long-term yet to reveal any revenues generated or overnight or within a few days. They do
growth, it seems like time will remain details about its customer base. What not deliver on bikes. However, if Uber
the focal point in any discussions re- is known is that as at March last year can find a way to deliver large parcels
garding innovation at Dominos. it had struck partnerships with about on a same-day basis, there is a huge op-
700 selectively curated food retailers portunity to reinvent the last-mile game.
DELIVEROO, FOODO- throughout Melbourne and Sydney. A McKinsey & Company survey
RA NEW KIDS ON THE More recently, Foodora Australia chief on the future of last mile, published in
executive Toon Gyssels has claimed not September, says it would be unwise to
BLOCK to be fazed by Ubers arrival in the mar- neglect the same-day delivery segment
Both Deliveroo and Foodora are ket, saying food delivery is very differ- as 27 per cent of respondents claim
relatively new to the Australian ent to the transportation of people. they prefer not to buy items online
market, and are at a smaller scale to Ultimately, a commonality between because of long delivery times. They
UberEats, having a presence only in Deliveroo and Foodora is the nega- note that fast delivery is relevant for
Brisbane, Melbourne and Sydney. Most tive publicity surrounding the wages products such as groceries and med-
noticeable are their couriers in their of its employees, many of whom are ication. As Australia is considered an
distinctive and bold turquoise or pink university students. If this issue can aging population, delivering medica-
clothing as they race their bicycles be resolved, it would go a long way in tions to the elderly may present a new
through innercity streets. This creates forging positive loyalties from employ- opportunity that may prove profitable
public awareness and intrigue, and is in ees and customers alike. in the not-too-distant future.
stark contrast to the autonomous nature However, before companies can
of the average Uber driver. However, NEW MODELS move ahead of the pack, it is crucial
cycling is far more labour-intensive, their strategy suits the environment as
demanding on the employee and time Where to from here? Economics 101 well as plays to their brand strengths.
consuming, and if the order is not suggests that as markets become more All this will ensure that the future of
delivered promptly the result can be an competitive, prices will begin to ease last-mile delivery services remains un-
unsatisfyingly cold meal. as consumers, spoilt for choice, find it predictable as incumbents, eCommerce
Recognising this, Deliveroo is harder to distinguish one firm from the players and dynamic start-ups all fight
creating a niche in the market, deliver- next. This offers opportunities for mar- to influence and capture consumer
ing to busy, time-poor city corporates. ket leaders to branch out and develop preferences for fast delivery.
Through the use of their smartphone ways to disrupt the market.

T R E N D I N G I N 20 1 7
TREND 2:
PUREPLAY DISRUPTORS
Across virtually every retail seg- FRANK BODY Nordstrom in the US.
ment, online retailing has materially While the move into physical
disrupted the activities of tradition- Similarly, Frank Body has harnessed retail made sense from a strategic
al bricks-and-mortar outlets. NAB the power of online to become a $20 perspective (enabling customers to
data shows that in the 12 months to million-a-year business in only three touch, feel and experience the brand
September, Australians spent an es- years. The three founders - Bree John- and its products), the execution was
timated $20.8 billion on online retail son, Erika Geraerts and Jess Hatzis flawed. The company decided late
(including groceries, which represent - began their business with a strategy last year to discontinue its brick-
around 17 per cent of online spend- to be open, honest and direct with and-mortar stores and return to its
ing). This was an 18 per cent increase the customers: to be Frank. roots as a pure-play online offering.
on the previous year. This level is Leveraging organic conversations Despite the store closures and resul-
equivalent to around 7 per cent of through social media from the outset, tant loss of sales, the company says
spending at traditional retailers, or 5.8 Frank Body now sells a packet of its its total group sales continue to grow
per cent excluding grocery spending. coffee-grind body scrub every 40 sec- month on month.
But these statistics can be mis- onds, with about 150,000 tags of users So what does this all mean? Pure-
leading. On a category analysis, we applying the product. play online retailers are nimble and
often see a much higher proportion of innovative. They have an unwavering
online sales to store sales. Our advice: MON PURSE ability to exploit niches that larger
ignore online at your peril. retailers cannot service. There is no
In 2014, Mon Purse founder Lana
The strength of online retail well question that when it comes to retail
Hopkins saw a gap in the luxury
and truly shone through on Black business models, the structural barri-
leather bag market. Wanting to create
Friday in the US. According to data ers are coming down and everyone is
a custom bag from premium mate-
collected by Adobe, online sales on empowered to disrupt. Anyone with a
rials, she realised she was not alone
the day reached US$3.34 billion - a great product or idea has access to the
in her pursuit for personalised bags.
whopping 21.6 per cent growth year online marketplace, and can leverage
Since launching online in September
on year. The importance of online to the power of social media overnight
2014, the company has grown sub-
any retail model is no longer a secret. to build a customer community that
stantially and now expects a turnover
Lately we have seen a raft of pure- once would have taken traditional
exceeding $10 million.
play eCommerce businesses emerge. brands years to achieve.
Expanding into physical retail,
Helped by the emergence of social However, despite the prevalence of
Mon Purse has opened a boutique in
media (Facebook, Instagram, Snap- online retail, the predicted death of
Sydney as well as concessions in Myer
chat, Twitter and YouTube), smaller physical stores has not materialised.
stores nationwide. While no longer a
players and start-ups are using the In fact, the growing consensus is that
pure-play eCommerce retailer, more
low barriers to entry associated with online and physical retail are com-
than half its sales continue to come
eCommerce to propel their innovative plementary rather than competing
from online.
ideas to the world. Here are the sto- strategies. According to a Common-
ries of a few Australian eCommerce wealth Bank Retail Insights Report,
pure-play disruptors. SHOES OF PREY 18 per cent of online-only retailers are
Founded in 2009 by Jodie Fox, Mi- planning to establish a physical outlet
STYLERUNNER chael Fox and Mike Knapp, Shoes in the year ahead.
of Prey was the worlds first website Online retailers such as Mon Purse
Stylerunner is an online store offering and Shoes of Prey have tried to make
where women could design their own
high-fashion activewear for women. It the move from clicks to bricks, and
shoes. It is now a multi-million-dollar
aims to set a new standard for workout with the right strategy and execution
international business. Following its
style across the globe. The business this can add value to the consumer
success online, Shoes of Prey made an
was founded in late 2012 by Sydney and brand alike. While eCommerce
attempt to get phy-gital (physical
sisters Julie and Sali Stevanja after they offers great convenience, it is physical
digital) in late 2014, opening some
identified a lack of choice and variety of stores that support brand engagement
standalone stores as well as conces-
activewear for women in one place. and the customer experience.
sions in David Jones in Australia and
Four years later, the business
boasts an annual turnover of around
$10 million. Social media has un-
doubtedly helped Stylerunner in its
rapid rise to success, with the compa- "However, despite the
ny racking up more than 500,000 fol-
lowers on Instagram alone. Interest- prevalence of online retail, the
predicted death of physical
ingly, Stylerunner has partnered with
fellow online disruptor Mon Purse to
stores has not materialised."

open a concept store, Stylerunner Lit,
in the form of a pop-up in the Sydney
suburb of Paddington.

TREND 3:
ONLINE VS BRICKS-AND-MORTAR
Australian retail has experienced
exponential growth through online
channels over the past five years, with
an estimated $20.1 billion of online
spending last year, according to NAB.
Online sales growth still vastly outpac-
es physical retail.
Online retailing in Australia has
largely been spurred on by the growing
use of online media (music, movies,
e-books), which had a 16.5 per cent
share of total online spending and
grew 23.3 per cent year-on-year as at
June last. In the subscription media
market, last year saw subscription
video on-demand customers outnum-
ber traditional pay TV subscribers for
the first time in Australia. Research by
Roy Morgan shows no slowing of this
meteoric growth.
TRENDS IN ONLINE AND

OMNI-CHANNEL RETAIL
The explosive impact of food-delivery
platforms such as Deliveroo, Foodora
Menulog and UberEats have boosted
online spend on food by 56.1 per cent
year-on-year as at the end of June last
still controls a significant portion of technologically focussed world, such as
year. We attribute the spectacular
the food-delivery market because of its completing the first pizza delivery by
success of the last-mile food deliv-
pre-emptive adoption of a standardised drone in New Zealand.
ery industry to creative promotional
online ordering platform complete Despite this impressive growth,
schemes, including Deliveroos Qantas
with GPS tracking of individual drivers Australian retailers are significantly
Frequent Flyer points offering and
along with the ability to view their per- lagging behind the rest of the world in
UberEats thoughtful free delivery of
sonal biography including their favou- adapting to omni-channel sales, and
smashed avocado on toast for millen-
rite song and sports team. Similar to online retail sales are still only mar-
nials.
its younger competitors, Dominos has ginal compared to those of traditional
Traditional fast-food chain Dominos
taken big strides to remain relevant in a bricks-and-mortar store sales.
Graph : Potential impact on sales from Amazon's entry

Source: Citi research estimates
Harvey Premier
JB Hi-Fi Super Retail Norman Investments Myer RCG
0%
-1.7% -1.5%
-2%
-4% -3.9%
-5.5%

T R E N D I N G I N 20 1 7
Analysis by Citibank suggests the playing field even more competitive, event to become the largest eCom-
Australias 10 largest retailers derive they need to be at the top of their game. merce trading day in the world. Aliba-
not quite 6 per cent of all sales from ba had the equivalent of US$17.8 billion
online channels, whereas that number BLACK FRIDAY, CYBER in sales during Singles Day last year,
is almost double at 11 per cent in the MONDAY marking a 32 per cent increase from
US. The possible entry of Amazon the previous record, set in 2015.
into Australia may be the catalyst that Major US retailers broke from tradition Cyber Monday, the largest retail
brings our eCommerce economy up to during the silly retail season last year, trading day in the US with a turnover
international benchmarks. offering most in-store deals online. JC of US$3.45 billion, is eclipsed by the
We expect retailers in all sectors Penny, Kohl's, Staples, Target, Walmart volume and propensity of eCommerce
to invest heavily in securing their and many others announced that on- transactions and digital uptake in
marketing channels as they try to fend line deals would start early, and that all China.
off the American heavyweight, which Black Friday deals would be available eMarketer and KPMG research sug-
is expected to undercut prices through online as well as in store. Most stores gests that more than half of last years
cost efficiencies. even offered free delivery. eCommerce sales in China were made
A notable example of excellence in This was a game-changer data via smartphone, and surveys suggest
online retail is Best Buy, which executed from a National Retail Federation that more than 90 per cent of Chinese
an impressive turnaround in 2012 at a consumer survey found that online consumers have used a smartphone to
time when the company faced immense consumers last year surpassed in-store make a purchase in the past 12 months,
competition from online disruptors, consumers for the first time by number again eclipsing the UK (75 per cent),
mainly Amazon. during the US holiday period. US (74 per cent) and the global average
Best Buy CEO Hubert Joly can be Adobe Digital Insights says Black (70 per cent). KPMG expects that 24 per
credited with stopping the bleeding at Friday eCommerce sales grew 21.6 per cent of all Chinese retail sales will be
Best Buy through tough restructuring cent year-on-year to US$3.34 billion, processed by smartphones by 2019.
decisions including redundancies, while Cyber Monday sales grew 12.1 The rise of eCommerce in Chi-
closing stores and divesting foreign out- per cent to US$3.45 billion. In compar- na can be attributed not only to the
lets. Best Buy also developed its online ison, total US retail sales increased 3.6 increased affordability and accessi-
presence, where sales are growing at 24 per cent year-on-year. bility of smartphones and technol-
per cent year-on-year. Mobile sales generated $1.2 billion ogy generally, but also to Chinas
Australias largest department in sales on Black Friday, surpassing booming middle class. McKinsey &
stores, David Jones and Myer, have both the US$1 billion mark for the first time. Co. expects the upper middle class
made the strengthening of their om- Further, ChannelAdvisor reported to continue to grow and become the
ni-channel propositions a core aspect that smartphones accounted for nearly main demographic of the country. The
of corporate strategy. However, they lag 70 per cent of all Thanksgiving Day online behaviour of this demographic
far behind international peers in terms traffic online. The strong growth in the reveals itself through some interesting
of online penetration. eCommerce sector and the enormous trends, such as Australian products
At a point in time when online shift in consumer behaviour in the including multivitamins and cereal
retail channels continue to demonstrate US toward mobile eCommerce is a selling in masses and at premium
exponential volume growth despite warning bell for Australian brick-and- prices through Chinese grey markets,
discouraging local GDP growth, David mortar retailers. where local shoppers ship the items to
Jones and Myers online adoption is consumers in China.
a crucial plank to their future success. SINGLES DAY When set against the world stage,
Best-practice department stores such Australian eCommerce remains
as Nordstroms (US) and John Lewis Singles Day in China was a holiday relatively small despite strong growth.
(UK) have embraced the convergence launched in 1993, derived from the We believe the entry of international
of physical and digital retail completely. student practice of singles buying online mass retailers such as Ama-
DJs and Myer both know the interna- each other gifts. Fast forward to the zon will accelerate the pace as well as
tional benchmarks have been set, and 2000s, and Alibaba, Chinas response further shake up the domestic retail
in a market where Amazon will make to Amazon, has commercialised the landscape.

