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Australian Retail
Outlook 2020
®
Powered by KPMG
Happy customer, happy company In the new retail landscape, best-in-class retailers know that if their business is not truly focused on the customer, they face an uphill battle to survive - much less prosper. KPMG Connected Enterprise helps retailers deliver a customer-centric approach to digital transformation. We work with retailers to connect every part of the business across its value chain, aligning the organisation to achieve a single, simple process. Placing the customer at the heart of everything it does. KPMG Connected Enterprise KPMG.com/au/connectedenterprise © 2020 KPMG, an Australian partnership. All rights reserved. 391181961MC
CONTENTS
FOREWORD 4
INDUSTRY IN FOCUS 5
AUSTRALIAN RETAIL OUTLOOK 2020 SURVEY 10
20
18
RETAIL TRENDS by KPMG
SUSTAINABLE IS THE NEW TICKET TO PLAY 20
SOCIAL CUSTOMER CARE 22
RETAIL AND THE SOCIAL LICENCE TO OPERATE 24
CASHLESS IS KING 26
IS E-COMMERCE PRIMING TO BOOM? 28
INVEST IN CX – BUT NOT FOR CX SAKE 30
PUTTING CUSTOMERS FIRST WITH ADVANCED ANALYTICS 32
RETAIL PROFILES
COLES’ TRANSFORMATION GATHERS PACE
EBAY ACCELERATES GROWTH
35
38
35
OFFICEWORKS’ BLUEPRINT FOR 2020 40
SWAROVSKI SPARKLES DOWN UNDER 42
DOMINO’S DELIVERS MORE INNOVATION 44
EXPERT FORECASTS by KPMG
WHY RETAILERS FAIL 49
ECONOMIC UPDATE 52
NZ RETAIL: BLACK CLOUD OR SILVER FERN? 54
THE POWER OF PERPETUAL INVENTORY 56
BRIGHT SPARKS IN TOUGH M&A MARKET 57
HOW TO GENERATE MORE CASH FLOW 58
54
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www.insideretail.com.au 2020 AUSTRALIAN RETAIL OUTLOOK | 3
FOREWORD
From the editor The year that was
WELCOME TO THE AUSTRALIAN 2019 WAS ANOTHER MOMENTOUS YEAR FOR
RETAIL OUTLOOK 2020, CO-PRODUCED AUSTRALIAN RETAIL.
by Octomedia – publisher of Inside Retail – Headlines were made (often) for the wrong reasons as retail
and KPMG. spending slumped to a 28-year low, the industry was further
Another year, same challenges and even impacted by the challenge of employee underpayments and more
more difficulties have made retailing Down retailers were forced to shut their doors, driven by a wave of
Under a tricky task. Just ask some of the consumer change.
latest retail casualties to enter administration There can be no doubt that the global retail sector is being
or those suffering from the unprecedented impacted by hugely disruptive forces as consumers shift to digital
bushfires that have ravaged the countryside. and online as their preferred medium of engaging with their
But it’s not all bad news. Consumers favourite brands.
have more paths to purchasing goods than The simple truth is Australian and New Zealand retailers are not
ever before, and the increased competition immune from the changes impacting the rest of the world.
has forced retailers in Australia and New The pressure on retailers to remain relevant in the eyes of the
Zealand to up their value proposition to consumer has never been stronger. Consumers are shopping
keep pace. The result? Exciting partnerships, differently, paying differently and their values are continuing to shift
launches and innovative retailing by as sustainability and ethical retailing have taken centre stage.
successful local retailers that are powering Retailers around the world are recalibrating their business models
ahead in the new retail landscape. to optimise (usually downsize) store portfolios and physical space
On the flipside, those lagging behind alongside maximising online and digital engagement. They continue
on merchandise and service are falling by to be subject to the challenge of profitable growth across all channels
the wayside. in the face of unparalleled headwinds, combined with the white hot
This year’s edition features the latest spotlight of where they fit in the circular economy and their social
insights from some of the largest retailers license to operate.
operating in Australia. We speak to Coles Across the Tasman, the New Zealand retail market has remained
CEO Steven Cain about the supermarket resilient amongst a buoyant national economy. However, much like
giant’s last 12 months and their current Australia, international entrants are driving competition and placing
transformation journey. pressure on retail margins.
Ebay’s MD Tim MacKinnon talks about the So who is doing well? JB Hi-Fi continues to dominate as the
e-commerce conglomerate’s continued success strongest player in the sweet spot of consumer electronics. The
in Oz, while Officeworks’ acting MD Michael Universal Store continues to power ahead as a beacon for other local
Howard talks about the retailer’s plans for the apparel retailers. Online players such as Kogan and Temple and
next 12 months. Domino’s ANZ CEO Nick Webster are producing good results leveraging data and digital to
Knight gives us a glimpse of the pizza firm’s engage with consumers.
innovation focus and Swarovski’s MD Brett History has shown that, overtime, retail has a tremendous capacity
Spinks talks about the jewellery firm’s plans. to adapt to changing customer preferences and consumer behaviour.
KPMG’s experts delve into the latest We believe that the next decade will see even more dramatic change
and largest trends in retailing while also in the retail sector as how we live and work further reshapes what
offering their forecasts on the business best practice retail should look like.
landscape over the next 12 months. We also Of course, with any significant change also comes significant
have the results from our industry-wide opportunity. 2020 is likely to be another challenging year where
survey and much more. Australian and New Zealand retailers will continue to adapt and
I hope you enjoy this year’s edition and look for that opportunity to differentiate themselves, reinventing
that it provides some valuable insights for their businesses and leveraging digital and data to engage with
the year ahead. their target customer.
DIMITRI SOTIROPOULOS MATTHEW DARBY, JAMES STEWART,
Editor, Partner, National Sector Partner, Joint National Leader,
Australian Retail Outlook Lead Retail, KPMG Restucturing Services, KPMG
4 | AUSTRALIAN RETAIL OUTLOOK 2020 www.insideretail.com.au
INDUSTRY IN FOCUS
COMPLEXITY AT THE CORE OF
LOCAL RETAIL LANDSCAPE
www.insideretail.com.au 2020 AUSTRALIAN RETAIL OUTLOOK | 5
INDUSTRY IN FOCUS
Surveying the scene
in 2020
It’s certainly been a tough year for retailers, and it doesn’t look like trading
conditions are going to get any better in the immediate future.
