Wednesday, April 24, 2024

Tomorrow’s leaders tackle today’s problems

By ASMCA Joe Berry Award Chairman Keith Quigg.

There has been a great deal of discussion between retailers, suppliers and other providers in past months. The efforts by both major retailers in conjunction with key suppliers to rebuild their businesses into growing, sustainable, competitive companies are being watched with great interest. After all, the results that they achieve will have ramifications for everyone in the industry.

Among the discussions is the pressure that is building from discounters and the soon-to-be-ubiquitous online retailers that are steadily acquiring market share – share that can only come from one place!

Among these discussions, we are regularly hearing about perhaps five or six key issues, the ones for which no-one seems to have a clear answer. We are regularly seeing articles and publications on the same key issues, from all around the world, as the industry struggles to understand the present.

It is not just Australia that has a melting-pot market. Walmart is trying rapidly to reinvent its dominance as it loses ground to online competition. Tesco has attempted several, previously untried, concepts with little success. European retailers such as Auchan and Carrefour are also making moves on store numbers and store sizes to try to keep pace with change. Each one a different approach, each one a struggle.

Change is the only constant in this dynamic market that is supposedly led by consumer preferences. The only problem is that consumer preferences seem to change every day, not always for the better.

So what are the key issues that the industry faces?

Pricing has become an albatross of their own making for many retailers. The pressure of competition has forced some into price wars that are predicated on everyday low price (EDLP) structures that only work for a while. Eventually, they become so ingrained that the customer will not bend to allow this price format to be removed. In other words, the low prices become the norm.

One option is price discounting, which allows more volatility at the same time as adding to the price war. Can you have believable price discounts when your competition has a better price? Can you keep supplying discounted product when the volumes are unpredictable? Is forcing a ‘no-price-rise’ edict on suppliers helping the pricing issue, or is it just a one-way plug?

So, if pricing isn’t the panacea, where to next? We know that all retailers are seeking innovation. New products are the lifeblood of the industry, adding consumer interest and opportunity for category margin growth. Who is taking the risk? Retailers are not innovators and they rely on suppliers for new concepts. Retailers cannot, under their current paradigms, offer extended shelf life to untested product. Suppliers cannot invest in innovation that has no guarantee of support. The Australian consumer who likes new things is interested today, but may not be tomorrow. It’s a challenge only the brave will accept.

Like innovation, the day-to-day market faces many barriers to market entry, even for those who have traded here for many years. What, then, are the barriers to entry for the mammoth online retailers who are swiftly taking a foothold in Australia. Can we easily dismiss their attempts at market entry and carry on regardless? Are the logistics of this vast country too great a hurdle for newcomers – or are we fooling ourselves? As one presenter said recently: stop worrying about them coming … barriers or not, they are already here.

Perhaps we can make a radical change of direction and move the bulk of our business into a different store format. If the population is changing, the building industry is changing and the quality of transport is improving, perhaps we should be moving with them? Store formats will enable us to reduce our inventory, reduce SKUs, modify our pricing to suit the location, and provide a changing menu to suit the ever-changing consumer. Changing format can facilitate an escape from EDLP or constant price discounting, allow for innovation, raise some added barriers to entry, and value-add to the supply chain. Why wouldn’t we do it?

Okay, all interesting issues – but how are we going to manage this raft of industry changes? We will need new people with specific skills who will engineer the change and remain with the business as it is recreated. These people, like innovation, are the new life of the industry, but what will it take to keep them where it counts? Finding and retaining talented people in an era when mobility is king is at the top of the challenge list. This will take some skill.

All these issues are on the lips of the industry leaders, and they are fighting to find the people and researched papers that may provide some answers. On Thursday June 15, six of the industry’s brightest stars will contest the 2017 Joe Berry Award. In front of 20 senior executives from the retail industry, they will present papers on EDLP and price discounting, product-innovation challenges, finding and keeping new talent, understanding the barriers to market entry, and changing store formats.

These finalists have spent many hours developing a case that will show the industry their ability to understand the issues and to recommend answers. Rory Gilbert, Catherine Eyre-Walker, Jon Stokes, Shah Riyad, Hattie Crawshaw and Brooke Shearer will impress everyone.

If you would like to know what they found as answers to the key issues, come along to the 31st Joe Berry Award Dinner at the Sofitel Wentworth Hotel Sydney on June 15 at 6:30pm and watch them in action. One of these six will be the 2017 Joe Berry Award winner.

To find out more, email or phone 0403 003 809.

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