TREND 4:
PRICE TRANSPARENCY
A GAME-CHANGER
US retailer Everlane is changing the Goldman Sachs, Google and Marc Ja- November 2012 now costs US$100. The
game on price and product transpar- cobs. They are pushing boundaries and brands response was applauded by
ency. This six-year-old retail business challenging retail conventions. Founder customers, who are developing a strong
is rapidly becoming the epitome of Michael Preysman has envisioned affinity for its honesty.
a new age of retailers winning the Everlane as the look of Cline and the Everlane has also broken traditional
hearts of customers with its offering of ethics of Patagonia. retail conventions with the openness in
high-quality affordable clothes, savvy For each of Everlanes stocked which it talks about its factories. Details
online channels, socially responsible items of sweaters, t-shirts, pants, coats, such as location, owner, products made,
values, and a level of price transparen- shoes and bags, customers can view materials used and employee condi-
cy that is truly a wow moment. the production costs broken down by tions are shared online and made vis-
Founded in 2010, Everlane sells materials, hardware, labour, duties and ible through photos of the factory and
mens and womens modern clothing transport. The Everlane retail price staff in action. Many retailers source
basics and boasts radical transparen- (production cost plus mark-up) is also ethical factories, but few broadcast the
cy to customers through its mantra compared to the retail price of a tradi- importance and integrity like Everlane.
Know your factories. Know your tional retailer. Everlane is not alone in this move-
costs. Always ask why. A great example of this transpar- ment of digital-first, high-quality,
This mantra has made Everlane ency in action was a recent move to socially responsible retailers. DSTLD, a
famous and a potential retail star. Ever- reduce the price of cashmere products Los Angeles-based denim brand, pro-
lanes team of employees cut their teeth when the price of raw fibres dropped. motes its moral fibre as not having
at places like American Apparel, Gap, A cashmere sweater that cost US$125 in sweat shops, and offering eco-friendly
fabrics and ethical pricing. For each
item, it also shows the retail price
next to what a designer brand might
charge. Again, the focus is on clothing
staples, not passing trends.
Can this transparent and socially re-
sponsible approach result in sustainable
profitability? DSTLD and Everlane are
connecting brilliantly with customers
by building trust and brand integrity
through a whole new level of trans-
parency. Both brands have built their
business based on inherent beliefs of
product quality, social good and brand
honesty. They reflect a structural shift
in which informed customers, largely
driven by millennials, want to know
where their product is coming from
and what the actual cost is.
According to a report from Nielsen
(2015):
66 per cent of global consumers say
they are willing to pay more for
sustainable brands up 55 per cent
from the previous year
73 per cent of global millennials are
willing to pay extra for sustainable
offerings up from 50 per cent.
We believe the focus on transparen-
cy and social responsibility by retailers
will translate to sustainable profitabil-
ity, provided the DNA of each brand
remains true to its business model.
What DSTLD and Everlane are doing
is driving a shift in customer expec-
tations to a new norm. For traditional
retailers, it is now a matter of how will
they respond, especially where millen-
nials are involved.

T R E N D I N G I N 20 1 7
TREND 5:
RESTRUCTURING CASE
STUDY: AEROPOSTALE
There is immense competitive pressure curators Authentic Brands Group and announcement that it was closing 100
from pure-play online and fast-fashion stock liquidators Gordon Brothers outlets within its portfolio.
retailers like H&M, Uniqlo and Zara Retail Partners and Hilco Merchant Re- Attracting and keeping long-term
that have effectively done away with sources. The consortiums 11th-hour bid tenants is proving crucial for retail
the traditional four-season apparel of US$243 million in August - almost landlords in a market where digital
calendar by introducing weekly cloth- four months after Aeropostale filed disruption and online sales represent
ing drops in stores. These competitive for protection - saved the retailer from the new norm. As retailers feel the
forces have proven too strong for the likely liquidation. pressure of the growing preference by
likes of Abercrombie & Finch, Amer- The reason this restructure should consumers for eCommerce, landlords
ican Apparel, Quicksilver, Sports Au- be considered momentous is that are as equally burdened as retailers are
thority and The Gap in the US, which it represents a significant shift in forced to question and reconsider their
have all resorted to filing for bankrupt- approach by major retail landlords on physical footprint and the experience
cy protection. an international stage. In a liquidation offered to the consumer.
Unfortunately, US teen apparel scenario, retail landlords are usually a Right-sizing Aeropostales store
retailer Aeropostale found itself in large unsecured creditor, exposed to footprint has been a crucial component
the same circumstance in May, filing outstanding pre-appointment rent, lost in the brands restructure. Of its 800
for Chapter 11 protection under the future rental income and costs associ- stores at the time of the bankruptcy
US bankruptcy provisions. However, ated with de-fitting and re-letting the filing, at least 229 are being retained,
its story differs in the way in which it vacant premises. and its eCommerce business expanded.
is set to emerge from Chapter 11 - as Simon Property Group held leases Ultimately, thousands of jobs will be
a refined and restructured ongoing for 160 Aeropostale stores at the time saved. Aeropostales restructure shows
business owned by shopping cen- of the bankruptcy filing. Had these that key stakeholders can work togeth-
tre landlords. This successful, albeit stores closed, there was clear scope for er to save a distressed retailer when
unusual, restructuring of Aeropostale lost revenue stream for Simon, which their interests are aligned.
potentially sets a precedent for the had already been impacted by Macys
future of retail restructuring in the US,
and perhaps even Australia.
A company that files for Chapter
11 bankruptcy protection and retains
the power to run and restructure a
business is known as a debtor in
possession (DIP). In the US, filing for
bankruptcy protection is a voluntary
process. While it is not a viable long-
term solution, it does give a business
time to restructure, for example, focus-
sing on becoming a leaner entity with
a smaller base of profitable stores and a
reduced cost base.
The DIP process is loosely compa-
rable to a Voluntary Administration
(VA) in Australia. However, the marked
difference relates to the powers of com-
pany directors. In Australia, directors
powers stop when voluntary admin-
istrators are appointed, and a formal
corporate restructure is typically com-
pleted by a professional who is wholly
responsible for reorganising and/or
reducing operations.
In Chapter 11 (DIP), directors retain
the power to continue running the
business. For Aeropostale, the direc-
tors continued running the business
while it was restructured and sold as a
going concern. The unlikely saviours of
Aeropostale were their major landlords,
Simon Property Group and General
Growth Properties, along with brand

UNCERTAIN TIMES
No improvement is in sight yet for the retail sector as
the gears shift in a sluggish Australian economy.
The gears have shifted in Australias ly those unable to pass on the rising lustre when viewed historically, and has
economy, with the slow and steady bust costs of imported goods to consumers been in decline since mid-2014.
of the mining boom weighing heavily on - and profit margins will be squeezed. While interest rates are at record
the western states, while the highs of Aus- However, a depreciating AUD has the lows, consumers continue to be
tralias housing and construction boom potential to boost domestic online sales impacted by some of the lowest levels
continue to keep the east coast afloat. as international online products become of wages growth in recent times, even
Historically low interest rates relatively more expensive. though unemployment continues to
support the economy as a whole, yet ease. Adding to wages pressure has
consumer and business confidence HOUSING MARKET been continued domestic and global
remains low. Retail spending has stayed economic uncertainty, particularly in the
It comes as no surprise that Australias
moderate yet stable, impacted by the di- past 12 months surrounding the federal
average house price has increased over
chotomy of low interest rates and slow government election last year and then
the past year, according to data from the
wages growth. As the Australian econ- the US election.
ABS (from $604,700 in 2015 to $623,000
omy remains sluggish, the expectation
last year). However, the housing market
is that the retail sector will not improve
is running at different speeds around UNEMPLOYMENT
in the short term, with the longer-term
the nation. Major cities along the east Australias unemployment rate fell from
outlook being uncertain.
coast are in a period of unprecedented 6.1 per cent in 2015 to 5.6 per cent last
growth. Conversely, the north and west- year (seasonally adjusted). A healthy
EXCHANGE RATES ern states have had a downturn in prices level of unemployment means more dol-
At the time of writing, the Australian as the benefits of the mining boom start lars in consumers pockets and stronger
dollar was sitting around 75 cents US. to taper. For example, the average price sales for retailers. Notwithstanding this,
This is a relatively high exchange rate in Western Australian has fallen from underemployment has risen, meaning
given the headwinds potentially facing $583,500 in 2015 to $546,200 last year. that of the people who have recently
the Australian economy. While housing is expensive, the cost of found work, many would like to work
The anticipated effects of Chinas money is still cheap, keeping consump- more hours than what is available to
debt problems, the need for the US tion afloat. them. This indicates the economy is still
Reserve to raise interest rates and the operating below capacity to some extent.
likelihood that commodities prices CONSUMER CONFI- The bottom line is that Australias
could drop on the back of this all points DENCE AND SPENDING retail environment is relatively benign.
to a potentially tough time for the AUD Conditions for retailers are likely to
going forward. Long-term risks to the Retail spending was around $299 billion remain tough as the steady stream of
currency seem to be to the downside. in the year to the end of September, international pure-play eCommerce
A weakening of the AUD will place representing a 2.8 per cent rise on the (Amazon) and brick-and-mortar retailers
added pressure on retailers - especial- preceding year. Despite the pickup, the continues to broaden.
growth in retail sales is relatively lack-

EXPERT FORECAST

EXPERT FORECAST
Dr. Ian Tho

Executive director,
Analytics
DELIVERING THE MAGIC

Intelligent machines are ushering in the era of predictive commerce,
which will put retailers one step ahead of their customers but in a
beneficial way for all concerned. It is something retailers need to embrace.
The ability of machines to learn, just sensors) as a phone login can further models a week, machine learning can
as humans do, is not new. In fact, recognise that you have just been create thousands in the same time
we are exposed to machine learning to the gym and suggests you buy period, allowing for an even greater
regularly, albeit in its most fundamen- an isotonic drink on the way home, capability to deliver more accurate and
tal and basic forms - when Facebook based on its reading of your hydration reliable views of the future.
suggests people you may know, levels. These context-specific
when Google Mail places spam in the recommendations are time sensitive DEEPER UNDERSTANDING
appropriate folder, when Siri responds and based on your specific situation. The iterative aspect of machine
to queries, and when our phone au- learning is important, but the turning
to-completes words as we type. BETTER DEALS point with machine learning is the
All of these examples provide Many successful retailers are now ability of computers to independently
some utility, but we have really leveraging customer analytics or adapt as predictive models are
only scratched the surface of what customer-identified purchase data, exposed to new data. Machines can
intelligent machines can do. Consider demographic information and other learn from previous computations
a scenario where you are on your way attributes to power customer-centric to produce reliable, repeatable
to work when you receive a message initiatives. There is no longer a question decisions and results more accurately
on your phone from your fridge at mark surrounding the benefit of these and more quickly than previously
home advising that you are likely to programs. Retailers like Medibank, possible. Todays machine learning
use the last of your milk tomorrow, Myer, Wesfarmers, Woolworths (owner abilities deliver gains in the form of
and cereal is on sale for $3.19 - would of the Country Road Group and David providing a deeper understanding of
you like to pick up an order from Jones) and Uniqlo, as well as most of every individual customer over time,
Coles near work for a total of $4.19?. our major banks, are using fresh data- without being explicitly programmed
You simply reply yes, and the order driven customer insights to deliver or instructed to do so.
is ready for you to pick up on the way better deals. Large online retailers such as
to the train station. With traditional advanced Alibaba and Amazon are recognised
We are entering the era of analytics, humans create mathematical for carrying inventory with endless
predictive commerce. In retail, models based on statistics and an aisles, but in truth this is not really the
this involves inspiring consumers in understanding of how things work. case. These businesses use machine
different contexts before, during and These let us predict how customers learning to scour millions of web pages
after a purchase. Your smart device will behave in response to changes in and billions of customer interactions
recognises that it is your mums price, product assortment, marketing to deliver to an individual customer a
birthday tomorrow, based on your stimulus and individual offers or shortlist of items and pages.
calendar entry and validated by data deals. But what does this all mean for
from your contacts list, and suggests Machine learning takes things retailers? This predictive technology
it makes an order for her favourite to the next level it is customer converts your aggregated customer
flowers. analytics on steroids. But whereas base of millions into a virtual world
Fingerprint recognition (biometric humans can develop one or two of one. It is as though you have only