IF ONE WORD HAD TO BE USED Strategy and Economics and Chief c-suite executives, owners or board
IN DESCRIBING THE CURRENT Economist, AMP Capital. members, think there will only be slight
state of Australian retail and broader “The Victorian Black Saturday changes to trading conditions over the
economy, perhaps ‘tempestuous’ is the bushfires are estimated to have cost next 12 months.
most appropriate. $4.4bn, whereas the current fires have It’s a view echoed by Dr Brendan
On the one hand, while some covered an area 15 times bigger,” he says. Rynne, Partner and Chief Economist
categories and retailers are Indeed, ANZ says consumer at KPMG, who in a must read economic
thriving, others are failing and confidence fell 1.7 per cent in the first update, says the trading environment
falling into obsolescence. week of January to its lowest level in facing Australia in 2020 is likely to be
And then there’s the impact of over four years – the ‘unusual drop’ a continuation of the current tough
unprecedented bushfires across the reflecting the the impact of the bushfires. trading conditions [page 52].
country. The costs from damage to Meanwhile, in this year’s Australian With consumer confidence already
property and wealth “will likely run Retail Outlook Survey [page 10], over low due to the catastrophic bushfires;
into many billions” according to Dr half of the 610 participants from across global economic factors and the volatile
Shane Oliver, Head of Investment the industry, of which 24.5 per cent are value of the Australian dollar; plus the
6 | AUSTRALIAN RETAIL OUTLOOK 2020 www.insideretail.com.au
same old culprits of rental overheads that the impact of this Black Friday [page 54].
and competition from both local and exceeded that of previous years.” KPMG’s James Stewart, Gayle
overseas retailers, it’s no wonder that Online retail turnover contributed Dickerson and David Hardy say
retailing is expected to be tough in 2020. 7.1 per cent to total retail turnover in technology has become a cornerstone
But while this may sound very original terms in November 2019, up on of retail success – a serious strategic
downbeat, there’s also been some the previous year which had an and tactical point of difference for best
positive news for retailers to herald a online retail turnover contribution of practice retailers [page 49].
new decade. 6.6 per cent. However, Andy Buckle, Director,
National Lead for Retail Technology at
CHRISTMAS KINDNESS TECH IN FOCUS KPMG says very few of Australia’s top
The first retail spending update from While the fundamentals for retailers have perpetual inventory, a
the Australian Bureau of Statistics (ABS) successful retailing remain – near real-time and ubiquitous approach
of the year and decade, is a positive one effective merchandising, supply to inventory management and the
for retailers. chain operations and enticing value ramifications are ominous [page 56].
Buoyed by major online sales events, proposition – technology has become a Meanwhile, Coles CEO Steven Cain
Black Friday and Cyber Monday, retail key area of interest for major retailers says that securing a series of key tech
had its largest retail sales increase in across Australia. partnerships with major firms are
two years, up 0.9 per cent in November It’s also the case in New Zealand, important for its transformation journey.
to a record $27.9 billion – doubling the where the country’s largest retailer The supermarket giant’s exclusive
increase expected by economists. is looking to overhaul its operations to deal with online retailer Ocado, will
“
There were rises for clothing, footwear compete with international platforms create an end-to-end online shopping ►
and personal accessory retailing (3.1
per cent), food retailing (0.5 per cent),
household goods retailing (1.2 per cent),
department stores (3.4 per cent) and While the fundamentals
cafes, restaurants and takeaway food
services (0.9 per cent). for successful retailing remain –
“We have seen strong growth in
Black Friday sales, both in areas such effective merchandising, supply
as electrical goods and online sales,
but also in areas such as clothing chain operations and enticing
and furniture,” said Ben James,
ABS Director of Quarterly Economy value proposition – technology
Wide Surveys.
“While seasonal adjustment removes has become a key area of
regular seasonal patterns associated
with Black Friday based on prior results, interest for major retailers
the strong seasonally adjusted rises in a
number of sub-groups this month shows across Australia.”
Has e-commerce hurt
bricks-and-mortar, or
simply weeded out the
weak from the strong?
www.insideretail.com.au 2020 AUSTRALIAN RETAIL OUTLOOK | 7
solution, from website to efficiently mapping
delivery routes to get customers’ orders to their
kitchen benches quicker and at a time that suits them
[page 35].
Domino’s Australia and New Zealand CEO Nick
Knight also expects 2020 to be full of more tech
launches for the pizza firm, with e-bikes, fast bake
ovens and world-first technology like the GPS Driver
Tracker, Predictive Ordering and DOM Pizza Checker
to be areas of innovation and iteration [page 44].
ONLINE TIPPING POINT?
With the rise of mega online sales events in
November now becoming normal, and e-commerce
continuing along its upwards trajectory, we may be
on the precipice of a second digital boom.
That’s the projection by KPMG’s Jane Cohen,
Partner, Global Strategy Group, who sees parallels
between the current economic pressures and trends
with the conditions that precipitated the Post-GFC
e-commerce boom [page 28].
That’s good news for the likes of Ebay Australia The historical
and New Zealand’s Managing Director, Tim Strand Arcade in
MacKinnon, who says the e-commerce giant already Sydney’s CBD.
has 11 million unique monthly visitors to Ebay and
remains the number one shopping destination in
Australia [page 38].
As retailers continue to increase investments in
e-commerce operations, and consumers become
more comfortable with online platforms, 2020
could be the year of accelerated digital shopping
and organisational transformation – separating the
profitable from the liquidated.
