ound in 2005, Aussie Farmers Direct has grown over the last decade to become an industry leader in online food shopping and a staunch supporter of Australian farmers. Refusing to be driven by profits, Aussie Farmers Direct proudly sources all-Aussie over 170 all-Australian products from local farmers and suppliers and delivers it direct to customers. It operates a network of around 140 franchisees, who deliver products to customers. Justin Grey: How does it feel to look back on what Aussie Farmers has accomplished since 2005? Keith Louie: It’s a fantastic business. It’s obviously a very competitive environment, and we’ve got really loyal customers. They appreciate what we stand for, which is purpose before profit, high quality local Australian produce, real convenience, and genuine value. It’s a great offer and still has potential going forward. We’re really passionate about supporting and sustaining local Australian farmers and suppliers, who perhaps cannot get a contract with the big supermarkets. And it’s a genuinely passionate business. I’ve spent a fair proportion of my life now in retail, and specifically in grocery retail. I’m going on 10 years now in online grocery retail, so that helps. JG: It’s an incredibly competitive market now, with Aldi taking market share, the major supermarkets pushing hard on price, and Metcash struggling to keep up… KL: It’s not easy; it’s enormously competitive. Clearly the major supermarkets are driving very, very, very hard on price. We would argue that value includes really high quality and convenience etcetera too. We are a high value business, but we’re not going to do dollar milk and 85-cent bread. We are always going to be fair towards our suppliers and farmers. Fair farm gate pricing is very important to us; we work with our farmers and suppliers and agree with what we believe are appropriate prices. We offer higher quality, local produce … and we offer fair farm gate prices. That’s our position. We’re passionate about Australian farmers and Australian suppliers. You walk into your average supermarket and you will see bread from Ireland and oranges from California and garlic from China and ham from Canada and seafood from southeast Asia. Many people recognise that in packaged groceries, most things are from overseas. But much of the fresh offer in supermarkets is from overseas as well, which we think is wrong. Local dairy farms and fresh suppliers are declining. We’re passionate about supporting that sector. We’re also passionate about growing the sector where we can as well. If we can grow industries and build local suppliers, then that’s fantastic. The stats off the top of my head are the average supermarket basket has travelled something like 70,000kms, which is just nuts. We’ve got fantastic quality produce over here, and we should be celebrating it when it’s in season. JG: Do you think there will be a time when the notion of “doing the right thing” will wane and price will be the only determining factor for customers? KL: I certainly hope not. Clearly there is a significant push at the moment from both major supermarkets on price, whether it’s “down down” or “cheap cheap”. But I think there are still a large number of customers in this country who do care, who do want to support local producers and local suppliers and do want to make ethical and informed purchasing decisions. You can see it with the recent commentary around product labelling. Consumers do not want to be misled, and arguably they have been misled. We are very pleased to see the improvements in labelling. We still don’t think they go far enough, but we’re pleased to see a stronger ‘Product of Australia’ labelling. It frankly wasn’t worth the paper it was written on when you could have an orange juice on the shelf that says “made in Australia”, when actually it’s 90 per cent imported concentrate. That is simply misleading. And it needs to change. JG: The ACCC recently raised concerns that some of the supermarkets are still operating under arrangements that are unfair to suppliers. What are your thoughts on the new grocery code? KL: I’m keen on any legislation that ensures farmers and local suppliers get a fair deal. That’s the ethos under which we operate. I must admit, when I watch a lot of marketing from both of the major grocery retailers that speaks very strongly to farmers and to some of the ethos that we’ve stood for for a long time, I do have a bit of a wry smile. We know how we operate with our farmers and our suppliers and we see some of the issues that have arisen with the major supermarkets and their dealings with farmers and suppliers. So there’s marketing, and there’s reality. JG: How is the franchising system working for Aussie Farmers? KL: We’ve got 250 or so franchised [delivery] rounds, and 140 or so franchisees; some own more than one round. There are clearly some significant advantages to having a franchised business. We believe it matches our brand ethos – we have a local franchisee who delivers the product fresh to your door, so we have that kind of local marketing capability, as well as a local deliver with a smile service. Clearly, all franchised businesses, almost by definition, have some strains in them, but that’s normal and I think that’s healthy. JG: There’s a legitimate concern that the franchising model, in a lot of cases, isn’t feasible in retail as the margins are too thin for both franchisor and franchisee to profit. Is franchising viable for retailers? KL: Fresh food retailing is challenging, yes. It’s clearly a tight margin game. But we’ve found that provided both parties are respectful of each other and we communicate strongly, it can work. I meet with all of our franchisees on a regular basis and we talk about what we’re doing and how we’re doing it, and we try to strike a balance between what’s right for the soverall company and what’s right for the franchisees. Yes, it’s challenging at times, but I think it works quite well actually. The thing about franchising is we’re all pulling in the same direction. We all want to grow sales and deliver fantastic customer service. That’s a good thing. JG: How long has the recently launched AisleOne app, which  recreates aspects of physical retailing in an e-commerce environment, been in the works for? KL: It’s a concept that I’ve wanted to do for a long time. I’ve been in online grocery retail for 10 years now, and one of my observations is that it’s not as easy as it should be for customers. Customers are very visual – if you actually watch customers in a supermarket, the way they shop is scanning left, scanning right, and using visual props to remind themselves of what they need and what they don’t need. What most traditional e-commerce enterprises do is require some kind of text first to locate products – either you need to read something to guess where a product is, or you need to type something into a search box. And intuitively people don’t think like that, and they don’t like having to think like that. So what we wanted to do was take the real-life supermarket experience and, as closely as we possibly could, present that in digital form. In essence, that’s what AisleOne is. The reason it’s called AisleOne is because everything is in one aisle. It leverages the best of technology and it’s very visual – it’s literally scroll left, scroll right, drag into basket. JG: Is there an effort with the app to break down some of those hesitations about buying fresh produce online, which for some is still a tough sell? KL: People want simplicity and ease. They simply want the visual props to be able to say, ‘I need that, I don’t need that’. Grocery shopping is more of a need than a want, so making it really easy and a little bit fun is the way to go. But really, the only way you can convince customers to buy fresh produce online is by delivering extraordinarily high quality, and delivering it conveniently, on time and in full. Because there are some people who are nervous about buying fresh produce online. So when we deliver an order to a customer, we want the customer to think, ‘Yes, that’s what I would’ve selected in the supermarket’. And if we can’t do that, we’re unlikely to retain customers. JG: What can you tell me about the plans to white label the AisleOne platform? Is there much scope for that moving forward in terms of revenue for Aussie Farmers? KL: Because we have one of the biggest chilled delivery networks going door to door, and e-commerce capability, we’ve found over the past year that some business are approaching us to leverage our network and our skills set to enable a direct channel to customer for their businesses. So we’ve signed up five or six customers now on that, and we’ve got quite a significant pipeline of customers looking to leverage our capabilities. So that’s our home delivery services business, within the group, and that’s a small but rapidly growing part of our business. And AisleOne is just one element of that. With one of those customers, Get Wines Direct, we have also built the AisleOne app for them, which will probably release before Christmas. We have had some interest in AisleOne as a standalone piece of software; at the moment we’re just assessing that to decide whether that’s something we pursue. Want more Inside Retail? Subscribe to Inside Retail Weekly now and get our premium print publication delivered to your door every week.