EXPERT FORECAST
one customer, and you know them

very well. Targeting is achieved at
a true segment-of-one level that
is, the individual customer by
leveraging massive amounts of
purchase data, calculated brand
loyalty, discount propensity,
purchase frequency and categorical
trends to suggest the right
promotion to the right customer at
the right time.
These AI (artificial intelligence)
platforms make use of machine
learning to automatically learn
from each promotion sent to a
customer, and use that learning
in the next iteration. Marketing
powered by AI or machine learning
is poised to disrupt decades of mass James Stewart Denis Carruthers
promotion and shopper marketing Azurium Azurium
initiatives as systems gain innate
intelligence to power strategic
LOOKING INTO
personalisation around pricing and
promotional offerings.
THE FUTURE
MERCHANDISING
IMPLICATIONS
There are also potential implications
Shopping centres will need to embrace new

for retail merchandising. The
opportunities for optimum product
assortments delivers an ability, technology, adapt to consumer behaviour and
at every store, to reduce out-of-
stocks, increase sales and deliver differentiate in order to survive and thrive.
an improved in-store experience.
Analytics on a model-by-model
basis can now be done by machines Retail has undergone a major trans- How can shopping centres re-
machines that not only ingest formation since the introduction of spond to the changing behaviour of
all existing customer intelligence the smartphone. Online and digital the connected consumer in this digi-
(segments, buying habits, disruption has shifted power from tal age? That question is perhaps best
discounting propensities) the retailer the retailer to the customer. answered by firstly examining the
may have, but also factors based on Roy Morgan research finds that shopping centres of the future now
extensive knowledge of in-store and in the financial year to June 2015, being built before considering how
out-of-store promotional activity to 16.5 million Australians (85 per cent) further technology may change the
optimise product assortment within shopped at one or more shopping shopping centre model. Chadstone
each store. Further, inexpensive centres in an average four-week Shopping Centre, Sydney Central
cloud-based technology means this period. Chadstone in Victoria was the Park Mall and Westfield World Trade
is no longer the realm of only the top destination, with 396,000 Austra- Centre in the US are great examples.
largest retailers with significant lians a month dropping dollars there, Chadstone has been redeveloped
marketing spend. just ahead of Westfield Parramatta in several times over to adapt and keep
Does it all sound too intrusive? New South Wales with 385,000. ahead of the constantly changing and
Many of us are inclined to only Also making the top five shopping increasingly complex needs of its con-
share our personal information centres by their average four-week sumers; Sydney Central represents
for experiences that are magical customer volume were Melbourne a new way of blending the retail ex-
and valuable, provided we know Central (307,000), Westfield Cherm- perience with the modern consumer
our information is respected and side in Brisbane (303,000) and just lifestyle; and Westfield demonstrates
managed appropriately. The ability 15km north of Chadstone Westfield leading-edge design.
to deliver this magic has arrived. Doncaster (290,000).
Retailers need to create experiences While some people proclaim WESTFIELD WORLD
that make this magic and value physical retail is dead, these figures TRADE CENTRE
apparent to customers. As shoppers show it is still alive and well. In fact,
Opened in August, the US$1.4 billion
expect faster and more intelligent retailers who have embraced the dig-
Westfield World Trade Centre was
service, and as expectations shift ital world are actually growing sales
developed by Australian-listed shop-
from on-demand to predictive in amid all this doom and gloom.
ping-centre heavyweight Westfield
commerce, retailers failing to Great examples are John Lewis in the
and is set to create a whole new
embrace this will inevitably fall UK, Apple in the US and Smiggle in
standard for retail in New York City.
behind. Australia.
It is inside the Oculus, a $4 billion

EXPERT FORECAST
"The future mix of a shopping

centre is a combination of retail,
social, work, transport and leisure
spaces. This is already happening,
but will be accelerated."
space-age transportation hub in lower hours (to 9pm on Saturday and 7pm
Manhattan. Designed by Spanish ar- on Sunday) and has even been experi-
chitect Santiago Calatrava to resemble menting with robotic cleaners.
a winged dove, the site is dominated What both these shopping centre
by a 48.7m-high superstructure that developments share is a desire to
has been likened to anything from a make physical retail more experien-
stegosaurus to the rib cage of a giant tial for the consumer. Indeed, Chad-
beast. stone aims to become the experience
The 111,252m concourse of dining capital. The goal for shopping centre
and shopping spaces features more owners is to increase the frequency of
than 100 global brands and is expected visits and dwell time once a cus-
to see footfall from 60,000 residents tomer enters their centre. This is no
and 300,000 commuters each day, small feat at a time when the average
generating annual revenues of $US1 consumer is time poor and is moving
billion. The stark white interior of the increasingly to online shopping.
mall is accented with giant media Westfield New York and Chad-
panels displaying signs, information stone both hope to counter this trend
and advertising for retail tenants. by offering what online retail cannot
Interestingly, rather than a tra- a physically engaging experience.
ditional flagship department store, This is demonstrated by the deliber-
Westfield chose Eataly as its anchor ate choice by both centres to incor-
tenant, an Italian cafe and food mar- porate experiential food offerings.
ketplace offering quality small goods Taking things one step further, West- shopping centre. But in a world of
and fresh produce along with a full field has deployed guides armed with rapid change, what comes next?
restaurant experience. The idea is to tablet computers who can direct and
appeal to time-poor commuters who help visitors throughout the complex SHOPPING CENTRES OF
can grab a tasty meal on the go. a special touch that personalises the
THE FUTURE
shopping experience.
CHADSTONE SHOPPING To look to the future, lets start with
SYDNEY CENTRAL the past: a shopping centre was
CENTRE
traditionally a complex of shops that
In the south-eastern Melbourne sub- PARK MALL
was a hub of activity and social life.
urb of Malvern East, Chadstone Shop- New retail environments are not It served a logistical purpose to bring
ping Centre has just had a $660 mil- limited to shopping centres alone. people to one place. Now, centres are
lion expansion by the Gandel Group Open-air retail precincts or hubs are a complex of shops, with food anchors
and Vicinity. Housing 600 retailers becoming more popular, particularly often replacing department stores,
in a 200,000 sqm area, Chadstone has in high-density metropolitan areas plus transport hubs, accommodation
become the largest shopping centre in where space for shopping centres is offerings and theme parks. They still
Australia. limited. Sydneys new Central Park serve a logistical purpose, but now
The expansion is accentuated by Mall, in the eco-friendly Central Park compete by offering new channels to
a 31m-high glass atrium, with the development south of the Sydney purchase and new places to enjoy.
centre welcoming 60 new retailers in- CBD, is a case in point. The multi-lev- Moving to the future, shopping
cluding international retailers H&M, el vertical mall is an architectural centres will be impacted by disrup-
Sephora and Uniqlo. The staged marvel, open to the elements and tive forces like every other industry.
opening will also see a Legoland combining retail, dining, technology They will need to adapt and evolve
amusement centre come on line soon. and performance spaces. One of the to remain desired destinations, and
As well as the extension, there are main features is super-sized interac- retail will become only a part of a
plans for an on-site hotel which could tive digital wall, created by lighting multi-purpose, multi-activity space.
be completed as early as 2020. A new designer Bruce Ramus. Other interac- Business model innovation will
Dining Terrace offers tailored dining tive features include gallery spaces, be key for centre owners, but success
experiences and features such eater- workspaces for visual artists, events will also rely on a trait that has never
ies as Fonda Mexican and Neil Perrys spaces and performance spaces. changed: every shopping centre
Burger Project. Each of these centres can be needs to stand for something - it's
Showing it is intent on delivering considered successful in offering unique selling proposition needs to
a modern shopping experience, the something new to the shopper that be clearly understood by customers
centre has extended its shopping goes beyond the traditional mall or in its main and secondary trade areas.

EXPERT FORECAST
CHALLENGING LEGACY
INFRASTRUCTURE
Technologies such as drones, driv-
erless cars, artificial intelligence,
virtual and augmented reality, the
internet of things and 3D printing
are undergoing exponential growth.
That is, growth whose rate becomes
ever more rapid in proportion to the
growing total number or size. These
technologies will challenge legacy in-
frastructure such as shopping centres
like never before.
It is not known what the impact
will be, but it has the potential to
be profound. For example, when
driverless cars and drones eventually
reach mass adoption - likely sooner
than we think - car parks will need
to be replaced by charging stations
or drop-off/pick-up zones. This is
a huge change for shopping cen-
tres where car parks account for a
significant portion of land space and
infrastructure.
Another example is 3D printing
potentially the next wave of online
shopping that will see consumers
printing goods at home rather than
buying in-store. To fight back, stores
and shopping centres will likely
focus on last-mile manufacturing that
allows hyper-customisation of prod-
ucts through advanced 3D printers.
THE FUTURE RETAIL TENANT centres become a blend of the digital This could be a click-and-collect style
As the role of the physical store shifts and physical world, their business adaptation.
to a multi-use hub, retailers and retail model will need to change. Retailers These technologies will challenge
property owners are being forced and centre management will need business models. As a result,
to re-examine the financial sustain- a joint physical and digital revenue centres and their tenants need to
ability of physical stores. The retail model or derive some form of charge be aware of these changes so they
store of the future will be a delivery for data services provided, such as can adapt, especially given their
hub that acts as a fulfilment centre, a intelligence about visitors. disadvantage of slow-moving legacy
service hub with advisors rather than infrastructure.
sales people, a showroom to deliver A MULTI-PURPOSE SPACE
the brand experience and a commer- OF EVERYTHING ADAPT, EVOLVE, SURVIVE
cial hub that acts as an endless aisle The future mix of a centre is a The future of a shopping centre is an
where customers can buy items not combination of retail, social, work, entirely different experience, one that
available in-store. transport and leisure spaces. This constantly changes to keep people
As more stores become experimen- is already happening, but will be returning, one that is a hub for move-
tal centres, there will be a shift from accelerated. ment, a one-stop shop for everything,
ownership to access. Pop-up shops Along with technology use, cen- a blend of the physical and digital
have taught companies that they do not tres must embrace modern consumer worlds.
always need to invest capital in stores. living. This includes building a sense However, this transformation
The most valuable customers of of experience, convenience for the ev- could be hard for many traditional
the future will be the ones who shop er-busy consumer at transport nodes shopping centres because of profit
in stores and online, and this is where (for example, London Heathrows dilution of their business model,
shopping centres, with a blend of T5 or Westfield World Trade Centre) capital-intensive legacy infrastruc-
leisure, retail and lifestyle, have an and blurring the boundaries between ture and exponential growth of
advantage over many high streets or retail and leisure activities (work/life technology advancing the speed of
traditional retail parks, says Nielsen balance). change.
UK head of retailer and business Centre owners will also become We believe that shopping centres
insight Mike Watkins. more selective about the tenants they that embrace new technology, adapt
Shopping centres will provide choose in order to achieve the right to consumer behaviour and differen-
visitor intelligence through real-time mix. This is where poor-performing tiate will survive and thrive. These
footfall analytics and insights to centres will struggle as they will centres will be loved by customers
tenants that can be used for deci- not be able to be selective with their and remain a destination for many
sion making and to drive traffic. As tenants and offer quality. years to come.