Retailers that
have entered
administration
in 2019-20 so far
Harris Scarfe
Bardot
Karen Millen (local arm)
Ziera
Ed Harry
Debenhams (local arm)
The Co-Op Bookshop
Napoleon Perdis
Shoes of Prey
Zanui
Jeanswest
Dimmeys
Stylerunner
Build-A-Bear (local arm)
Bose (local arm)
Colette by Colette Hayman
8 | AUSTRALIAN RETAIL OUTLOOK 2020 www.insideretail.com.au
www.insideretail.com.au 2020 AUSTRALIAN RETAIL OUTLOOK | 9
AUSTRALIAN RETAIL OUTLOOK 2020 SURVEY 10 | AUSTRALIAN RETAIL OUTLOOK 2020 www.insideretail.com.au
AUSTRALIAN RETAIL OUTLOOK SURVEY 2020
Industry insights:
executive voices
Volatile consumer confidence and a struggling Australian dollar are
keeping retail executives cautious in outlook and approach – here are
the findings from our annual industry-wide survey.
THE FIRST AUSTRALIAN RETAIL OUTLOOK year’s survey.
Survey to herald a new decade has drawn responses from Supply chain and fulfillment executives [3.6 per cent],
a broad cross-section of the sector – including 360 retailers buying and merchandise planners [5.3 per cent], area
and 250 related industry members. and store managers [6.6 per cent] were also represented in
Survey respondents came from all levels of retail the findings.
organisations, with 24.5 per cent representing c-suite All retail categories had participants in the survey,
executives, owners or board members. Over 36 per cent with nearly 15 per cent plying their trade in clothing,
of participants work at retail organisations with 400 or footwear and accessories. Supermarket and grocery firms
more employees. [7.4 per cent], furniture and homewares [6.9 per cent] and
Marketing executives [10.5 per cent] and sales pharmaceutical/cosmetics were all healthily represented.
representatives [8.7 per cent] had a strong showing in this All data is in percentages.
Q.1 How would you describe trading
conditions in the past 12 months?
3.1% 25.9% 41.8% 20.5% 8.7%
Best I have Good Ordinary Poor Worst I have
experienced experienced
Last year’s optimism – where there same opinion. majority nominating the last 12
was an increase in retailers describing And at the other end of the months of trading as ordinary [41.8
trading conditions as the best they’d spectrum, there was an increase of per cent]. There was a notable decline
experienced – has declined. respondents asserting that the past in retailers identifying trading as
Whereas last year, over five 12 months were the worst they’d good [25.9 per cent, down from 38.3
per cent of retailers said that experienced, up from 6.9 per cent to per cent in 2019].
trading conditions were the best reach 8.7 per cent this year. Meanwhile, more participants
they’d experienced, 3.1 per cent of The bulk of responses were identified trading as poor [20.5 per
participants this year were of the somewhere in between – with the cent, up from 12.9 per cent].
www.insideretail.com.au 2020 AUSTRALIAN RETAIL OUTLOOK | 11Q.2 Q.3 In the year ahead,
how do you expect
How did the last 12 months trading conditions to change?
compare to the previous?
Significant improvement
6.6% 16.9%
Slight improvement
30.8%
25.9%
Remained about the same
24.4%
52.3%
Slightly worse
32%
Significantly worse
11.2% Significant changes
Slight changes
The negative trend continued, when considering Remain about the same
comparisons of full-year results. The number of respondents
claiming the last 12 months were significantly worse, rose to Looking to the year ahead, most retailers expect slight
11.2 per cent [up from 7 per cent in last year’s survey]. changes to trading [52.3] per cent. A further 30.8 per cent
Worryingly, the number of retailers who said the last 12 think trading conditions will remain the same.
months were slightly worse jumped from 19.7 per cent last Just under 17 per cent said that the next 12 months
year, to 32 per cent. will have significant changes in trading conditions. The
There was also a nearly 10 per cent swing from figures are close in comparison to last year’s responses,
retailers claiming their full-year results were a significant where around half of the executives also only expected
improvement on the previous year, dropping from 17.4 per slight changes.
cent to 6.6 per cent.
Q.4 What
are the
biggest challenges
44.9%
18.9%
Rental overheads
International entrants
facing the retail 26.7% Offshore online retailers
industry in 2020? 42.1% Discounting
The top three challenges facing 56.4% Consumer confidence
the retail industry in 2020, are
a mirror image of last year’s selections
30.8% Labour costs
by participants. With respondents asked
to select the three major challenges facing the industry
in 2020, the major challenge identified by 56.4 per cent 28.9% Global economic factors
by executives was consumer confidence [up from 51.3 The value of the
per cent in 2019]. 25.7% Australian dollar
Next was discounting with 42.1 per cent, followed by
rental overheads with 44.9 per cent, consistent with last 4.8% Taxes
year’s results. Meanwhile, local executives are less and less
scared of the threat posted by international e-commerce 5.7% Private label
giants, with overseas entrants dropping from 34.1 per cent
last year, to 26.7 per cent. 6.1% Government regulation
Global economic factors [28.9 per cent], labour costs [30.8
per cent] and the value of the Australian dollar [25.7 per
cent] continue to weigh on executives’ minds.
9% Other
12 | AUSTRALIAN RETAIL OUTLOOK 2020 www.insideretail.com.auQ.5 What will be the top priorities
for your business this year?
`
When given three choices
Increasing margin 54.3% for selecting the top business
priorities for the next 12
Increasing turnover 59.3% months, executives were
consistent with their goals
E-commerce 44.4% compared to last year. Again,
mirroring the results from
Omnichannel initiatives 37.1% last year, increasing margin
[54.3 per cent], increasing
Expanding store network 14.3% turnover [59.3 per cent] and
e-commerce [44.4 per cent]
Entering new markets 28.9% occupied the top three spots.
Retailers are still keen
Expanding product range 26.6% to prioritise omnichannel
initiatives [37.1 per cent],
Closing stores 8.9% while entering new markets
[28.9 per cent] and expanding
Reducing product range 6.7% product ranges [26.6 per cent]
had increases on last year –
Rebranding 7.8% indicating that executives
Others are keen to find new avenues
12%
of growth.
Q.6 Do you plan to
change your
Q.7 Does the influx
of international
retailers to Australian shores
number of stores this year? worry you?
