Why underinvestment is hurting Australian retail

business-strategy5Investment in space stimulates society, it stimulates it economically, it stimulates it intellectually, and it gives us all passion.

Bill Nye

Walk into any regional shopping centre or high street and you will see that some of Australian mid-market speciality retail is in a malaise. These retailers are faced by increased competition, a technology-using customer who is more promiscuous than ever, where product substitutes and copies abound and where the ethos of speed to market are no longer differentiators per se, but simply entry tickets to participate. These retailers are starting to fall behind as the impact of all these changes and their own investment lag starts to bite in.

The key to competing is inherently – and almost counterintuitively to many retailers – investment, at a time when there are less guarantees than ever before, where speed of obsoleteness in technology is quickening and there is investment in customer experience rapidly across channels and brand touchpoints. Investment in people with entirely different skills sets and perspectives to the person we hired yesterday.

Change – and the investment in change to be precise – is the very basis of being able to compete in this new retail landscape. For many years and for many valid reasons, many of our retailers have focused on simple trading economics – expressed in the P&L of their organisations. Investment in scale tended to be more about standardisation and efficiencies of scale and today it’s about building customer inspired design. Very different ethos and all inspired by change.

Organic growth of physical shops dominated old approaches – that is that ‘build as many physical shops as possible’ is now superseded  by the building of a retail “ecosystem’.

The retailer’s customer “tribe” investment matters far more than ever before.

Capital investment in key areas such as fit outs and business information systems have been somewhat overlooked until absolutely necessary – and our capitalisation per square metre has been traditionally below many of our international counterparts.

While we have been an island in global retail, our focus on trading profits has been well understood and now we see great change. Accordingly many of our leading mid-market retailers of the last 10 years or so are starting to feel the effects of underinvestment in these key areas. Take any of our country’s known speciality retailers operating nationally, and I suspect that some of their fit outs won’t have made discernible differences in shops designs, layout, look and feel of the shop they opened in 2007 (or in some cases 1997).

We certainly hear and talk about globalisation and the growth of online as driving change. I would agree although would add our relative under capitalisation and preparedness for change has had the most significant impact. It is the law of diminishing returns that occurs in all underinvestment that is affecting some of our retailers more so than any other factor.

Walk past our world class A+ centres into the broader centres and high streets, to see this malaise in full display.

What are the three pillars of immediate investment that retailers need to embark upon, if not already commenced?

Today’s retail is about differentiation and data – both require investment into brand and brand promise, and data to drive all aspects of customer personalisation underpinning the retail ecosystem.

I should probably add discovery here. Investing in relevant customer and market insights is increasingly critical for defining your place in the sun and who your “customer tribe” actually are.

We need to think coverage and community, rather than the traditional investment of out flanking competitors by building bigger and  or more. These large legacy retailers are being replaced by cathedral like customer showroom retailing, integrated with seamless and fast feeders such as social communities and online/ digital channels.

Quality is fast replacing quantity.

Lastly, and this never really changes, it’s about people who serve the internal customer and those who serve the external customer. There is no great secret here, other than the consistent application of great rather than good retail is even more challenging. Once again, we see through all our customer insights, that the businesses with a true retail ecosystem approach, score a higher rate of customer satisfaction. And that great retailers never lose track of being brilliant in all aspects of the retail basics. And these basics aren’t regarded as sexy, yet are absolutely crucial and that will never change.

Why do our A+ centres typically trade at 50 per cent higher sales per square metre than their shops in the broader markets? How do retailers and asset managers keep an equal focus on the investment step change that todays and tomorrow’s retail experience demands, while trading is more competitive than ever before?

Think investment or risk customer divestment.

Brian Walker is founder and CEO of Retail Doctor Group and can be contacted on (02) 9460 2882 or [email protected]

Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week.

Comments

3 comments

  1. Dave posted on April 28, 2017

    These so say 'shortcomings' would then have to be indicative of the support industry within the retail industry - along with 'quantity and quality'? reply

  2. Evan posted on April 29, 2017

    Business must be very quiet for the retail Doctor at the moment as all he seems to want to do is trash struggling retailers, though i hardly think this is the way to gain future business. reply

    • Brian Walker posted on July 10, 2017

      Hi Evan, Business is great thanks ,helping retailers achieve greater results is always worthwhile. Oh and its capital R for Retail Doctor Group, Best fit retail Brian reply

Comment Manually

Loading...

Inside Retail Polls

The Amazon effect...
What impact will the e-commerce giant have on Aussie retail?

Inside Retail Directory

Twitter

How to build a global brand like Santa Claus. https://t.co/Bne43Gw2ES

3 days ago

Swedish fashion retailer headlines centre's final stage of $350m redevelopment. https://t.co/cOQRDg4luJ

3 days ago

Surging Chinese demand for Australian-made products fuels company's growth plans. https://t.co/IlE7VaFERs

3 days ago
x

SUBSCRIBE
FREE NEWS BRIEFS Get breaking news delivered