EXPERT FORECAST
Neeraj Sharma
Azurium
Ben Kite
Azurium
NOTHING
CHANGES IF
NOTHING CHANGES
and 2014. During a period of low eco- company. The clarity with which they
nomic activity and increasing online can communicate the vision gives
consumer activity, its management people purpose and constraints as to
launched the Renew Blue initiative, why the initiative they are taking part
aimed squarely at realigning the in matters.
companys strategy with the change Further, the traditional retail busi-
occurring within the US retail sector. ness model premised on brick-and-
The program focussed on accelerating mortar stores needs to be reconsid-
online growth and improving and ered, and based on customer pull
optimising store footprint and layout. (what customers want) rather than
This focus entailed a change across all product push (what we can make).
aspects of Best Buys business. In other words, the new retail business
model is one that provides a seamless
With the constant and STILL STRUGGLING omnichannel experience to custom-
ers across both digital and physical
ever-growing threat of In todays world, retailers need to be
agile to deal with disruptive forces worlds, and leverages deep insights
disruption, it is vital like advancements in technology derived from analysing customer and
product data to constantly tailor the
to formulate a retail and digitisation, the market entry of
international retailers and changes experience for each individual.
strategy that puts the in consumer preferences. However, Just as importantly, retailers need
to create robust governance around
customer first. It starts
many Australian retailers are still
struggling to deal with the reality of executing their strategies. This in-
with a vision and a a changing market. Specifically, their volves:

strategies and brand execution are not 1. formalising strategy implementa-
mission... evolving at the rate required to stay tion as a program
relevant to their customers. 2. providing top-level executive spon-
In our experience, many retailers: sorship to the program
The lifespan of large companies is 3. taking a disciplined and structured
are distracted by day-to-day activ-
becoming shorter and shorter. A approach to execution
ities and do not dedicate appro-
study by Innosight has found that the 4. thinking big but delivering outcomes
priate time to develop a coherent
33-year average tenure of companies early by focussing on quick wins
vision of the future
listed on the S&P 500 in the US in 1965 5. dedicating appropriate resources to
confuse a digital strategy with a
narrowed to 20 years in 1990, and is implement the changes
technology play. Digital is not just
forecast to shrink to 14 years by 2026. 6. changing the corporate culture (win-
about technology but about how a
As we all know, the speed of change ning the hearts and minds is key)
retailer fundamentally redesigns
in the retail industry driven primar- 7. measuring and rewarding achieve-
its business model to deliver truly
ily by technology, digitisation and the ments.
customer-centric experience
changing behaviour of tech-savvy Change is not easy, but it is also no
have great ideas but are unable
consumers is accelerating at a rate longer optional. Change is critical to
to execute them. They struggle
never before seen. Some retailers have counter the constant and ever-grow-
to understand how to prioritise
adapted, and are winning by quickly ing threat of disruption. Under-
investments to maximise value, for
pivoting their strategy to deal with standing these guidelines and being
example to turn sales growth from
potentially disruptive threats. mindful of the common roadblocks to
new and existing channels into
Best Buy in the US, for example, has change is a good first step in prepar-
profitable growth. Their culture
seen its share price rise 60 per cent this ing your business for dealing with
often becomes an impediment to
year on the back its successful turn- change.
successful execution of good ideas.
around strategy, Renew Blue. Forbes Ultimately, what is a threat to
A retailers business strategy needs
says the companys gross margins fell some will become an opportunity for
to begin with its vision and a mission
from 25 to 22 per cent between 2011 others.
this provides the direction for the

EXPERT FORECAST
David Khadi
Regional Director
Michael Page Australia
ALWAYS A
CHALLENGE
How easy will it WHAT WILL BE THE
BIGGEST CHALLENGES FOR
are seeking experts in their field to
help drive the growth of SMEs in
be for retailers to RETAILERS WHEN IT COMES Australia.
find staff this year? TO RECRUITMENT? International expansion: European

retailers entering the Australian
There will always be Administration and workload will
be their largest challenges. There is
market will create job opportunities.
Technology advancements: These
challenges, according a lot of pressure on hiring managers will put pressure on operational
to a recruitment agency
and HR departments to manage staff. For example, the demand
the recruitment process along with from customers for faster delivery
expert, who offers their core responsibilities. Many processes will require an investment
of them are time-pressed and do
insights into the state not have the capacity to handle the
from retailers in their inventory
control and process management to
of the market. workload. Some retailers do not even
have a specialised HR department
meet expectations.
Social media presence: This
or the internal resources to manage is creating new roles for digital-
WILL IT BE EASIER OR recruitment processes, and in marketing specialists. Most big-box
HARDER TO FIND RETAIL those cases, it will fall on the store retailers with an online presence have
STAFF THIS YEAR? managers (and above) themselves created specialised digital teams.
to take on the extra responsibility, Those without a digital footprint will
It is hard to say either way. However,
without appropriate training or be under pressure to launch efforts.
we do know that retail is, and is
qualification. Online retail: This will continue
likely to always be, a candidate-short
market because of the relatively niche to grow, and if not so already, will
skills required. Therefore, talent HOW WILL RETAIL SALARIES become any multi-channel retailers
recruitment will always have its PERFORM THIS YEAR? biggest store in terms of sales
challenges. We have seen European Not much change is anticipated, but revenue.
retailers, such as John Lewis, recently there will always be pressure on
enter the Australian market, with retailers to reduce their costs because WHAT ADVICE WOULD YOU
Debenhams and Decathlon following of ongoing margin constraints. There GIVE RETAILERS TO HELP
in their steps. With this, there will is also pressure from the candidates THEM BETTER RECRUIT
be more opportunities for retail to have their salaries increased, as STAFF THIS YEAR?
candidates. this is a candidate-led market, and
Establish strong working
retailers often comply when buying
relationships with key recruitment
WHICH ROLES WILL BE back their staff because they want
partners who are specialists in their
HARDER OR EASIER TO to retain their talent. However, the
field. They are often very informed
FULFIL? growth in SME businesses might see
and prominent within the retail
a shift with basic salaries reducing
The junior to mid-management industry, and can be on hand when
but other incentives growing. For
market (for example, at the assistant needed. Reputable recruiters can
example, SMEs might choose to offer
store manager or store manager level) deliver on speed and accuracy
new employees competitive shares in
is traditionally the toughest. This is as well as relevance with their
the business to make up for the lower
where there are the fewest candidates, candidates.
salary. Entrepreneurial employees
so they are constantly in high demand. The key focus for retailers should
see this as an investment, and want
Also, it is difficult for retailers to be on staff retention by offering
to have more involvement in the
retain them because they are often ongoing training and development,
business they work for.
headhunted for new opportunities and providing employees with
that usually promise a salary increase succession planning. This way
WHAT FACTORS employees will be less inclined to
as well as other incentives, including
career progression. This is usually WILL AFFECT THE pursue other opportunities presented
the main contributor to attrition RETAIL RECRUITMENT to them through headhunting.
in the retail environment at mid- ENVIRONMENT, AND WHY?
management level. The growth of SMEs: Businesses

EXPERT FORECAST: RETAIL DOCTOR GROUP
Brian Walker
Founder/CEO
Retail Doctor Group
DONT BE
LEFT BEHIND
Change will happen retailers increasingly invest in
digitalisation, business informa-
within department and DDS net-
works, and pure-play online retailers
faster this year, leaving tion systems and having a business who do not open physical shops or
retailers who dont platform that can communicate with
customers 24/7 and provide a point
aggregate for scale.
The retailers who will thrive this
invest in technology or of difference. Retailers will not only year will be those who focus on:
focus on their points

use digital to enhance the customer The differentiation and unique-
experience and the frontend of their ness of their offerings
of difference and businesses, but also to improve their Customisation and personalisa-
backend fulfillment processes that tion driven by data
customer experience is, to get products to the customer Building communities rather than
way behind. faster than ever before, and to bolster
their logistics.
just building retail networks
Evolving the omni channel into
the retail ecosystem
This year is set to be similar to last MORE FOCUSSED Predicting consumer behaviour
year, but the rate of structural change Expect to see retailers far more through the use of big data
to retail will be faster. Time and focussed this year on the in-store Understanding consumers with
speed will drive the retail agenda. experience they provide, and on far more alacrity and accuracy,
Consumers will have more choice differentiating their brand experi- using fields such as neuroscience
than ever before, and increased digi- ence. They will be far less absorbed (which will begin replacing tradi-
tisation will allow them to shop in- with expansion just for expansions tional customer research)
stantly, wherever and whenever they sake (quality over scale). This will, Enhancing the physical experi-
want. Customers will be far more of course, shake the marginalised ence to drive traffic
promiscuous and less loyal. Their retailers out of the market. Technology that advances aug-
behaviour will be more about me, Those who wont thrive include mented reality (although it is still
singular and community focussed. the non-differentiated, middle-class early days in this sphere)
They will be better researched, retailers with too much of the same The smart use of space and brand
less location-dependent and more stock in the same marketplace, as for example, pop-ups that are
concerned about speed, time and well as undercapitalised mid-market, actually brand beacons
convenience. And there will be a long-established fashion retailers Providing more information and
clearer division between functional who traditionally rely on location communication to customers
shopping and experience seeking. and an aging customer. about their products
This will also be the year when There will also be fewer shops Providing greater transparency
around the origin and pricing of
their products
Enabling more in-store interactiv-
"This will also be the year ity, especially via digital innova-
tions such as smart mirrors
when retailers increasingly Investing more in areas such as
radio-frequency identification
invest in digitalisation, business Providing greater levels of
customer entertainment and
information systems and having convenience
Getting close to the basics.
a business platform that can On a global scale, it is possible the
new Trump administration in the US
communicate with customers and its attitudes to trade with China
could be bad news for the Australian
24/7 and provide a point of economy, dampening local consumer
confidence and spending. Expect
difference." cash rates to stay low.

EXPERT FORECAST: NORA
Paul Greenberg
Executive director
Nora.org.au
BACK TO BASICS
Despite convergence, players like Amazon and eBay, where
SKU counts are in the tens of millions.
that retail at its core is a deeply creative
endeavour. And while good retailers
artificial intelligence, Real-world retailers are responding by have always understood their business
bots, drones, big data and going tighter, not wider.
Expect to see more of this approach
dashboards and customer insights,
mixed in with this must be a good
so on, some traditional this year. Businesses like Apple, Mic- amount of chutzpah, creativity and
retail basics still count in