There’s been a reduction in retailers looking to increase
the number of stores they operate, with 23.3 per cent,
down from 28.4 per cent in 2019. More executives are
now looking to decrease the number of stores, with 10.2
per cent [up from 9.3 per cent last year] planning to cull
the amount of physical locations they operate.
More concerned
50%
36.9% than last year
25.4%
YES – DECREASE THE
NUMBER OF STORES
NO – STAY ABOUT THE SAME
23.3% Less concerned
22.3%
than last year
YES – INCREASE THE
NUMBER OF STORES
ANY PHYSICAL STORES
WE DO NOT OPERATE
Not concerned 27.7%
10.2% It appears that international retailers entering Australia
are not seen as a large threat to local firms’ market
share. Executives are rather bullish this year, with 50
per cent asserting that they are not concerned about
international entrants.
A further 22.3 per cent are less concerned than last
year while the number of retailers more concerned,
dropped to 27.7 per cent from [32 per cent last year].
www.insideretail.com.au 2020 AUSTRALIAN RETAIL OUTLOOK | 13Q.8 Q.9 Did you
3.5
find that
How do you 3
you received more
believe the flexibility and
Australian help from landlords
retail market 2.5 last year?
is placed
Always a hot topic of the industry, this
compared 2 year’s response to the flexibility and
to other helped proffered by landlords showed
that attitudes are perhaps changing for
international the positive.
markets? 1.5 The number of executives saying
2.8% they had significantly more help rose
from 3.6 per cent to 4.9 per cent, while
Mirroring last year’s
slightly more also increased to 18.7 per
findings, the majority 1 cent [up from 15.7 per cent].
of participants
Meanwhile, 7.5 per cent of
said the Australian
respondents said they had slightly less
retail market is in
help, down from 10 per cent last year.
the middle-range, 0.5
compared with
overseas markets. Less
Significantly more
executives said that
Australian retail was Slightly more
in the lowest-tier, with 0
Remained about the same
9.3 per cent down from
13.3 per cent last year. WEIGHTED AVERAGE Slightly less
Significantly less
Q.10 How do you
expect leasing
terms to change this year?
4.9% 18.7%
Most executives expect leasing terms to remain the
same, with 43.6 per cent expecting slight changes
and 45.7 per cent anticipating no changes at all. 4.3%
Interestingly, there was an increase of respondents
expecting significant changes, rising from 7.8 per
cent to 10.7 per cent this year.
REMAIN
ABOUT
SLIGHT THE SAME 7.5%
CHANGES
43.6% 45.7%
SIGNIFICANT
CHANGES
64.6%
10.7%
14 | AUSTRALIAN RETAIL OUTLOOK 2020 www.insideretail.com.auQ.11 How will the value of the Australian dollar impact your
business this year?
11.2% 59.8% 29%
Positive impact This year’s response to the potential value and impact of the Australian dollar, again
doesn’t point to much local confidence. Nearly 60 per cent [59.8 per cent] expect a
Negative impact
negative impact from the Aussie dollar, while 29 per cent don’t think there will be
No impact any impact on trading conditions.
Q.12
35.1% How has your
33.8%
revenue from
e-commerce changed in the
27.7%
past 12 months?
E-commerce continues to draw positive sentiment
from the business community. The number of retailers
experiencing a decline in e-commerce revenue dropped
again [down to 3.4 per cent from 4 per cent].
More executives said that e-commerce revenue stayed
the same [35.1 per cent, compared to 32.6 per cent], while
33.8 per cent said revenue slightly increased.
Increase slightly
Increase significantly
Stay about the same
3.4%
Decrease
Q.13 What percentage of your total revenue comes from
your e-commerce channel?
Less than 5% 43.1%
Less than 10% 24.6%
Less than 25% 18.2%
Less than 50% 6.6%
Less than 75% 3.1%
100% of revenue 4.4%
0 10 20 30 40 50
But while e-commerce continues to be a source of revenue growth, the
overall contribution towards a company’s balance sheet appears to remain
comparatively low. Over 43 per cent of respondents said that e-commerce
represented less than 5 per cent of overall revenue.
www.insideretail.com.au 2020 AUSTRALIAN RETAIL OUTLOOK | 15Facebook 72%
Q.14 What is
the best
Australian retail brand
for 2019?
Instagram 66.9%
7.9%
JB Hi-Fi
Q.15
LinkedIn
25.3%
Which are the
most effective Blog/native content
on website 14.1%
social media
7.2%
Bunnings
channels your Don’t use social media
retail business 7.2%
uses?
Twitter 6.4%
Facebook and Instagram continue to lead the
way, in terms of most effective social media
6.6% channels used by retailers. WeChat 3%
Woolworths Respondents were asked to select two
platforms and Facebook [72 per cent] and
Pinterest 2.6%
Instagram [66.9 per cent] clearly came out on
top. Interestingly, there was an increase in Snapchat 1.8%
respondents that don’t use social media – up to
4.3% 7.2 per cent from last year’s 5.5 per cent. Tiktok 0.8%
Mecca
3.8%
Aldi
Q.16 What do you think
consumer expectations
will increase the most in over the
next 12 months?
3.1% Speed of delivery and increased
Coles 42% flexibility in fulfilment options
again came out on top, with
3% consumers’ e-commerce
Kmart 35.9% demands continuing to rise.
34.9%
Online delivery speed [42
32.5% per cent] and online delivery
2.8% options [35.9 per cent] were
Cotton On Group the frontrunners for consumer
expectations in the next 12
2.5% months. Customer service is still
The Iconic deemed critical, nominated by
1.8% 34.9 per cent of executives as a
Harvey Norman key area to watch in 2020.
Online delivery options
14.7%
Online delivery speed
In terms of popularity contests, the 13.8% 14.4%
typical big names featured prominently
Customer service
Product freshness/
Product quality
in the top 10 of most voted for retailers.
In-store digital
functionality
Some executives weren’t sure, making
7.1%
comments including “none really, there
relevance
is no retailer that is really standing out to
Product
3.8%
variety
Price
the consumer”.
