One of Australia’s leading retailers, Solomon Lew, joined the conga line of business whiners this week with complaints that the recently departed Labor government had been bad for his industry.
Yesterday I posted an interview with Susan Olivier of Dassault Systemes about how the retail and fashion industries – Solomon Lew’s businesses – are being radically changed by technology and changing consumer behaviour.
Lew, along with most Australian retailers, has completely missed these changes and instead remained focused on their 1980s model of screwing down suppliers while charging customers high prices for poor goods and substandard service.
Now that 1980s business model has come to an end Lew and his other retailers like David Jones’ Paul Zahra, Myer’s Bernie Brookes and, most vocal of all, Gerry Harvey bleat about government taxes, high labour rates and almost anything else apart from the obvious factors they can fix themselves.
Bigger storms ahead
Along with the two factors Olivier identified, there’s two much bigger factors threatening Australian retail – the tapping out of the credit boom and the aging population.
The aging population is simple, consumer tastes are changing as the population ages and the need for conspicuous consumption and the latest fashions tapers off as one gets older. The demographic boom of the late Twentieth Century is over.
More immediate though is the tapping out of the credit boom, since the Global Financial Crisis Australians have swung around to be net savers which immediately pulls a large chunk out of the discretionary consumer spending pie which had kept the retail industry ticking along through the 1980s and 90s.
Another aspect is the end of the home ATM – while Australian Exceptionalists deny this happened down under, it certainly did as banks sought to ‘liberate’ the equity householder had locked in their properties. This too fuelled the credit boom.
Perversely we may be seeing the home ATM receiving a reprieve as Australian property prices accelerate from their already bubble-like levels, however that short term sugar hit for retailers and the economy is only creating bigger problems for the country’s merchants.
Funding an uncompetitive economy
Contrary to the bleating of Australian retailers, the biggest problem facing the sector is the nation’s high rents and property prices.
For consumers, those huge rents and huge mortgages take money that could otherwise be buying more consumer goods, at the same time retailers are being slugged by some of the highest rents in the world, pushing up their costs and reducing competitiveness.
That lack of competitiveness is affecting all parts of the Australian economy, particularly tourism, and the retail industry isn’t immune to those forces.
Anyone who visits an Australian eating establishment will have experienced this, personally I had another experience last night at a pub that charged $4 (3.70 US) for a soda water.
This wasn’t a trendy downtown bar but a pub in a lower middle class suburb with two overworked and under trained young bar staff. During the three hours there, our table of six was cleared once.
Swiss prices coupled with service that would be barely acceptable in a 1970s outback Queensland roadhouse is not the formula for a successful economy.
The business challenge
Which brings us back to Solomon Lew’s whinge about the government, Sol handily overlooks the previous government’s stimulus packages which kept the nation out of recession and put money straight into his and other retailers’ pockets.
There’s a lesson there for the Australian Labor Party that the tweedle-dum, tweedle-dumber strategy of offering near identical corporate and middle class welfare policies to the Liberal Party is not going to win you friends with the nation’s business sector and its entitled leaders.
For the incoming Liberal government, it is faced with the challenge of making Australia a competitive, high-cost economy along the lines of Japan, Switzerland or Germany.
It’s hard to be optimistic about the Abbott government meeting this challenge given the bulk of its ministers are holdovers from the previous Howard Liberal government that was largely responsible for Australia flunking the transition to being a high cost economy along with institutionalising a middle class welfare culture into Australian society.
Even if Abbott does genuinely attempt to address Australia’s lack of competitiveness, he can be sure he will get absolutely no help from the whingeing captains of the nation’s industries, as Solomon Lew has shown.
While Solomon Lew and the Australian managerial class struggle with their perfect storms of economic, demographic and technological change, the nation also faces those headwinds.
Hopefully for Australia there are capable leaders who can navigate those storm waiting to take the helm.