rosoft (retail), Pandora, Samsung and adventure. This has underpinned many
Swarovski are showing us the way. of our successful online retail entre-
modern times. preneurs and brands, with Catch of the
DISINTERMEDIATION Day being a fine example.
Leading on from this, another oldie I think we will see more of this
Predicting retail trends is a challenging but a goodie long spruiked by retail playfulness with our largest retailers
business as the tides of fortune in this commentators is the force of disinter- having a go at building buzz with their
vibrant sector change quickly. mediation. Increasingly, we will see the customers via apps, trials, promotions
As an example, Professor Scott Gallo- retail landscape being led by retailers and technology. A bit of style over sub-
way, an American technology and retail who own the brands in their store - an stance is fine by me and many shoppers
trends expert, predicted at the outset of end-to-end retail system where the in- who are itching for innovation and
last year that the shopping arm of Ama- tellectual property and the margin are change. A fine example was eBay and
zon.com would not be sustainable with- owned wholly and solely by the retailer. Myers virtual reality store earlier last
out a strong partnership or ownership Of course, good aggregators year. Did it change the world? No, but
of a business like US Postal Services. like department stores and speciality it was a lot of fun for the teams of both
As the year closed, in a commendable retailers will have their place in the sun, businesses to develop. Customers had
and unashamed pivot on that view, he but as futurist Howard Saunders notes: a fantastic play, and the media went
claimed that Amazon could well be the Retailers must understand that if they into meltdown with excitement. No
first business in history with a market dont offer us a unique experience or losers here, and my prediction is that
capitalisation of more than US$1 trillion. sense of belonging, then we will order this could quite well develop to be a
So, rather than focus on the big it online. This will challenge the so- significant needle mover.
shifts underpinning the sector con- called middlemen of retail further, Retailers in challenging times could
vergence, artificial intelligence, bots, and their response must be a vastly be forgiven for not wanting to adopt
drones, big data and so on - I am look- improved customer experience. This is some of these innovative projects,
ing at going back to basics, reframing already happening with brands like JB but good leadership in the sector is
traditional retail principles for contem- Hi-Fi and Myer. recognising that small failures are the
porary times. stepping stones to success. Inactivity is
still the biggest risk.
A COMEBACK BY CREATIVITY
PARADOX OF CHOICE I look forward to another milestone
In the face of the big-data buzz over year for the industry - onward and
As retailers build their ranging strat- the past few years, I have long argued upward.
egies, there is a tendency to go wider.
Customers tell retailers they like choice
and variety, and retailers respond by
growing their SKU counts. But recent
years have shown that less can be more, Increasingly, we will see the retail land-
and the age-old adage of preselection,
where good retailers build a tighter scape being led by retailers who own
range and do the choosing for the
customer, is paying dividends. the brands in their store - an end-to-
Perhaps this is best reflected in the
turnaround of Kmart under Guy Russo. end retail system where the intellectu-
Tightening up range, dramatically,
has paid off handsomely. In truth, real al property and the margin are owned
long-tail business models have be-
come the domain of large eCommerce wholly and solely by the retailer.
EXPERT FORECAST: DELOITTE
David White
National leader
Deloittes Retail, Wholesale &
Distribution Group
DISRUPTION THE
NEW NORM
The prospects for Australian retailers this year are relatively positive,
but competition will be more fierce than ever and all players should be
planning for change, especially with the possible entry of Amazon.
Retailers have just had a relatively typically only one winner when compe-
positive year, with the feel-good factor tition is based predominately on being FORECAST RETAIL SALES
from the continued growth in house the lowest priced, so we can continue PERFORMANCE BY STATE
prices in New South Wales and Victoria to expect significant disruption in the
undoubtedly helping discretionary discount stores sector this year even if New South Wales and Victoria were
spending, as did low levels of interest Amazon doesnt make an appearance. the stand-out states last year, but there
rates and unemployment. These numbers also mask the early are challenges ahead. The wealth factor
So what will this bring for Austra- signs of recovery from the two major created by rising house prices in NSW
lian retailers? When we asked retailers department stores in Australia over the will slow down as house-price growth is
this question in our 2016 Retailers past year. With new leadership teams expected to moderate. This means retail
Christmas Survey, the overwhelming and new strategies at David Jones and sales growth this year in NSW will
response was positive. About 64 per Myer, we should really start to see soon more likely match rather than exceed
cent of respondents are expecting their how successful they have been in trans- the national average. Similarly, while
earnings to increase by 5 per cent or forming their respective businesses. Victoria had above-average growth last
more this year, with such levels of opti- Supermarkets continue to face a year, potential overbuilding of apart-
mism at their highest since we started challenging market with price deflation ments and the closure of car manufac-
this survey five years ago. and increased competition across the turers could slow growth this year.
We can expect a steady improvement board with the growing presence of Western Australia continues to to
in retail sales throughout this year, Aldi in Australia. Population growth feel the effects of the downturn in the
which is likely to coincide with a modest has helped offset falls in per-customer mining sector, and trading conditions
improvement in wage growth over time. spend, as has a cultural shift to quality are still expected to be challenging. It is
fresh foods. However, inflation-adjusted likely that retail turnover will not start
NOMINAL AND REAL revenue in the category is still set to to recover until next year.
contract for another year or so as wage The other major state impacted by
AUSTRALIAN RETAIL
growth remains constrained. the mining slowdown, Queensland
TURNOVER
Deloitte Access Economics is expecting
total retail sales in Australia to grow Graph: 2017 Retail Sales Growth (value) percent
by 2.9 per cent in FY17, with the largest Source: Deloitte Access Economics: Retail Forecasts, November 2016
growth expected across the catered
food (6.1 per cent) and apparel (4.4 per Total Retail Sales
cent) sectors. Total non-food sales
While the overall market for apparel
was strong last year, it has become Total food sales
increasingly competitive. In particular, Other retailing
the influx of international brands into
Households goods
Australia continues to put pressure on
retailers. With this trend set to contin- Apparel
ue, we can expect further pressures Dep't and discount
on apparel retailers as the fight for the
Catered food
consumer dollar intensifies.
The department and discount stores Specialty food and liquor retail
sector is expected to continue to be Supermarket retail
challenged, with retail sales forecast to
shrink by 3 per cent next year. There is -4% -2% 0% 2% 4% 6%

has a more positive outlook. There More Australian retailers last year Growth prospects
have been stronger signs of growth started expanding internationally - As shown in the table below, retailers
lately with the lower Australian dollar into the US, Europe and Asia Pacific. continue to focus on apparent tradi-
spurring significant numbers of tourists The numbers are still relatively small, tional strategies for growth.
and students. This is expected to con- but with competition in the domestic In an environment where consumers
tinue and should help boost retail sales market threatening saturation in certain are demanding more convenience, the
growth in Queensland this year. categories, we can expect to see more question is whether retailers should be
Australian retailers take a leap of faith focussing on opening more bricks-and-
THREATS, CHALLENGES AND into overseas markets this year. mortar stores. Even these outlets are
OPPORTUNITIES fundamentally changing as the tradi-
Consumer confidence
tional role of the store evolves. Stores
The elephant in the room While consumer confidence has been
are taking on multiple roles, from being
If Amazon is not on the agenda at board quite steady over the past 12 months, any
distribution centres for click-and-collect
meetings for Australian retailers, then dents to confidence in the coming year
purchases to becoming marketing focal
it should be. With the rumoured arrival through instability or uncertainties could
points designed primarily to build brand
of the US giant to Australias this year, be a major stumbling block for retailers to
awareness. So this year we can expect to
the potential for major market disrup- achieve their growth aspirations.
see more retailers experimenting with
tions is huge. Already several retailers After the initial shock of Brexit, it ap-
store design, layout and footprint, with
are setting up task forces to assess the pears so far that it will take several years
bricks-and-mortar stores remaining
potential impact of an Amazon market for the full impact of this game-chang-
fundamental to their strategy.
entry, but its not yet clear what exactly ing decision to be felt financially, as the
As we head into a fresh year, the
the company has planned for Australia. complexities and time frames to unwind
prospects for Australian retailers re-
All we know is that where Amazon has the UK from the EU become apparent.
main relatively positive. Many retailers
entered markets, the impact on local The US election outcome has created
expect to be able to grow and expand
retailers has been seismic in almost all greater uncertainties as we wait to see
their businesses. However, competition
categories and channels. what impact a Trump administration
will be more fierce than ever, and even
Retailers cannot afford to wait and will have on the global economy. Any
if Amazon does not enter the market
see what Amazon does they need to move toward more protectionism by the
this year, Australian retailers need to be
be developing strategies and taking US could certainly affect pricing and
planning for change - disruption is now
action now. demand for Australian retail goods.
the norm, not the exception.
Time will tell.
International competition and
expansion
We can be sure the influx of interna-
tional retailers will continue this year Graph: Primary Driver of
and beyond. This will be driven by our Sales Growth for Retailers in
strong economic conditions relative to 16% Source: Deloitte Retailers Christmas
other countries, high consumer demand Survey 2016, Stocking up for Christmas
for international brands, and relative
proximity to Asia.
One of the key differentiators 7%
international retailers have brought to
Australia is in their store-design and 42%
customer-experience model, leveraging
their experience from larger markets.
However, Australian retailers are slowly New Stores
starting to fight back, investing more of-
ten in store design, concept and flagship 24% Overseas Expansion
Acquisitions
stores. New entrants will find Austra- 2% New Products
lian retailers better prepared and skilled New Sales Channels
to take on this challenge compared to 9% Online Offerings
five years ago.

EXPERT FORECAST: GFK
Norrelle Goldring
APAC Region Shopper Lead
GFK
ITS ABOUT
THE EXPERIENCE
The retailers and brands that will succeed this year and beyond are those
that treat their customers as special individuals and provide them with
tailored offers without broaching their sense of security.
There are 12 macro-trends retailers

and manufacturers need to take into
account in both their medium-term
strategies and day-to-day business,
Harness positive word-of-mouth
according to GFK ConsumerLife.
The macro-trends cover five
by creating offers around
themes:
Prevention: wellbeing, *safety and
customer advocacy programs,
security
Conscientiousness: eco
and leverage reviews.
citizenship, *considered
consumption
At home wherever: house to
home, *instant everywhere Proof points: 27 per cent of adult use that increases as age decreases.
Me-ism: *identity, *experience, *we Australians think it is important to Shopping behaviours are becoming
are all Influencers be reachable wherever they are, one more determined by their values and
Expectation: redefining value, in five need the shops and services attitudes than their generation. GFK
*streamlining, satisfaction. they use to be open and available Futurebuy says that while shoppers
* Particularly pertinent to retailers 24/7, and 10 per cent will even settle are becoming less loyal to particular
and brands. for an inferior product or service if it retailers and brands - loyalty
is available when they need it. GFK programs reward transactions rather
These trends change slowly Futurebuy indicates that one of the than generate emotional loyalty -
over time. GFKs 2016 FutureBuy advantages of buying online is more they increasingly say they would be
study data has shown that shoppers and better delivery options. more loyal to a brand/retailer that
were behaving in much the same Whos doing it well: Dominos, lets them give input or help shape the
way last year as they were the year Netflix, Uber and McDonalds products and services they buy.
before, only more so. This means an 30-minute delivery in China and Japan. Whos doing it well: Nutella
increased emphasis on experiences So what? What is your strategy personalised Christmas jars
more than objects, and influences for being available 24/7? What is your the largest-selling Myer SKU at
more than price. strategy for delivering 24/7? How can Christmas 2015 and leveraged again
There has been either a shift in, or you make the process of interacting last year; Nike and Shoes of Prey
more likely a re-emphasis of, existing with your brand easier, such as customised footwear; McDonalds
behaviour pertaining to the macro- shorter wait times or easy sign-up. Create Your Taste; Toyotas
trends... 360-degree showroom kiosks; LG
IDENTITY marketing to values in Japan and
INSTANT EVERYWHERE What it is: Self-expression, Korea.
What it is: Being on demand, 24/7 uniqueness, specialness, segments So what? Email your customers
contactability, availability and delivery of one, tailoring, customisation, with offers specific to them based
anywhere. This entails customer personalisation, co-creation - know on their purchasing histories and
service and sales capability at any me in order to tailor products, what similar customer profiles have
time, and flexibility with delivery services and offers to me. bought. Dont just gather feedback
options such as third-party collection, Proof points: How shoppers from your customers - encourage
drones, click and collect, and buying use their phones differs little across them to design products and services
in-store with delivery elsewhere. generations, its just the amount of with you.

EXPERT FORECAST: GFK
EXPERIENCE STREAMLINING One of the pri-

mary barriers
What it is: Sensory stimulation, What it is: Choice and complexity
shared experiences, entertainment, reduction, one-touch/one-tap/one-
for mobile pay-

excitement, exploration, humanising click, maximum of three screens to
retail, fun, novelty, gamification, navigate to reach where I need to go,
what I do rather than what I have. simplicity, ease, speed, efficiency
Proof points: Experiences make
us happier than objects, and are
Proof points: Four in 10 GFK
ConsumerLife participants believe
ments is fear of
more memorable. Four in 10 adult
Australians believe experiences are
innovation means an easier way of
doing something, 27 percent say it
insecure finan-
more important than possessions. The
top reason for shopping in physical
means simplifying something that
is too complex and 71 per cent say
cial data.
stores is tangibility (see/touch) and technology makes their life easier.
web-rooming (researching online According to GFK FutureBuy, weve
and buying in-store). seen web-rooming (research online, in control and they need to be able to
Whos doing it well: Blackmores buy in physical store) more than trust you in order to provide you with
Wellness Stores, BOQ, Lorna Jane double since 2014 while showrooming their data. Reassure them, and send
fitness classes instore, St George is static. This is because, despite a them only tailored offers - dont spam
Banks immersive scratch-window proliferation of touchpoints and them with generalities.
Christmas gift campaign. information, shoppers are trying to
So what? Focus on creating simplify their options via research VALUE AND SATISFACTION
experiences, not just selling stuff. online before they start pounding the The other two trends to note are
Tell a story, provide a theme, such as pavement. This means that in many redefining value and satisfaction,
apportioning a part of your store to categories, even for more involved which work together. Value is
themes and seasonal items. Ensure and complex purchases, the number not about lowest price, or even
your experiential marketing activities of physical stores visited has reduced quality divided by price. It is about
are shareable, and that sharing is to one or two. perceived quality, including that
encouraged. Whos doing it well: Amazon bestowed by the role of influencers in
Dash Buy Now buttons, Hungry recommending a product or brand.
WERE ALL INFLUENCERS Jacks breakfast e-tags trial store, It is about choice, durability and
NOW Starbucks Skip the queue, happy guarantees (guarantees tie back to
you. safety and security).
What it is: Recommendations,
So what? Is your offering Likewise, satisfaction is not
reviews, sharing economy, social
enhancing the lives of your merely being happy with the quality
media, word-of-mouth, trusted
customers? How does it make their or value of a product or service. It
opinions, advocacy, crowdsourcing.
lives better? How does it make their is about indulgence, fulfillment,
Proof points: 31 per cent of
lives easier? Work on removing gratification, reward, extravagance,
FutureBuy participants say social
pain points and focus on the core surprise and delight, exceeding
networks have become as important
proposition. Look at how you expectations, and being best in class.
as other information sources for
can trim the fat to create a more In other words, satisfaction arises
making product purchase choices,
streamlined and efficient offering. from being treated as special. This
and this rises to 69 per cent for
How can you make it one tap, one ties into identity.
leading-edge consumers. The point
click, maximum three screens? In summary, Australian retailers
here is that peer reviews those of
How do you ensure you are in the and brands bound to do well this
third parties and strangers are
shoppers consideration set so your year are not those with merely an
becoming more prolific and more
physical store is one of the two they adequate range at a low price. A
influential than the opinions of
actually visit? number of these have failed already,
retailers and brands.
Whos doing it well: 7-Eleven and deservedly so.
Bring your own cup campaign, SAFETY AND SECURITY No, the retailers and brands that
Dominos Pizza Mogul, Lego product What its about: Cyber privacy will succeed this year and beyond
development. Amazon originated and security, risk mitigation (such as are those that treat their customers
this with its People who liked this guarantees), willingness to exchange as special individuals and provide
also like along with posting money and time for peace of mind. them with tailored offers, without
user reviews. A similar story for Proof points: One of the primary broaching their sense of security.
TripAdvisor. barriers for mobile payments is fear They are the retailers and brands
So what? Retailers and of insecure financial data. Strangely, that tell a story and provide a truly
manufacturers need to harness the however, Australian shoppers have memorable experience in their retail
power of their shoppers, particularly no problem with tap-and-go credit- environments, beyond mere range/
advocates, and provide platforms for card transactions (we lead the world merchandising/price/service. They
showcasing third-party opinions both in these). are the retailers and brands that
online and at shelf. Social listening So what? Shoppers are willing leverage the power of third-party
is a must. Harness positive word to share their details with you - if reviews to drive traffic. And they
of mouth by creating offers around they think your systems are secure, are the retailers and brands that are
customer advocacy programs, and and if youre asking them only available 24/7 to customers via a
leverage reviews. for enough details to tailor offers. range of communications formats
Fundamentally, shoppers want to be and vehicles.

