We have the wrong attitude to retail ambition in this country
A recent article in the Australian Financial Review took a shot at retail brand Kikki.K’s “ambitious international expansion” and the early establishment costs associated with the overseas expansion. It pointedly commented on the obvious by stating “the Melbourne based retailer lost $8.4 million in 2017, after losing $5.1 million in 2016, as start-up costs overseas offset earnings growth in Australia”.
While neither the AFR or the journalist in question are Robinson Crusoe in this narrative, the investment community and media in general in Australia do little to support and much to destroy retail ambition in this country. Not only is this in stark contrast to the attitudes on other international markets, but also to the overseas approach to start-ups and notably the technology sector.
Amazon – as a glaring example – has only ever made paper profit (arguably much of it from not paying allegedly appropriate international taxes and accounting treatments) and never declared a dividend payment despite being a constant focus of media attention.
Australian retail brands can no longer be just Australian operators. Increasingly the shopping ground of consumers is global and competitors attack from every angle. Often overseas operators are treated with an exotic air that gives them an unwarranted short to medium term advantage. From both an Australian GDP and foreign exchange perspective, not to mention a healthy retail marketplace perspective, we need strong Australian brands to balance out the options for all stakeholders in the industry.
That will only come with broad backing that supports Australian retail brands to take the necessary risks to successfully challenge on the global retail scene. One of those risks is calculated loss in the establishment phase of global expansion. American investors have a tolerance of over ten years of such losses. Amazon – once again – is a case in point.
Rather than constantly taking the kind of negative approach that stifles the ambition of retail brands, we should be encouraging them in the same way that other international businesses (outside Australia) are encouraged by their shareholders, financiers and domestic and international media to fly the flag, grow and prosper outside their birthplaces.
Investment involves risk. I would argue that the international expansion of some Australian retail brands is far less risky than the long-term bet on international technology stocks and some of the ‘emerging market’ plays currently being entertained by Australian investors.
We have much to be proud of in this country. Unfortunately not much of that applies to the sustained encouragement and investment in Australian business people, businesses and brands to take on the world and win.
Unless we want the only brands on offer in this country – let alone around the world – to be foreign brands to the exclusion of all else, that attitude has to change rapidly and resolutely!
Peter James Ryan is a retail expert and head of Red Communication. 02 9481 7215 or [email protected].