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PART 2: NAVIGATING THE CHALLENGES FACING AUSTRALIA’S RETAIL SECTOR

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  • Australia
  • Economy

The A ‘n’ Z of Economics - Episode 3 Part 2 - “Navigating the Challenges Facing Australia's Retail Sector”  |   February, 2018 

Listen to Part 1 here

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“I think it's a really interesting time for retail in Australia. It's a world of disruption. It's a world of challenge but it is also a world of opportunity.”
Jo Masters, Senior Economist, ANZ

Welcome to part two of our A’n’Z of Economics podcast on the challenges facing the retail sector in Australia.  

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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“I think we need to understand that retailing has changed per se in Australia...”
Russell Zimmerman, Executive Director for the Australian Retailers’ Association 

 

KEY HIGHLIGHTS:

Russell Zimmerman: I think we need to understand that retailing has changed per se in Australia...

Russell Zimmerman: How could any retailer justify paying a year on year increase of CPI plus two or two and a half percent… when they're in a market that's virtually going backwards. You can't do it. Unfortunately I think the property people have really got to wake up to this and I think what you're going to see as the Internet becomes stronger and as we see store sizes change. 

Russell Zimmerman: If you can have a tablet in your store somebody comes in to try the jacket on and there might be five different colours in the jacket in five different sizes and the customer tries the black one. But they want the orange one and then they can go back to their work place and have it delivered within a couple of hours. Why do you need 120 or 130 square metre stores? So I think we're going to see some really big structural changes and I don't think that the landlords have really come to grips with it 

Jo Masters: You know technology and AI is obviously creating a lot of job insecurity actually across a range of industries and retail obviously right at the very forefront of that and as you said quite a significant employer in Australia… 

Jo Masters: One of the comments that I get often from our clients is "ah you know Jo people are buying less stuff and more experiences, and we actually do a little bit of work around that because it's a comment that we hear really consistently and actually when you drill down to the ABS data it's actually not true.

Jo Masters: It’s just not true that we're no longer buying things, we're only buying experiences. We're actually buying things, we're just paying less for them. So that's very challenging as a retailer, but presumably quite good for households particularly in a low wage high debt world. 

Richard Li: What we did is we categorised different products with different kind of features. Some is that going to the volume, some is going to price which means better margin. So we find that the consumer's behavior is also different. Some are in some cities or areas that people like shopping in the evening. So that's the reason why we encourage and sometimes even talk to the landlord to see if we can open for a longer time. They're coming to the shops, they are just the shopping for a couple of pieces and are there maybe for entertainment or to relax after work. And some areas are different. So we need to look into the details and do data analysis to use different strategies for different shops and for different residents around the area. But generally speaking yes you have use the kind of the strategy of combinations. 

Russell Zimmerman: But I think the types of products were buying is also changing. So let me give you a couple of examples. People now will have more than one TV in their home, generally. Most people will have an iPad or a number of mobiles. I think the statistics are that most average households have six connected devices. There's also a little bit of a shift in the fact that if you've got the TV set then you want the Netflix or whatever it may be. So there's a cost being involved in that or it's the Foxtel or whatever the latest is and then obviously you've got internet cost and you've got mobile phone costs although I agree with you that we are buying still quite a lot of hard products. 

Jo Masters: I think it's a really interesting time for retail in Australia. It's a world of disruption. It's a world of challenge but it is also a world of opportunity. 

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