Other
16 | AUSTRALIAN RETAIL OUTLOOK 2020 www.insideretail.com.auTHE FUTURE IS UNFOLDING
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www.insideretail.com.au 2020 AUSTRALIAN RETAIL OUTLOOK | 17SPONSORED ARTICLE
Retail Data: Unavoidable cost or
investment opportunity?
BY PAUL HINDS, IRI Managing Director Asia-Pacific
AFTER A PROLONGED PERIOD insight-driven collaboration between the decisions we support and
OF STABILITY, THE RETAIL DATA themselves and their suppliers are measure. Our independence in the
market in Australia is currently visionaries. These retailers do expect a marketplace enables us to act as a true
going through some major changes, commercial return on their data sharing collaboration agent.
reflective of the global trends impacting but this will not be their driving force.
our industry. They understand that the long-term SO WHERE SHOULD YOU SPEND
There are generally two approaches commercial benefits of sharing their YOUR BUDGET ON DATA SERVICE?
retailers are taking to sharing their data: data will far outweigh the short-term When I look at the evidence from
data revenue. IRI’s strategic global retailer
1. Supplying more granular data to Many retailers do view the goal partnerships, where we work with
their suppliers more often – sharing of commercialising their data as the majority of the top 20 retailers
the challenge of creating faster, more pure incremental revenue. If this is in both the US and Europe, I believe
actionable and measurable insights transparent to their supplier base and those willing to collaborate on
to drive incremental customer value. the cost is not exorbitant, this approach deriving insights will gain the greatest
can work; there is still incremental value competitive advantage. By focusing on
2. Controlling and limiting supplier to be derived from the insights to inform customer needs, they will truly enjoy
access to data – concerned about product, pricing, promotional and a WIN/WIN/WIN (Customer/
suppliers knowing too much about channel strategies. However, if genuine Supplier/Retailer).
the inner workings of their business collaboration is minimal, it will take far They best way to achieve this is
and the potential for competitors to longer to have an impact and the ROI to offer a meaningful joint business
access and leverage this data. will always be questionable. planning process where both the retailer
IRI holds a unique position in and supplier leverage common data sets
An important nuance for retailers the FMCG eco-system. We have and agreed KPIs, supported by new,
who share data lies in their objectives. relationships with retailers and faster, innovative methods of accessing
Retailers who recognise that to their suppliers. We generate data to generate impactful insights.
differentiate their offering and revenue from data but our value to This is the winning criteria for data
win customers requires genuine, clients is the insights we provide and defined as an investment opportunity.
18 | AUSTRALIAN RETAIL OUTLOOK 2020 www.insideretail.com.auRETAIL TRENDS www.insideretail.com.au 2020 AUSTRALIAN RETAIL OUTLOOK | 19
RETAIL TRENDS
Sustainable
is the new ticket to play
Transitioning to a circular textile economy is both a sales opportunity and
risk management strategy that can safeguard a retail organisation’s future.
BY MYRIAM BENTLEY, Senior Account Manager, Clients and Markets, KPMG
DID YOU KNOW THAT THE Unsurprisingly, caring for the are developing initiatives to promote the
AVERAGE AUSTRALIAN BUYS 27 environment has never been a hotter circular economy, which they claim can
kilograms of clothing every year yet throws issue both for society and businesses. potentially deliver economic benefits of $1
away (cough...recycles) 24 kilograms of And right in the middle of the trillion globally by 2025.
apparel a year? battleground is retail, which is a huge In Australia, state and federal
Approximately 65 per cent of the contributor to the environmental government initiatives have been
clothing we ‘recycle’ usually gets sent problems we face around the world. announced, with $167 million being
offshore to a developing country where it In response to a global environmental invested federally to contribute to the
is sent to landfill. disaster, the circular economy movement circular economy and recycling.
And somewhere between California and is gaining momentum as brands recognise This is in part for funding a Circular
Hawaii there is an island of plastic and that a sustainable environmental footprint Economy Hub developed through Planet
floating rubbish known as the Great Pacific is the new ticket to play in retail. Ark, planned to launch in 2020 where
Garbage Patch – comprised of 1.8 trillion The circular economy gives new life a marketplace will connect buyers with
items of rubbish that is twice the size of to products and materials that would sellers in the circular economy.
Texas and three times the size of France. otherwise make their way to landfill,
Well you may not know it – but your letting products have an infinite lifecycle THE CURRENT STATE IN THE
customers sure do. Particularly millennials. through different uses. TEXTILE INDUSTRY
And it is very important to them. Globally, governments and industries While the majority of Australians
believe they already contribute to a
sustainable circular economy in textiles
An infinite product
– via charitable donations, which is
lifecycle loop.
primarily recycled clothing – the reality
is much different.
While charities have given a second
or third life to over 285 million items of
clothing and hard goods, there is still an
estimated 62 million kilograms of textile
waste exported by charities yearly. And
these charities are spending around $13
million in landfill costs per year.
Globally, 85 per cent of textiles are
sent to landfill, equating to around one
garbage truck load of textiles being sent
to landfill or burned every second.
When we then recognise that 60
per cent of textiles are made from
polyester, what we wear as consumers
can be compared to the plastic bottle
waste the community is currently up in
arms about.
MOVING TOWARDS A MORE
SUSTAINABLE INDUSTRY
Retailers are starting to take
sustainability more seriously, seeing
it both as a sales opportunity and risk
management strategy to future-proof
their business.
Sources: Victorian Government; KPMG Australia Customers have shown that they
care and sustainability is here to stay.
20 | AUSTRALIAN RETAIL OUTLOOK 2020Nudie Jeans Repair Shop in Zetland, Sydney.
Yet the complexity for retailers to diverted from landfill and saving The primary ambitions of the initiative
transition into a circular economy can 386,000,000 litres of water. are to phase out substances of concern
be like navigating a labyrinth, making and microfiber release; increase clothing
it difficult to action without sacrificing GLOBAL CIRCULAR RESOURCES utilisation; radically improve recycling;
profitable business models. If retailers are interested in undertaking make effective use of resources and move
Retailers should see the circular the journey to becoming part of the to renewable inputs.
economy as an opportunity to be circular economy, there are a plethora of
innovative, collaborative and explore resources available to assist them. A CALL TO ACTION
new business models that connect with One of the largest organisations Retailers should seriously consider
their customers. Partnerships are key in a associated with the circular economy the impact of sustainability on the
circular economy, ranging from recyclers, is the Ellen MacArthur Foundation, future of their organisations – that is if
resellers, repairers, manufacturers, a valuable resource to get education they aren’t already thinking about the
distributors and customers themselves. and understanding of the innovative circular economy.