EXPERT FORECAST: IBISWORLD
Lauren Magner
Senior industry Analyst
IbisWorld
TOUGH TIMES
AHEAD
A look in the crystal needed. Technological innovations
will include interactive displays,
sales, as both continue to adapt and
coexist, providing consumers with a
ball reveals this is adaptive storefronts and robot-en- seamless and convenient multichan-
set to be another
abled dressing rooms. nel experience.
challenging year for INTERNATIONAL SIGNIFICANT ADVANTAGES

retailers on the back COMPETITION Retailers who start out online are
recognising the benefits of having
Overall, retailers will continue
of negative consumer to face challenges over the next five a physical presence, as on-ground
sentiment, intensified years as more international players
move into the Australian market.
stores have significant advantages
over their internet counterparts. This
competition and Australia emerged comparatively includes the ability of consumers to
technological change. unscathed from the global financial
crisis, which drew the attention of
inspect and try on products, receive
face-to-face customer service, and
many international retailers. Gap, instantly acquire products rath-
With negative consumer sentiment, Topshop and Zara are just a few of er than waiting for delivery. As a
clothing retailers can expect their the big names already here compet- result, pure-play online retailers are
revenue to decline by 1.4 per cent in ing for market share, while newcom- increasingly using multiple channels
2016-17, to $19.1 billion. ers H&M and Uniqlo plan to expand to engage and connect with custom-
Many clothing retailers have had their store presence rapidly over the ers by opening up flagship brick-
difficulty adjusting to the shift in next five years. Australian retailers and-mortar stores that typically act
consumer spending behaviour over will have to compete with overseas as showrooms.
the past five years. Consumers have entrants with significantly larger As online sales continue to ex-
been reducing debt and increasing supply chains, allowing for better pand faster than traditional retail,
their savings, with bargain hunting brand positioning and lower prices. boosting their share of total con-
becoming increasingly prevalent. As Fierce competition from online sumer spending, physical floor space
retailers have discounted stock to shopping is also anticipated over the will be less focussed on driving the
boost sales, consumers have become next five years, as websites become sale of products in-store and more
accustomed to price reductions and more sophisticated and offer a on engaging and interacting with
have come to expect items to be al- greater range of products. Despite the consumer. This includes the use
ways on sale. They have also become increased competition from the of video content, television screens,
increasingly comfortable using web- online-only space, many traditional tablets and interactive displays in
sites to compare prices and buy the brick-and-mortar retailers now have stores to view and order products
best-value items from both domestic their own dedicated online stores, online. Retailers are also explor-
and international retailers. These supporting revenue growth. Further- ing other avenues to enhance the
changes have pressured traditional more, with the fall of the Australian customer experience by introducing
brick-and-mortar clothing retailers, dollar, domestic retailers can expect cafes, spas and salons to their stores.
who previously enjoyed a relatively relief from international online com- For example, Glue Store has a cafe in
high degree of protection from exter- petition as the products they offer some of its stores.
nal competition. become more expensive for Austra- Retailers will continue to face a
Multichannel retailing will lian shoppers. tough and challenging retail envi-
become increasingly important as While many Australian retailers ronment over the next five years. To
retailers aim to capture consumer scrambled to develop online stores drive sales and boost profit margins,
demand at any given point in time. in the wake of fierce competition domestic retailers will need to adjust
This will involve the continued mi- from the eCommerce market, this their store format and the number of
gration of brick-and-mortar retailers trend is now happening in reverse outlets in their network. Consumer
online, and vice versa, as previously with pure-play online retailers behaviours are constantly evolving
online-only stores develop a physical expanding to other sales channels, as new technology is adopted, and
presence. The role of the traditional including physical stores. There is no retailers need to be able to allow
retail store will be challenged, with longer any threat online sales will customers to buy through a variety
large physical footprints no longer cannibalise traditional retail store of channels.

EXPERT FORECAST: SAVILLS
Leighton Hunziker
Director of Retail Services
Savills
ELEPHANTS
AND POACHERS
Australias shopping centres are facing challenges on many fronts, the
likes of which have not been seen before. Retail landlords will need to
adapt their mix and business models to maintain relevance and earnings.
A year ago I wrote about the concept poachers with ready opportunity to pricing pressure meaning the actual
of retail relevance and adaptation, fire away. Why? price per unit has increased only 15
both for retailers and lan dlords, and Metaphors aside, the desire of in- per cent). During the same period,
the importance of experience in the vestors for never-ending rental growth centre MAT has increased 25 per cent,
retail landscape as a tool to maintain has meant that specialty rental growth the anchor supermarket 27 per cent,
customer engagement. That all holds has outpaced sales growth, leading and the customer count only 8 per
true for this year and beyond. to a combination of retailer margin cent. By any measure, the tenant has
However, I do see some particular erosion, higher product prices and outperformed the centre. His rent
challenges ahead for retail landlords. now, courtesy of access to information increase in the same period - 73 per
Previously I have written about and macro economic forces, customers cent. Yes, rental growth has more than
customer behaviour, retailers them- reaching point-of-purchase resistance. doubled every other metric at this
selves and retail property - nothing People are less confident or willing to property, and this landlord wants a
earth-shatteringly revealing and buy stuff at inflated prices. further 20 per cent now, because in its
quite often just observing the ele- In an environment where CPI is own words we know your sales and
phant in the room. What is inter- very low, has been for a long time and you can afford to pay the rent.
esting is that it is the landlord bull is predicted to remain so for a while So heres a situation where rent is
elephants that object the most. They yet, how sustainable is it for a landlord being based on a captives capacity to
dont like to hear anything but bullish to drive specialty store rents at CPI + 2 pay, rather than real-estate fundamen-
predictions. per cent increases in an environment tals. That is not market rent, thats a
When it comes to the multi-bil- where sales growth has not kept pace? sales tax bordering on extortion.
lions of dollars invested in the retail Not sustainable at all.
property sector, the custodians of our VICTIM OF SUCCESS
fortunes are reluctant to consider that BEING SQUEEZED By the landlords own admission, the
without change they may be consign- The result? Retailers are stressed centre is willing to risk vacancy loss
ing their assets to the elephant grave- because they are being squeezed by
yard. Perhaps they are too focussed on unsustainable cost escalations on one
counting their short-term performance end, and tapering sales growth at the
bonus and so are less inclined to con- other end.
sider what the shape of things may be Here is a prime example. At Savills
in 10 years or so. we are helping a longstanding, suc-
cessful, independent mum-and-dad
PREDICATED ON GROWTH food retailer with their lease renewal
The current game for fund managers at a small suburban sub-regional
is easy to understand and largely centre. The rent was set to market
predicated on growth: growing sales, five years ago by a major institution-
growing rent, growing asset value, al landlord. Since then, the rent has
growing fees. The model doesnt cope escalated by 5 per cent a year. It is now
too well with decline. lease renewal time, and the landlord
In simple terms, the thing that is fixated on a 20 per cent increase.
made retail asset investment great for Otherwise, he says, the shop will be
both investors and fund managers leased to someone else.
alike - sustained rental growth - is So here we have a successful
the very thing now driving the assets retailer who, over the past 10 years,
to unsustainable levels, provided the has grown sales 31 per cent (despite

EXPERT FORECAST: SAVILLS
and incentivise a new replacement So Im thinking it is peak value brand supply chain/broader distri-
tenant - that is, use the shareholders time (PVT) for retail property as a bution strategy
funds - to deliver the rental result, class. Why? Quite simply: That provide a special or differenti-
most likely through a franchise, All the indicators say so ated product or experience
meaning the centre loses another local Global uncertainty levels remain That provide the above at a compel-
identity and differentiation point. All elevated ling value proposition.
this when the rent the proven and Personal and property finance Who readily springs to mind? Most
successful tenant is prepared to pay lending criteria is becoming tighter noticeably Aldi, Amazon, Bunnings
is more than market, fair and sustain- Interest rates are rising and Costco, but more will come. What
able. However, the retailer is trapped, Wage growth is subdued do they have in common as a key
a victim of his success. If he agrees There is more chatter regarding competitive advantage? They have sig-
to the new rent, hell be working for housing price unsustainability and nificant scale, category dominance and
wages only with no reward for entre- residential price softening. generally do not locate in shopping
preneurial effort. Already retail sales are slow. The centres, and so pay a fraction of the
Economists may say, Let market above indicators just perpetuate low rent that retail landlords charge. This
forces prevail, let him go, but in so consumer confidence and make cus- gives them a substantial cost advan-
doing a family will lose its livelihood tomers hold on to their cash or make tage they transfer into lower prices for
for no other reason than the fund more considered spending decisions. the consumer.
manager wants a bigger bonus and is Consumers win (lower prices), the
in a position to extort maximum price. COMPETITIVE ADVANTAGE retailer wins (sales), but shopping
The cashflow result of the existing Remember that fundamental equation centres lose. Why buy a $100 shirt in
tenant versus a new tenant in the next earlier? The very foundation of shop- a specialty store at a shopping centre
five years is nominal. The fund will ping centres is sales. If sales decline, so where the retailer is paying $1500 a
be using capital to subsidise the rent too will rent. It has to, otherwise well sqm in rent, when you can buy a com-
(and maximise value and fees too, by see more retailers entering adminis- parable or better-quality shirt online
the way). Not a too sustainable outlook tration and increased vacancy the from Amazon (paying $150 a sqm
long term. cancer of a centre. Fund managers warehouse rent) for $50? Its just too
This scene is being repeated across arent going to let that happen. compelling for consumers. The price
the retail property spectrum investor The situation is magnified because differential is so significant, partly
capital being used to prop up rent and sales transfer out of shopping centres courtesy of inflated product prices
hence asset prices, resulting in higher to the poachers retailers with a com- with inbuilt rent.
management fees for the manager. In a petitive advantage. These are retailers:
rising tide, with cap rate compression, With a reputation for consistency LOOKING FORWARD
this is a magical phenomena - every- and quality
one gets rich and all boats rise. But I So, polish the crystal ball and look
With product control over their forward five years. What will we see
believe the game is changing.
at the local mall? It will increasingly be
things that cant be replicated online or
delivered by drone, things that are expe-
Shopping centres arent dead as riential, personal or of a service nature
- space that responds to the trade area
a whole, but many will fail to ad- demographic instead of the one size fits
all current model of shopping-centre
equately respond and become leasing and development.

Undifferentiated fashion shops
shadows of their former glory. will be squeezed out by international

juggernaut retailers, increasing cost
(rent) pressures and flat sales (think
Howards Storage, Ice Design, Payless
Shoes, Pumpkin Patch). The DDS
sector will continue to struggle. Banks
will shrink or disappear from centres.
Retailers that compete purely on price
will fail.
Shopping centres arent dead as a
whole, but many will fail to adequate-
ly respond and become shadows of
their former glory. The composition
of successful centres will change. Our
collective superannuation funds wont
allow assets to become vacant lest
they spiral to terminal decline, as has
happened in many US malls.
But all that has a cost to imple-
ment, and that cost will be that
property returns will be lower. A
sobering thought for our investment
balances.

