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PART 1: NAVIGATING THE CHALLENGES FACING AUSTRALIA’S RETAIL SECTOR

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  • Australia
  • Economy

The A ‘n’ Z of Economics - Episode 3 Part 1 - “Navigating the Challenges Facing Australia's Retail Sector”  |   February, 2018 

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“It's not four seasons, it's only two seasons. The slack season and peak season and we don't want slack season we want peak season, peak season, peak season.”
Richard Li, Chief Operation Manager, Miniso

Welcome to the third edition of A’n’Z of Economics, where we look to bring our research to life via podcast.

This podcast is the first in a two part series piece looking at the challenges facing Australia’s retail sector, where the collision of technology, globalisation and stretched household budgets is rapidly changing the landscape. ANZ’s Senior Economist Jo Masters is joined by Russell Zimmerman, the Executive Director for the Australian Retailers’ Association and Richard Li, the Chief Operation Manager for Miniso, a Tokyo based retailer that is a client of ANZ and has recently opened stores in Australia. 

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“We’re seeing more and more retailers creating a demand by changing their product and instilling some newness to their product. So the consumers are all looking, coming and buying all the time. That's a real art, and yes we've had a lot to learn from our overseas counterparts.”
Russell Zimmerman, Executive Director for the Australian Retailers’ Association 

 

KEY HIGHLIGHTS:

Jo Masters: The impact of technology, of globalisation and of competition are changing the landscape in many parts of our economy and retail is no exception. In fact the impact has shifted the dial so much on the retail sector, I wonder if it may be a microcosm for how these forces will play out for the broader economy.

Russell Zimmerman: Seeing retailers actually going out of business is not something new. But I think it's also rather interesting that when you look at why retailers from overseas are looking at Australia we've really got very low unemployment growth. We've got a fairly stable government although perhaps many people would not necessarily agree with that. We actually do have a fairly stable government and the opportunities in retail are humungous.

Jo Masters: Margins are something that we talk to our clients about all the time and whether you're looking at supermarkets, which is somewhere where we've had a lot of that foreign entrants in competition through to clothing. It seems very much a margin game and I guess for a long time Australia's had margins well above global norms and that's been a key sort of a factor that's brought these foreign competitors in and I guess now we're battling with margin compression and the need to drive sort of cost savings.

Richard Li: There is no landmark website or something like a Amazon or in China JD or Tmall like AliBaba. Everyone knows what they like, everyone who has their eye on shopping something go to there. In Australia it's hard to find this kind of marketplace. So this is first thing stopped us because without this kind of well-known marketplace you won't have enough traffic.

Russell Zimmerman:  What really made the change in Australian retailers was when Zara came they were making virtually a change to their stores every four to six weeks and that meant actually changing the display, changing that product. The other thing that they have also been very clever at doing is almost creating a shortage of the market.

Russell Zimmerman:  We’re seeing more and more retailers creating a demand by changing their product and instilling some newness to their product. So the consumers are all looking, coming and buying all the time. That's a real art, and yes we've had a lot to learn from our overseas counterparts.

Richard Li: We also talked about when coming to us through the four seasons and different celebrations like holidays across Australia… But in the end of day we decided that it's not four seasons, it's only two seasons. The slack season and peak season and we don't want slack season we want peak season, peak season, peak season.

Jo Masters: I imagine there's a bit of a, sort of, virtuous cycle going on in the sense because the more that that retailers respond to consumer demands and put new products on all the time presumably consumer purchasing behaviour is changing as well. So, you know we're changing our own clothes more frequently, we're buying slightly lower quality because we're not expecting to wear it for a few years. You know, we want to be updated with the new trends and the like. So I think that's really interesting as well.

Russell Zimmerman:  I think there's a huge separation happening and I think what you're seeing is product as you say less expensive but then you've got the other end where you've got the you know the Hermes and the really, really expensive products and they're still staying at a completely different market, but that middle market is perhaps changing. 

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Part 2: Navigating the Challenges Facing Australia’s Retail Sector

Jo Masters, our Senior Economist, continues the conversation with Russell Zimmerman, the Executive Director for the Australian Retailers’ Association and Richard Li, the Chief Operation Manager for Miniso, a Tokyo based retailer that is a client of ANZ and has recently opened stores in Australia. Among other topics, we discuss how retailers can tackle issues such as limited pricing power, price deflation and changing consumption patterns.

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