An example of a company that has solutions and ideas that have Simple ways to engage with the
taken the textile circular economy started to form globally in the textile circular economy could be to reduce
to heart is Nudie Jeans, which uses circular economy. packaging, identify additional ways to
sustainable and recycled materials. The An initiative from the foundation reuse transport material, incorporate
company has global repair locations for called Make Fashion Circular has sustainable clothing materials, explore
customers to maintain their jeans, as brought global leaders together from with rental and reselling products or
well as re-sell and recycle their jeans. across the retail industry, including identify local partnerships related with
In 2018, the company reported they innovators, philanthropists, governments the circular economy.
had repaired over 55,173 jeans, collected and retail brands to stimulate The most important step in any
10,557 jeans to resell or recycle, resulting collaboration and innovation for the journey is the first one, you should
in 44,000 kilograms of clothes being textile circular economy. consider yours if you haven’t already.
www.insideretail.com.au 2020 AUSTRALIAN RETAIL OUTLOOK | 21RETAIL TRENDS
Social customer care:
The new standard of customer service
Retailers that are proactive, instead of reactive, on social media
are driving brand advocacy – and profitability.
BY LOUISE POGMORE, Director, Customer, Brand and Marketing Advisory, KPMG
THE UBIQUITY OF SOCIAL working alongside team members to queries immediately. The supermarket
MEDIA HAS GIVEN CONSUMERS help them make and bake pizzas to giant staffs their social channels with
more ways to interact with brands. perfection every single time. service agents, who possess detailed
According to The Harvard Business Aside from providing convenience to knowledge about products, deals or
Review, 67 per cent of people have the consumer, resolving customer issues service – ensuring replies offer real
shifted away from traditional customer via social media costs less than other value immediately.
“
service channels like phone and email, channels. Optimising your social media
and are now using social media as their channels to deliver social customer care
preferred channel. has never been more important.
With 18 million active users, social
media is an integral part of Australian
The difference between ‘customer ...best
service’ and ‘social customer care’ is
society and provided consumers with subtle, yet critical. Customer service practice retailing
a platform to share their stories, both traditionally triggers when the
positive and negative. customer contacts the organisation is about being part
Today, an issue has the power to with an issue or a complaint.
trigger hundreds, if not thousands Social customer care is about
of, and shaping
of retweets, comments, hashtags and
memes – potentially damaging a brand’s
proactively meeting customers’ needs
– where retailers not only respond to
the conversation to
reputation and bottom line in a matter complaints, but are also actively listening avoid reputational
of seconds. to customers, and acknowledge their
Best practice retailers ensure they brand interactions across social media. damage and
adapt so they can deliver consistent, Leading the way, Nike has a dedicated
convenient and quality customer service Twitter account, Team Nike, providing negative impact.”
both offline and online. social customer support 24/7 in six
When the number one customer languages. When a customer mentions Whether you have a social media
complaint on Domino’s Pizza’s social the brand on Twitter, @teamnike jumps presence or not, from a B2B or a
media accounts was “my pizza doesn’t in to provide support. B2C perspective, your customers
look like it should,’’ the pizza firm By providing a dedicated social are actively talking about you – best
leveraged this insight alongside leading customer care channel for all the practice retailing is about being part
AI technology to ensure they could support their customers require, Nike of, and shaping the conversation
deliver the best customer experience has demonstrated how committed and to avoid reputational damage and
and product quality. dedicated the brand is to addressing negative impact.
Domino’s subsequently launched the customer needs, and ultimately meet Social customer care doesn’t need
DOM pizza checker – a smart scanner their expectations. to be onerous – there are four steps
that sits above the pizza cutting bench Meanwhile, Tesco in the UK make you can take to optimise your social
and checks the quality of every pizza; sure they can answer detailed customer care:
22 | AUSTRALIAN RETAIL OUTLOOK 2020 www.insideretail.com.auGOVERNANCE
Social media customer care
governance is an essentaial
foundation. Governance is about
creating and maintaining an
enterprise-wide framework for
keeping a company’s array of social
customer care touch points known,
secured, accessible and operating
within a set of standards. This
approach ensures compliance is
maintained and risk is mitigated.
RESPONSE TIME
Retailers would never ignore a
customer who walked up to them
in-store and asked about a product.
Yet, brands respond to only half of
social media messages. According
to research conducted by The Social
Habit, 42 per cent of consumers
expect a response on social media
within 60 minutes.
Answering a complaint on social
can increase customer advocacy by
as much as 25 per cent, while failing
to respond can reduce customer
advocacy by as much as 50 per cent.
HUMAN VERSUS TOOL
It’s not feasible to have a human
answering social queries 24/7.
However, it is important to have
the right balance of human
versus tool to foster connections
with consumers.
In order to meet consumers’
expectations, firstly conduct a
review to understand when and how
often your customers are connecting
with you on social media, which
will enable you to determine what
options you need deployed to
meet their needs – whether that be
self-serve, messaging service or AI
powered chatbots.
CUSTOMER INTELLIGENCE
Actively listening to and
synthesising actionable insights from
social media data enables a brand
to really optimise social customer
care, giving you real-time insights
when people are engaging with your
brand, outside your own channels.
This empowers you to connect and
engage with consumers when they
least expect it – driving advocacy.
Social customer care is an integral
part of gaining, retaining and
growing customers. Brands that are
leading the way are ensuring their
most public facing customer service
channel is optimised to meet their
customer’s expectations.
www.insideretail.com.au 2020 AUSTRALIAN RETAIL OUTLOOK | 23RETAIL TRENDS
Retail and the
social licence to operate
More consumers now choose to buy brands based on their social and
environmental impact – and retail boards have to comply or risk the costs.