How good are Australians with innovations and technologies? Most Australian top brands are in foreigner’s hands + also lands, properties, etc. DJ, Myer faces competition from Zara and company. Coles & Woolworths may have duopoly in supermarket arena but faces competition from Aldi, Costco and company. Same goes for other Australian retail players and other Australian sectors – competition due to low technical and innovation skills. Disruptive innovation is here to stay & has been going on for centuries. Economic impact is worth $14 trillion to $33 trillion per year by 2025 due to those innovations (given by McKinsey). Already, Australia faces challenges when it comes to Marketing Technology as most developed nations & some developing & emerging countries have already gone for apps marketing & have hit mobile payment space sometime back. Australia hardly has coopetition/coopertition/cooptition like Netflix & Amazon, Apple & Samsung, Tesla & Toyota, Tesla & BMW, etc – cooperating rivals yet innovating (which are there within Asia, Europe, other continents too). Same goes with blue ocean strategies-Australia has hardly any unlike from Tata, Embraer, Tesla, Good Baby, etc – China, India, Brazil, US, etc (just few from Australia like Casella Wines which can be seen from Blue Ocean Strategy Australia site, not many).P&G, IBM, etc were 1st ones who shifted it to innovation 30 years ago as relationship alone long gone – doesn’t work. World’s top firms and others from other countries- all innovative ones. Globalisation over as next stage of glocalisation/globality/semi-globalisation where any1 and every1 competes from anywhere and everywhere (Globality video that shows blue ocean strategies under Youtube – book written by Boston Consultancy Group and video used by world’s best business school-Wharton) So, if just have relationships and not much innovation, will face challenges like Australia is facing with most retailers and manufacturers.
Australian perspective (no offence and it’s just reality):
Australian marketers are waking up to the fact that Marketing Technology is more than creativity and involves analytics, database, etc (big data is all under this area). This is an area where retailers from Australia are getting knocked by foreign competition (Zara vs DJ + Myers). Marketing Technology (http://chiefmartec.com/2012/09/marketing-technology-landscape-supergraphic-2012/) is part of Corporate Marketing though need to understand technology including Analytics as Creativity is only a tiny part of it. Marketing Technology is a new discipline coming up where digital marketing is 1 part of it as it involves bits of direct marketing too. Marketing Technology is closely related to a new discipline that has come up in the last 15 years or so, Marketing Operations where MOCCA is its largest body):
i) Brand valuation at university via Marketing Departments is usually shown via BrandZ of WPP though there are Interbrand of Omnicom as well as brandirectory.com that is part of Brand Finance. The top brand from Australia would be Woolworths ranked in the 100s way behind the ones from US, UK, Canada, India, China, etc. Woolworths and Coles duopoly in the supermarket sector though IGA, Aldi and Costco are 3 other players there. Zara as well as others are knocking DJ and Myer (http://www.fool.com.au/2013/08/14/clothing-retailers-be-afraid-very-afraid/). All of them have failed with innovation and technology which can be seen under http://www.afr.com/p/australian_retailers_stumped_by_meuCL7di6LxiZG4VotdITL as well as https://theconversation.com/factcheck-is-our-grocery-market-one-of-the-most-concentrated-in-the-world-16520
ii) Half of Aussie organisations fail big data quest -http://www.cmo.com.au/article/472323/half_aussie_organisations_fail_big_data_quest/
or http://www.fifthquadrant.com.au/fifthquadrant/media/ARN_CIO_ComputerWorld_BigData.pdf
iii) Businesses are loaded with customer information but unable to act upon it -http://www.cmo.com.au/article/512359/businesses_loaded_customer_information_unable_act_upon_it/
iv) Aussie businesses are not data-driven: PwC outlook -http://www.cmo.com.au/article/466296/aussie_businesses_data-driven_pwc_outlook/
v) Australian SMEs are failing at social media, says Telstra -http://www.businessreviewaustralia.com/marketing/social-media/australian-smes-are-failing-at-social-media-says-telstra (article just 3 months old)
vi) Australian businesses should blog and why? Facebook, Twitter, LinkedIN, blogging and Youtube are the five most commonly used social media platforms by marketers while Tumblr, WordPress and Blogger are few of the platforms provided for blogging by social media. On Tumblr and WordPress platforms itself, there were more than 150 million blogs read by people of different age groups. Also out of the 3000 marketers surveyed for the purpose of understanding how they had used social media for the growth and promotion of their businesses, 62% of them had said that they had wanted to master blogging the most.