EXPERT FORECAST: MIMA DESIGN
Mark McConnell
Design Director
Mima Design
KEEPING UP
APPEARANCES
Whats going to be hot and whats not this year? Heres a look at
some important trends to ensure you are on the right track when it
comes to retail design.
Many exciting retail design concepts Companies that develop patents different tonight? Store apps will
and developments are set to shape the on concepts that make our path to make a suggestion, show you where
competitive landscape this year. purchase more informed, faster and to find the products in your local
Firstly, experiential brand easier will quite simply rule the high store, then when you get home you
immersion is going to continue to be street. Look at Apple and the advent can watch the video of their company
developed by retailers keen to bridge of Apple Pay and iTunes, or Dominos chef preparing everything step by
the gap between online and brick- with its tracker app and drone step. No more reading recipes (so last
and-mortar environments. Where delivery. Amazon could be the next century).
technology and communications big game changerif it works. We
companies have had the edge on the will continue to see some great ideas SLIGHTLY SCARIER
integration of technology in-store, driven by technology and led by our A slightly scarier development in
retailers and restaurateurs are quickly love affair with our smartphones and personalisation will be the retailer
understanding the advantages of embedded RFID chips. pre-empting your purchase and
designing it into their business. Personalisation will become communicating with you via your
McDonalds has probably been more and more evident as we do
the best example, last year rolling our shopping, partly thanks to the
out menu kiosks. This brought in a advances in technology, but also
new experience, allowing customers because brands want to build a lasting
to design their own burger. It also relationship with you. Virtual and
allowed the company to cut back augmented reality, 3D scanning and
the staff standing behind counters printing are no longer ideas but tested
and offer more customer service to technology that is more affordable
the table. What we all need to learn and therefore ready to integrate into
from this is that in-store technology our everyday lives. It's already being
isn't about showing-off the latest used by online companies to sell
technology, but using it in a way to products and services, which will
ensure excellence in customer service. naturally filter into retail stores.
There has also seen another Whether youre buying an
interesting development with apartment before it has been built
Amazon announcing a counterless and want to walk through it and
supermarket trial in the US. Someone check-out the views, or youre having
had to be first. This is a great example a body scan to ensure showroom or
of how technology is driving our online tailored clothes fit, technology
expectations, and that technology is going to consistently offer
integration into retail environments opportunities to retailers and start-
will continue to be game changing. ups.
I love the way Amazon is striving Not happy with what everyone else
to improve the everyday shopping has? Your product can be modified
experience by removing the bits we in-store to suit you, then delivered
hate queuing and paying. when ready. This could be anything
from computer-printed cake toppings
WHO WILL RULE THE to one-off customer-designed training
STREET? shoes. Want to cook something

smartphone, and potentially via competitively, and convenient to experience, I am not sure I have
focussed media channels inside buy, that will shape the best retail seen anything revolutionary from
the store. Apps will be triggered as concepts this year. Achieving this any of them. Smaller bespoke and
you enter a store where you have will involve every member of a more personalised fashion brands
purchased before, and reminders retail organisation. They need to lift will pop up, potentially within
will identify what and when you their game and deliver their part of department stores, keen to offer
bought something, whether you the solution. Overseas brands may something different that won't be
need to buy it again, or if there lead the way in how this is done found in the malls.
is something else that will most effectively.
likely interest you based on your Australia has seen an influx of PLACING PRESSURE
profile gathered from your previous overseas brands over the past few The supermarket space has also
purchase history and web browsing. years, all bringing new, engaging continued to see quite a bit of
I can imagine your phone telling store experiences. Think what Apple development as Aldi continues
you what you need to go shopping did. Now think Tesla, definitely to place pressure on the larger
for, the best route to take and when a company to watch. The fashion competitor formats. This is likely to
to take a break at your favourite sector has seen the most action with grow worse with Amazon and Lidl
cafe, clarifying how much you are brands such as Gap, H&M, Uniqlo rumoured to move into our territory.
probably going to spend - and all and Zara expanding their footprints This is why major Australian
this before you get out of bed. and really socking a big punch retailers have been scrambling
While all this new thinking is a to some well-known Australian to adjust their entire businesses
little lost on our burgeoning older retailers. But in terms of in-store and store environments. I think
community, retailers tend to focus
on our younger generations whose
expectations exceed what can be
Whatever we learn from the in-

delivered by a brick-and-mortar
location, primarily because of the
plugged-in instant response their
smartphones, tablets and laptops
provide them. Retailers have been
fluence of overseas brands on
grappling over the past few years
with the challenge to instantly
the local retail scene, one rule
gratify their demands and win their
loyalty online and in the real world.
that never changes is that if you
It is this search for great
products or services that are
simply stand still and watch,
presented brilliantly, with expert
knowledgeable service, priced
youre going backwards.

Woolworths is really making strides concepts. This transfer of talent into DINING SPACES
and this year will see better results a mainstream restaurant sector has Food courts as we know them will
as it returns focus back on what it is lifted consumer expectations, and slowly disappear as malls create
good at. we're all better for it in my opinion. more immersive dining spaces
Whatever we learn from the But the success is already attracting that accompany more individually
influence of overseas brands on more overseas food brands. Carl's Jr, designed food concepts you want
the local retail scene, one rule that Hotto Motto and Yayoi are some that to dine in for the experience, not
never changes is that if you simply are here already. Expect more this sitting in a generic sea of tables and
stand still and watch, youre going year. chairs. Malls no longer want you to
backwards. Look at fallouts such Commentators talk about hurry through your food, but rather
as Dick Smith, Howards Storage how retail will involve a more provide a space where you can meet
World, Payless Shoes, Pumpkin experiential design, but I think friends and family, and use more
Patch - they just didnt seem to move Australians have been developing regularly.
their business concept forward. this well in terms of our fresh food Retail convenience will become
Unfortunately, I think more will and restaurant design, primarily led more important in our lives.
follow. by the best retail design landlords, Everyone is becoming even more
Probably the most successful creating superb food precincts. time poor. Smaller developments
growth area in retail since the GFC Australians love of food can be seen will pop up closer to multi-
has been casual dining. I believe in shopping-centre developments, residential hubs where community
Australia is among the best in with more money being spent on matters, people know each other, and
the world for creating amazing food precincts that are expanding a balanced mix of essential services
food concepts. Our climate, our into unusual spaces like basements and products are retailed beautifully.
producers, and our multicultural mix and rooftops. Affordable high- We're working with retailers who
really shines here, with worldwide quality casual dining stimulates are completely re-thinking their
experiences delivered on a plate. The more regular visits and increases outdated methodology in order to
combination of a sluggish economy dwell time in the malls, which leads address customer needs. We will see
has meant a reduction in luxury to higher sales. Emphasis on quality retailers get staff out from behind
purchases in favour of more regular food and service is paramount, and counters as technology allows more
good food experiences. Masterchefs is often a reason to chose one centre mobile cashless sales, with tablet-
closed its fine-dining restaurants in over another. wielding store managers able to
favour of smaller format affordable complete a sale, or find a product

come in and try out products you Shopfronts within malls are going
have probably already researched to blur more into the fabric of the
(one of our clients noted 40 per mall itself, especially in fresh food
cent of its customers researched its and restaurant precincts. Abundance
website before visiting the store), and is the key word, presenting a mass of
if you do decide to buy something, textures and products, seating and
it will be sent from a distribution canopies, and integrating interior
centre. The benefit to the retailer is and exterior spaces to provide year-
space. With less stock to manage round spaces to enjoy. We've been
they can run smaller stores, reducing seeing this development in some
rent. The upside for customers is major mall developments, so other
more immersive experiential retail landlords will follow their lead.
environments, and a new focus on For non-food retailers, lighting
professional customer service. design and quality merchandising
Another knock-on effect of remain retail classics that are all too
reduced stock would be the often ignored but help distinguish
integration of a food offer into a a professional from the amateur.
traditionally non-food retail format. Creative lighting is essential to
This is nothing new. I remember ensure products are illuminated
retailers doing this 25 years ago without being harsh or blinding. If
in London (Next), only now it is you don't understand how to light
easier to implement. Target has been a space, engage a qualified retail
introducing a cafe into its stores for lighting designer. LED technology
the past couple of years, and Myer continues to inspire new methods
has asked Mima Design to develop of illuminating spaces, making the
a cafe for its new store concept at light source virtually invisible in
Warringah Mall in Sydney's northern some instances. High CRI levels
beaches, such is the power of food to from cost-effective fittings means
attract and retain customers. Smaller most retailers and restaurateurs
retailers may also follow this trend can have extremely good-quality
with highly refined coffee and food lighting. Once you have some
concepts targeted at their specific great lighting that presents the
customer demographic. store or restaurant to the mall,
artful merchandising can capture
ACCOUNTABILITY attention.
Unhealthy and unethical brands and So to keep moving forward, how
that isnt on the shelf and have it do we know what next years colour
products will continue to struggle
delivered to you by the time you get and material trends will be? This
as competitors develop attractive
home, with no cash involved. In fact, is never an easy answer, especially
alternatives and educate consumers
you will probably go shopping and when related to retail environments
about what they are buying. It
leave with nothing, but have a great developed to appeal to specific
has been a long-run challenge for
meal and watch a movie without the customers, with a brand story often
fast-food chains to step up, but
hassle of carrying all those bags. defining many aspects of design. I
new entrants are forcing their hand
Shops are going to become believe this year will continue the
and our younger generations also
experiential showrooms where you exploration of textures with earthy
demand accountability. If you are
aiming to go mainstream, you have tones layered over the emerging
to think about how you look after Scandinavian design ethos that
Considered your customers health, how you developed last year. This has all
treat your staff, how your suppliers come out of the old industrial chic
a risky move manage their product and what good movement of the past four to five
your profits are doing for others. years, so unless your environment
really does have industrial
not long ago, Our client Guzman y Gomez has
been quite vocal about the need to heritage, you need to move on.
Think clean with simple grids and
social media improve fast-food ethical standards,
and it chose to lead by example. lines using natural materials and
with highlights of pastels, used in
managed Considered a risky move not
long ago, social media managed furniture for example. If you aren't
sure, pop on to Pinterest and you
correctly can correctly can actually stimulate
consumer loyalty and increase sales will soon see what is happening all
over the world, but interpreting it
actually stimu- to cover the higher costs to purchase
more ethical raw ingredients, all and picking the best bits for your
business is where designers earn
late consumer while building upon a point of
differentiation. We will see more their points. If you dont have a clue,
employ a qualified retail designer
loyalty and of this rebellious response with
smaller brands being more nimble and take a ride on the wild side to
see how good design can elevate
increase sales and standing proud for what they
believe in. your business this year.