BY CARLY RICHARDS, Director, Retail Lead, Risk Consulting, KPMG
R E TA I L B U S I N E S S E S A R E FA C I N G
A WAV E O F B L A C K TA P E I N T H E
growing and competitive Australian
retail landscape, as the social licence to
operate becomes a factor consumers are
increasingly concerned about.
For retail boards today, the objective is
not only revenue and profit growth but
also how their organisation meets the new
community standard, of what it means to
be a socially responsible retailer today.
As a greater number of consumers shift
their focus to social and environmental
trends such as plastic pollution, climate
change and public health, the spotlight is
on retailers to reflect these changing values
and respond to societal challenges.
With the green generation making
sustainable shopping a priority, the
need for ethical, social and environmental
business models that underpin
purpose-driven companies is critical.
New research by Unilever shows a third
of consumers now choose to buy brands
based on their social and environmental
impact and one in five consumers say they
would choose a brand if its sustainability
credentials were made clearer on
packaging or in the product’s marketing.
Today’s discerning consumers are
more informed and now shop with their
emotions and values, instead of just
their wallets.
Retailers and consumer brands
are presented with both opportunities
and challenges with the rise of the leaders in Australia. with the threat of heavy fines for non-
savvy shopper. These organisations exemplify compliance. Stricter regulations to protect
Businesses that make meaningful authenticity through altruistic initiatives consumer data and privacy, safeguard
sustainability commitments by that reflect the intrinsic values of employee welfare and ensure accurate and
ensuring environmental, social and Australian society. As a result, a fair business reporting for shareholders
corporate governance policies reflect relationship of trust is instilled and have come into effect.
these values are likely to be seen as perceived customer experience is elevated. It’s also clear from recently introduced
favourable by consumers. Failure by businesses to define and legislation such as the Modern Slavery
KPMG’s Customer Experience Excellence act on sustainability initiatives can Act, Notifiable Data Breaches Scheme
Report 2019 highlights the average significantly impact a retailer’s brand and [NDB] and the General Data Protection
customer experience excellence rating in financial performance. Regulation [GDPR], that retailers must
the Australian market was 7.14 out of 10, Over the past year, a series of Royal be transparent about the impact of their
with the grocery retail sector maintaining Commissions and subsequent media business activities across a range of areas.
its leading position for customer coverage have placed integrity and the
experience and improving its overall social licence to operate at the forefront of UNDERSTANDING THE
score to 7.4. any great retail experience. REGULATORY ENVIRONMENT AND
The report shows community-centric The regulatory landscape has also THE COST OF NON-COMPLIANCE
brands are rated as customer experience reinforced responsible business conduct It’s known that regulations in retail have
24 | AUSTRALIAN RETAIL OUTLOOK 2020 www.insideretail.com.au“ As consumers
better understand the
link between corporate
activities and social
impact, retailers need
to consider the value
their business can
create for the economy
and society as a whole.”
been growing in number and rigour, with data with consumers. – such as fines, suspensions, loss of
the cost of non-compliance on the rise. Retailers should be aware of their operating rights, loss of customers, or
Placing compliance at the heart of data privacy obligations, while ensuring severe reputational damage.
a retail business can create a strategic customers are at the heart of everything As human rights and social risks
advantage by helping retailers manage risk they do. become mainstream and are placed on the
in their supply chain, protect customers It’s critical that organisations corporate agenda, the onus is on retailers
and safeguard employees more effectively. understand data privacy changes and to ensure they have a sound strategy
what action is necessary to comply in place to keep track of updates and
FOUR PILLARS TO ALIGN with and how a data breach would be mitigate risk.
CUSTOMER VALUES AND handled, especially as data breaches Effective compliance results in better
have potential for a significant brand outcomes for businesses, their customers
COMPLIANCE REQUIREMENTS
To ensure compliance, protect your brand and reputation damage. and shareholders.
and manage financial risk effectively,
every executive in a retail business has an PROTECT YOUR PEOPLE
important role to play. An ever-growing number of household
brands continue to fail to meet industry Five key
KNOW YOUR CUSTOMERS standards and regulations. In Australia,
retailers must adhere to minimum
questions to
Consumers are becoming increasingly
aware of the damaging effects of plastic wage regulations, national employment
standards, as well as relevant awards and
consider for
pollution on land and marine life, and they
expect retailers to take action. enterprise agreements. managing
According to The Fair Work
The source of food produce has
also become a hot topic whereby Ombudsmen, more than $40 million regulatory
grocery retailers offering regional
produce are seen to be supporting local
in unpaid wages was handed back to
Australian workers in the past financial compliance
Australian businesses. year, with the Ombudsmen recovering
money for 17,718 workers in 2018/19. 1. How well do you understand
As consumers better understand the link and prioritise regulations that
between corporate activities and social Understanding wage requirements
and ensuring robust payroll process impact your business?
impact, retailers need to consider the value 2. Can you clearly articulate how
their business can create for the economy are in place remain essential steps for
organisations to uphold brand integrity your business complies with
and society as a whole. regulations to policy makers?
Retailers need to focus on their supply and maintain trust in the eyes of
employees and the wider community. 3. Do you have sufficient internal
chain and identify areas to improve and external assurance to give
environmental sustainability to reflect confidence to regulators, the
consumer values and allow them to make UNDERSTAND REGULATORY board and your customers, in
more informed choices. REQUIREMENTS the non-financial information
Nowadays, organisations cannot just say Organisations not only have to transform you’re reporting externally?
they have a sustainability strategy, they to remain relevant in this dynamic 4. Have you implemented
need to show the consumer that they are market, but must keep one step ahead strategic, cost-effective internal
acting upon it. of their obligations to prevent breaches risk and control systems to
across a number of potential exposures. ensure regulatory compliance?