US, Britain, Russia, Brazil, and France were few of the world leaders within social media while for blogging, few of the world leaders were US, UK, Japan, Brazil and Canada. Australian businesses, on the other hand, had been failing to keep up with social media. 50% of the top 100 Australian companies had no social media presence while many of the others preferred that their customers didn’t comment back. Also, amongst the small and medium businesses that represent 99.7% of the actively trading businesses within Australia, only 27% of the small businesses and 34% of the medium businesses had a social media presence where only 12% had been blogging
vii) Are organisations failing in their use of social media and apps as customer service channels? -http://servicedelivery.fahcsia.gov.au/2012/11/19/are-organisations-failing-in-their-use-of-social-media-and-apps-as-customer-service-channels/ (few months ago)
viii) If Australia Could Get Over Its ‘Fear of Failure’ Tech Startup Firms Could Contribute $109B to Economy by 2033, Create 540,000 New Jobs – Google Study -http://au.ibtimes.com/articles/460641/20130424/australia-over-fear-failure-tech-start-up.htm#.Ud7RSj6yghQ (3 months ago)
ix) Australia is no innovation leader: GE -http://www.arnnet.com.au/article/412937/australia_no_innovation_leader_ge/ (Jan 2012)
x) http://www.alexa.com/topsites/countries/AU – Top Sites in Australia (The first 10 are global US sites like Google Australia, Facebook, Google, Amazon, LinkedIN, etc). The 11th top one is news.com.au but which has a Global Rank of 548 -http://www.alexa.com/siteinfo/news.com.au#keywords . The 18th top one is Sydney Morning Herald but with a Global Rank of 1064. Google Australia is the top site with a Global Rank of 85.
The world’s top SEO firms are ranked underhttp://www.topseos.com/ and the main editions over there are from US, UK, Canada, India and Australia though other countries’ editions are also there. That same site has the rankings for content marketing, email marketing, social media marketing, etc (at bottom left hand side when scrolled right towards the end though few of those ranking categories are also given at the top right hand side of the site). Now, taking India because it was the only non-western main edition under topseos.com via http://www.alexa.com/topsites/countries/IN , its top site is Google India with a Global Rank of 11. The first 8 are global US sites including Google India though its 9th one is indiatimes.com with a Global Rank of 117. Its 23rd one is naukri.com with a Global Rank of 391.
Even via Social Media, Australia isn’t a leading country via brands, pages, etc. For Facebook, it’s USA, then India, Brazil, Indonesia and so on (even Canada, Philippines are shown though not Australia unless when click the button ‘load more countries) – http://www.socialbakers.com/facebook-statistics/ . For Twitter, it’s USA followed by Brazil, Japan, UK, Indonesia, India, Mexico, Canada etc and again Australia’s not there – http://www.mediabistro.com/alltwitter/twitter-top-countries_b26726. Google+ – Australia again not there where as Canada is (India is 2nd after USA) – http://www.website-monitoring.com/blog/2012/02/14/google-facts-and-figures-infographic/ (haven’t found for 2013 but there would hardly be any changes in that).
Look at http://w3techs.com/- FLASH loses (Apple was the major player that had started this where it was knocked out. Adobe doesn’t support Flash on some of the devices). HMTL5 is the alternative. Apps works better on mobile devices such as smart phones and tablets due to its technology while for others, cookies works better via online world. Even if using online way of marketing, each device is different due to its shape, size, etc whether Macs, smart phones, notebooks, netbooks, tablets, etc (http://www.fourthsource.com/online-advertising/mobile-advertising-online-13026- why can’t you do mobile advertising like online?
xi) Aussie B2B companies fail the social media test, top performing industries include airline, telco, accounting, banking and motor vehicle via Lead -http://www.campaignbrief.com/2013/03/aussie-b2b-companies-fail-the.html (March 2013)
xii) State of Digital Marketing in Australia: coming of age or barely keeping up -http://www.marketingmag.com.au/interviews/state-of-digital-marketing-in-australia-coming-of-age-or-barely-keeping-up-37304/#.UeMQez6yghR
xiii) Are Australian marketers missing the multicultural opportunity? – http://www.bandt.com.au/events/failing-to-connect-are-australian-marketers-missin
xiv) Companies are failing the online test -http://www.businessspectator.com.au/article/2013/7/26/media-and-digital/companies-are-failing-online-test
xv) Aussie marketers fail at multi-screening -http://mumbrella.com.au/aussie-marketers-fail-at-multi-screening-144427
xvi) The key reasons CRM implementations fail -http://www.marketingmag.com.au/blogs/the-key-reasons-crm-implementations-fail-42297/#.Ugy342Syjvd
And these are apart from high prices and so on. For example, Australia’s 3rd largest export sector – tertiary education faces competition. It used to be cheaper than US and UK couple of years ago. Now, most expensive. For US and UK, need to do GRE/GMAT/SAT, etc but Australia, not needed for most universities. Also, out of 0.3% world population that Australia has, just 25 to 27% Australians have a uni qualification (no match for the rest of the world with uni qualifications including PhDs and professional certifications). The universities here survive due to foreigners again. Good universities here even though quality from US and UK universities are still superior.
I’ll keep my reply brief. Glad you mentioned the landlords who are the major problem for most Australian retail outlets.