EXPERT FORECAST: CBRE
Zelman Ainsworth
Head of Retail Brokerage
Leasing, Melbourne
CBRE
THINKING SMALL
If 2016 was the year a global level, with Collins Street
and Chadstone Shopping Centre
eryone. Not only do microstores pro-
mote a more rich and diverse retail
of the international continuing to produce unprecedent- offering, characterised by boutique
retailer, this will be the ed results in both rental levels and
retail sales. And the strong ongoing
and independent stores, the con-
cept also offers fiscal perks for the
year domestic players performance of Melbournes retail owners. These include lower capital
rise to the challenge,

sector is drawing the attraction of outlay costs, lower overheads and
retailers from all over the world as the chance to have multiple tenan-
with the emergence of they look to Australia for expansion. cies in different locations, opposed
Melbourne is also leading the to just one large store.
microstores helping trend toward microretailing with its Microstores are also helping sup-
level the playing field laneway culture providing a platform port traditional bricks-and-mortar
for home-grown retail, enabling retailing. Despite the growing avail-
between local and smaller, dynamic and ever-changing ability and convenience of online
offshore brands. tenancies across the city.
As noted in a recent CBRE report,
retailing, a CBRE study of the habits
and preferences of Australian mil-
tighter vacancies and higher rents lennials has shown that 70 per cent
The rise of the microstore is estab- on main strips in Melbournes CBD of people still make their non-food
lishing a new paradigm in which re- have begun to push some retailers purchases in a physical store.
tailers are embracing flexibility and into tiny spaces of about 60 sqm or What continues to draw people
diversity in a bid to secure a share of even less, with some retailers work- to bricks and mortar? The ability to
Australias increasingly competitive ing in spaces as small as 18 sqm. touch the product, try the product on
market. These microstores are becoming and have the product immediately.
Australian continued to cement an important and successful part of As a result, online retailers are also
its position on the global retail stage Melbournes retail landscape as the seeking modest spaces to display
last year with an influx of interna- citys population grows, consumer products, and are becoming more
tional names in the major shopping tastes change and the concept of strategic in their quest for brand ex-
capitals. destination retailing grows. The posure through small showrooms
It was a year defined by new microstores provide the opportunity that offer an enhanced focus on store
entrants, with about 60 offshore re- for a variety of retail types to have a design and customer experience.
tailers expanding or opening across CBD presence, driving a more diver- An example of this is the expan-
the nation. From a global perspec- sified retail mix. sion of online menswear boutique
tive, there is still huge potential in The microstore concept is also The Practical Man into bricks and
Australia for foreign brands, with being adopted in some parts of the mortar. Originally exclusively on-
our market low compared with inter- Sydney CBD. A prime example is line, the brand has leased a 30 sqm
national saturation rates. Temperance Lane, with the addition ground-floor store in Scott Alley in
However, this equilibrium is of the small bar Grasshopper and the Melbourne CBD. The alley, run-
starting to shift, with the microstore boutique retailer Sneakerboy provid- ning off Flinders Lane, has quickly
phenomenon emerging in major cit- ing some welcome activation in this established itself as a microstore hub,
ies, helping support the more niche, tucked-away precinct. with some retail leases for areas of
independent and ultimately local This trend is good news for ev- only 18 sqm.
pockets of the retail market.
Offshore retail giants such as
H&M and Uniqlo are now synony-
mous with main shopping strips in
cities like Melbourne and Sydney,
Microstores provide the opportu-
with significant deals being signed
last year.
nity for a variety of retail types to
Melbourne is widely regarded as
both the fashion capital of Australia
have a CBD presence, driving a
and a notable retail destination at
more diversified retail mix.
EXPERT FORECAST: NETO
Ryan Murtagh
CEO
Neto
KEEPING IT ALL
IN THE FAMILY
To succeed this year, offer better value for money than their
foreign competitors.
websites more appealing.
retailers will need to FURTHER INCENTIVE

embrace strategies that NOT SEPARATE The arrival of more international
To meet this challenge, Australian and retailers and new marketplaces is
recognise the value of New Zealand retailers need to stop only further incentive for Australian
all customer contact as focussing on sales channels as separate and New Zealand retailers to include
businesses with separate strategies. indirect selling methods as part of their
part of a continuous They need to create a cohesive user sales strategy. While eBay started out as
shopping flow, be it in- experience and business-management
strategy that all channels support. With
a platform for small consumer-to-con-
sumer auctions, many high-profile
store, online or mobile. a single view of inventory across these brands now list their complete inven-
channels, retailers will be able to opti- tory as Buy Now stock in order to
As we head into 2017, Australian mise their supply chain by minimising compete directly with smaller-scale
and New Zew Zealand retailers are freight costs. resellers. The benefits of listing stock on
starting to truly understand the im- Retailers will need to encourage sites like eBay and Etsy are evident, but
portance of shifting to omnichannel online shoppers to buy now with inventory and delivery management
retail strategies. same-day delivery or click-and-collect can become a nightmare for retailers
Retailers testing key elements of services that foreign retailers cannot who do not have a single view across all
omnichannel thinking are experiencing compete with. And they need to offer channels. Companies like Neto can pro-
the benefits of giving consumers the free shipping and free returns, factors vide that view with an all-in-one tool
information they need to make smarter the KPMG Omnichannel Retail Survey that lets users integrate seamlessly with
buying decisions in a consistent brand 2016 says have been driving extra on- each marketplace that presents a new
environment. The divide between online and in-store buying. opportunity to connect with customers.
line and in-store shopping is diminish- A key part of an effective omnichan- So what new technology will we
ing as retailers recognise that in-store nel strategy is rethinking the bricks- see in Australian and New Zealand
service experiences affect online sales, and-mortar outlet. Its not just a point retail this year? We expect to see a
and customers needs for immediate of sale any more it is anything you significant improvement in mobile apps
delivery and service are driving them want it to be. It can be a service base. for purchasing. The State of Retailing
back to the store. It can be a user experience lounge. It Online 2015 Forrester Report showed
But the No. 1 threat facing Austra- can be a fulfillment centre. It can be a that retailers see 30 per cent of their ses-
lian and New Zealand retailers this pop-up shop that spends a month in sions coming from mobile phones, and
year is the same threat as every year: each city around the country. It can be Goldman Sachs predicted that mobile
failure to understand their customers. a boutique mart. There is no script to commerce will account for almost half
Modern consumers are informa- follow an outlet does not even need of all eCommerce by next year. New
tion-hungry, using multiple devices to be in a shopping mall. apps will make it easier than ever for
on-the-go to shop wherever the buying We also expect retailers to revamp consumers to find the information they
is best. And, according to the Omni- their websites, giving customers a bet- need and buy the things they want.
channel Shopper 2016 (John Gaffney, ter experience and building brand trust. We think the best way for online
MasterCard), they are loyal, which In the PwC Total Retail 2016 Survey, 37 retailers to lift their game this year is to
means they are likely to stick with a per cent of respondents claimed their embrace strategies that recognise the
good retailer once theyve found one. buying behaviour was influenced by value of all customer contact in-
The PwC Total Retail 2016 Survey reviews, and 25 per cent had used a store, online or mobile as part of a
says that 62 per cent of Australian and mobile device to check reviews while in continuous shopping flow. This starts
New Zealand shoppers would be likely the store. So there is value for retailers with taking a more rounded approach
to buy from an overseas retailer if the in giving potential customers access to sales and marketing that does not
prices were better, and 34 per cent had to reviews in all the same places they depend solely on driving traffic to
used their mobile phones in-store to can buy. Customers also want to know corporate sales websites, but instead
compare prices. To thrive in this global whether the item theyre after is avail- provides a consistent brand experience
market, local retailers need to keep their able online or instore, so the integration across all channels. It is time to go
customers engaged and informed, and of live inventory levels will make brand omnichannel.

Experiences
Worth
Remembering
ICC Sydney
29-31 March 2017
Register Today!
Day 1 29th March 2017: FREE for retailers Second r
ou
ticket rele nd
The Customer Journey a
with first se
Attraction, Engagement & Loyalty day
Perfect for marketing, sales & customer management
FREE
for retaile
rs
First Half 09:00 - 12:30 Second Half 13:00 - 17:00
The Customer Landscape The Honeymoon period | Keep the spark alive
A good customer experience means you need to Attracting new customers is only one step of the journey. Its time to
understand the customer better than they know engage, convert and keep customers loyal all whilst juggling the
themselves, en masse. How do you now go most chaotic retail environment in human history. What do you do to
beyond exceeding expectations? keep the spark alive, and keep customers loyal... or is loyalty dead?
Day 2 30th March 2017

Retail Leadership, Management and Expansion
Culture, Crisis Management & Business Growth
Perfect for senior marketing retail executives, leaders and owners.

Retail Management 3.0 Managing Crisis | The Next Retail Frontier
Dynamic, agile businesses are leading the new wave of disruption. Your main competitor has just collapsed, a seemingly
You need to adapt new models for innovative retail management. steadfast retail operation, are you next? Print is dead,
How does culture support retail leadership, and how do you manage services and industries are becoming automated, how
the mellenial generation? How are top retailers empowering floor will you adapt to industry crisis? What are the economic
staff? With the offshoring and automation revolution continuing, how levers that impact your customers? Whats the next
are you managing expectations, and futureproofing your staff? frontier for Australian expansion internally and abroad?
Day 3 31st March 2017

Retail 2027
Disruption, Opportunity and Adaptation
Understand where the retail industry is headed and plan and execute real strategies.
Future Setting | Disruption Practical Next Steps | The
Future is Here (Its Just Not
Our intuition about the future is linear. But the reality of information Distributed Yet)
technology is exponential, and that makes a profound difference. If I take
30 steps linearly, I get to 30. If I take 30 steps exponentially, I get to a How do you tackle the future? What
billion. Ray Kurzweil do you need to do in the present
The amount of change in the last ten years is equivalent to an entire to be ready? Weve been given the
generation of change for someone born in the 1900s. We cannot use warning signs of change and impact
the last ten years of change as a precedent for the next ten, we must now you need to act.
think far more imaginatively. How well are you prepared?
For the full agenda please visit insideretail.live
Chadatip Chutrakul Jim Fielding Jon Bird Steve Maraboli

CEO, Siam Piwat Head of Retail, Managing Director, Author and
Featured Co, Thailand DreamWorks (USA) Labstore Global Behavioral Scientist
Speakers
Russel Howcroft Peter Wilkinson Stefaan Le Clair Launa Inman

Executive General Chairman, Berenike Global Non-Executive Director,
Manager, Network Ten Forever New Fashion Management Commonwealth Bank
www.azurium.com.au
www.insideretail.com.au
www.azurium.com.au
www.insideretail.com.au

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AUSTRALIANRETAIl

www.insideretail.com.au AUSTRALIAN RETAIL OUTLOOK 2017 | 1

Speak with one of our

Enhance. Transform. Grow.

4| Welcome EXPERT FORECASTS

22 | Terry White Group:

34 | Disrupt Sports: Doing it 68 | Mima Design: Keeping

AZURIUM 72 | CBRE: Thinking small

38 | 2016 Scorecard: 73 | Neto: Keeping it all in

42 | Trending in 2017: Food

www.insideretail.com.au AUSTRALIAN RETAIL OUTLOOK 2017 | 3

RETAIL Octomedia, publisher of Inside Retail and Azurium.

Ltd. We recommend obtaining professional advice from an James Stewart

content included in this publication. No part of this publication

may be reproduced, stored in a retrieval system, or transmitted

in any form, as per the Australian Copyright Act 1968.

4 | AUSTRALIAN RETAIL OUTLOOK 2017 www.insideretail.com.au

www.insideretail.com.au AUSTRALIAN RETAIL OUTLOOK 2017 | 5

THE STATE OF PLAY

6 | AUSTRALIAN RETAIL OUTLOOK 2017 www.insideretail.com.au

www.insideretail.com.au AUSTRALIAN RETAIL OUTLOOK 2017 | 7

tial for major market disruptions is

strategies and to offer something different that will

taking action now." Zelman Ainsworth, head of retail

8 | AUSTRALIAN RETAIL OUTLOOK 2017 www.insideretail.com.au

www.insideretail.com.au AUSTRALIAN RETAIL OUTLOOK 2017 | 9

1 0 | AUSTRALIAN RETAIL OUTLOOK 2017 www.insideretail.com.au

www.insideretail.com.au AUSTRALIAN RETAIL OUTLOOK 2017 | 1 1

The Whos who

2016-2017 EDITION Published by

BEST I HAVE EXPERIENCED HOW WOULD YOU

Fewer respondents to the survey

challenging than they did last

per cent. Yet only 28.9 per cent saw

worst they have experienced 8.1 per

Respondents to this question only includes retailers

www.insideretail.com.au AUSTRALIAN RETAIL OUTLOOK 2017 | 1 3

improve a little (45.7 per cent). IMPROVE

Respondents to this question only includes retailers

1 4 | AUSTRALIAN RETAIL OUTLOOK 2017 www.insideretail.com.au

Like last year, the top priority of respon- 30.5 %

1.1% Pure-play retailer

42.5% Add more stores 1.9 %

9.2% Reduce store numbers 0.0 %

www.insideretail.com.au AUSTRALIAN RETAIL OUTLOOK 2017 | 1 5

1 6 | AUSTRALIAN RETAIL OUTLOOK 2017 www.insideretail.com.au

DID YOU FIND THAT YOU

TOP COMMENTS INCLUDED:

There is too much floor space.

www.insideretail.com.au AUSTRALIAN RETAIL OUTLOOK 2017 | 17

"If a retailer is seeing decking online

Almost half of the retailers surveyed, our margins"

www.insideretail.com.au AUSTRALIAN RETAIL OUTLOOK 2017 | 1 9

Australias top brands:

ALDI RETAIL BRAND FOR 2016?

COTTON ON/JB HI-FI/MYER

WOOLWORTHS place last year to scoop our

Q.15 70.1% FACEBOOK

WHICH ARE THE MOST EFFECTIVE

2 0 | AUSTRALIAN RETAIL OUTLOOK 2017 www.insideretail.com.au

www.insideretail.com.au AUSTRALIAN RETAIL OUTLOOK 2017 | 2 1

JUST WHAT THE

2 2 | AUSTRALIAN RETAIL OUTLOOK 2017 www.insideretail.com.au

HOW DO YOU EXPECT TO