PROTECT YOUR CUSTOMERS Retailers must define, identify and help 5. Are you able to anticipate
Changes to privacy regulations in mitigate conduct risks in their business new regulatory developments
Australia are a top priority for businesses and embed conduct risk management and plan and implement new
with regulations such as the NDB and into daily operations and existing risk strategies to ensure compliance
the GDPR lifting the standard on security management frameworks. once they come into effect?
measures, organisation-wide data Failure to manage the continual
awareness and restoring trust of personal changes can have costly consequences
www.insideretail.com.au 2020 AUSTRALIAN RETAIL OUTLOOK | 25RETAIL TRENDS
Cashless
is king
The impact of new payment
platforms on both consumers
and businesses shows no signs
of slowing down.
BY BRETT WATSON, Partner, Advisory,
Management Consulting, KPMG
DISRUPTION IN CONSUMER that improve customer experience, of handling cash, the price of card
PAY M E N T S S H O W S E V E R Y S I G N reduce staff costs and improve processing has attracted significant
of continuing, as new products such as checkout times. attention from merchants. This was
buy now pay later (BNPL) grow rapidly. Simultaneously there has been a exacerbated by the rise of contactless,
There’s also the occasional big idea, rise in integrated payment terminals which automatically diverted
such as Facebook’s blockchain-based as digital payments allow greater payments down the costlier credit
digital currency – Libra payments network communication between management processing rails.
– which keeps everyone contemplating software and payment services, further The RBA eventually acted by
about longer-term alternatives. reducing check out times, reconciliation mandating the banks introduce least
In the medium-term, the payments requirements and human error. cost routing that allows merchants to
landscape looks set to follow existing divert card payments to the cheapest
trends. Total card use continues to grow 2. Least cost routing: while cards could available option. These solutions are
strongly, however millennials are showing arguably be cheaper than the cost finally beginning to emerge.
an aversion to credit cards, also shown by
e-commerce and alternative payments,
albeit from a low base.
Despite these trends, the combination Debit cards are our favourite payment
of digital payments and mobile is yet
to disrupt the Australian retail landscape
method accounting for ~50% of all
as significantly as it has in markets such
as China.
payments
AUSTRALIANS LOVE CARDS
In 2018, there were 9.4 billion card
payments in Australia, with debit cards
alone making up 50 per cent of all
payments after growing at an annual rate
of 13.7 per cent for the past five years.
Alongside this has been an enthusiastic
take up of contactless, which in 2016 was
estimated to account for 65 per cent of all
card payments, with the value transacted
via contactless increasing a further 50 per
cent to 2018.
This trend has resulted in two
key outcomes:
1. Faster checkouts: cards have allowed
rapid checkout options at Woolworths,
Wesfarmers-owned brands, fast
food outlets and many more have
introduced self-service options Source: Reserve Bank of Australia
26 | AUSTRALIAN RETAIL OUTLOOK 2020 www.insideretail.com.auBUT MILLENNIALS LOVE BUY referrers in Australia. purchasing experience.
NOW PAY LATER As a result, retailers are today Amazon has also taken steps to
It is impossible to avoid the impact that accepting payment processing fees integrate digital payments and the
Afterpay and its competitors are now at double, even triple, their regular e-commerce experience into physical
having on the retail industry, and this merchant service fees, in order to offer stores such as Amazon’s bookstore,
trend shows no sign of slowing down. their customers these services. which replicates its online store in a
Initially disrupting e-commerce, Even Australia’s larger online retailers physical form, and Amazon Go, its
taking 10 per cent of e-commerce are signing on, with Ebay partnering cashier-less store.
payments within two years of listing with Afterpay in November and Zip In Australia, Woolworths has begun
on the ASX, Afterpay has moved partnering with Amazon Australia. testing a similar experience with its
quickly into physical stores which now Afterpay in particular is succeeding Scan&Go application that allows
accounts for 21 per cent of its $4.3b in in globalising its BNPL product, with shoppers to scan items as they move
processed transactions. 2.6 million US customers after just throughout the store, a move that has
Approximately 27 per cent of over a year of operating and 400,000 been followed by 7-Eleven trialling its
Australian millennials and 16 per cent UK customers after just six months own click-and-go store.
of all Australians now have an Afterpay of operating. Within stores, mobile point-of-sale
account alone, not to mention the The company has ambitions to terminals are offering a simple, initial
myriad of other competitors such as Zip connect its international solutions, step to providing a more intuitive
Pay, Humm, and LatitudePay. eventually offering retailers the ability in-store payment experience by allowing
Not only are more people using these to accept international payments from attendants to complete transactions
services, they are using them more global customers through its platform. anywhere in-store.
often. Afterpay recently revealed that its BNPL has become the modern Retail experiences such as those
recurring users – users who have been example of a payment platform owning created by Apple remove the need for
on the platform for one year – made 4+ the customer relationship. a single checkout location but instead
transactions which increased to 10+ after Accepting these higher cost payment allow personalised interactions and
two years and 20+ after three years. channels is increasingly demanded by on-the-spot payment experiences.
While BNPL is not a new service, customers who not only want to use As consumers begin expecting
the millennial-focused, digital first BNPL for their purchases but will also shopping experiences that replicate the
solutions that have entered the use the provider’s platform to seek out ones they experience online, retailers
payment industry demonstrate the retailers and make purchasing decisions. have an opportunity to innovate their
appetite for a service that offers a in-store experience to both improve
simple checkout, easy sign up and PAYMENTS ON THE MOVE efficiency and drive customer sales. So
point-of-sale credit option. The opportunity that digital payments what’s next?
The outcome is that these services provide is to make payments seamlessly Digital payments will continue to
become more than simply payments and anywhere in a transaction process. support an evolving retail landscape in
credit. Afterpay is a massive marketing Until very recently, Starbucks was the Australia. As we move further towards
machine running bi-annual sales most popular payment application the a cashless and digital-first society,
promotions, driving transaction values USA, combining loyalty, pre-ordering payments will continue to support new,
and becoming one of the largest lead and payments to create a seamless innovative customer experiences.
“
Accepting
these higher cost
payment channels
is increasingly
demanded by
customers who not
only want to use
BNPL for their
purchases but will
also use the provider’s
platform to seek out
retailers and make
purchasing decisions.”
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