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AUSTRALIAN
                        RETAIL
                      OUTLOOK
                          2017                                              CONTENTS

                                 4|     Welcome                     EXPERT FORECASTS
                                 5|     Retail predictions: It’s    52 |   Azurium: Delivering the
                                        time to buckle up for              ‘magic’
                                        2017.
                                                                    53 |   Azurium: Looking into
                                 11 |   2017 Retailer Survey:              the future
                                        Results from Inside
                                        Retail’s latest reader      56 | Azurium: Nothing
                                        survey.                          changes if nothing
                                                                         changes
                                 EXECUTIVE
                                                                    57 |   Michael Page: Always a
11                               PERSPECTIVES                              challenge

                                 22 |   Terry White Group:
                                                                    58 |   Retail Doctor Group:
                                        Just what the customer
                                                                           Don’t be left behind
                                        ordered...
                                                                    59 | NORA: Back to basics
                                 24 | Super Retail Group:
                                      Changing dynamics
                                                                    60 | Deloitte: Disruption the
                                                                         new norm
                                 28 |   Asian Restaurant
                                        Concepts: Boxing on
                                                                    62 | GFK: It’s all about the
                                                                         experience
                                 30 | Lush: Change more than
                                      cosmetic
                                                                    64 | IbisWorld: Tough times
                                                                         ahead
                                 32 |   Oxfam Australia
22                                      Trading: No exemption
                                                                    66 | Savills: Elephants and
                                        from turbulence
                                                                         poachers

                                 34 | Disrupt Sports: Doing it      68 | Mima Design: Keeping
                                      their way
                                                                         up appearances

                                 AZURIUM                            72 |   CBRE: Thinking small

                                 38 |   2016 Scorecard:             73 |   Neto: Keeping it all in
                                        Winners and losers                 the family

                                 42 | Trending in 2017: Food
                                      retail and the last mile

                                 50 | Economic update: No
38                                    improvement in sight

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FROM THE EDITOR
                                       AUSTRALIAN                   Welcome to the 2017 Australian Retail Outlook, a joint effort between

                                           RETAIL                   Octomedia, publisher of Inside Retail and Azurium.
                                                                    Last year wasn’t easy for retail with several major brands bowing out of the
                                         OUTLOOK                    industry, including Payless Shoes, Dick Smith, Masters and Pumpkin Patch.
                                                                    Another wave of global retailers arrived again and we said hello to Debenhams,
                                             2017                   John Lewis and Decathlon, while the Chinese market continues to ramp up.
                                                                    In terms of online retail, Australians are increasingly shopping using their
The Australian Retail Outlook is printed                            mobile devices and in response, retailers are picking up their game in the
by Octomedia                                                        delivery space with the rise of click-and-collect. Perhaps in response, traditional
                                                                    bricks-and-mortar retailers are seeking creative ways to lure customers into their
                                                                    stores, through special events, in-store experiences and even one-off pop-up
                                                                    stores.
HEAD OFFICE                                                         Meanwhile, Amazon is hot on the heels of Australian retailers - it will be
Level 3, 51-57 Pitt St                                              interesting to see how our local stores respond to the online giant’s interest in
Sydney, NSW 2000                                                    our shores.
PO Box R217                                                         I hope you enjoy reading the latest Australian Retail Outlook and it offers you
Royal Exchange NSW 1225                                             some food for thought for your business for the year.
Tel : +61 2 9901 1800
Fax : +61 2 9901 1800                                                                          Jo-Anne Hui-Miller
                                                                                               Editor, Inside Retail

EDITOR
Jo-Anne Hui-Miller
jo-anne.h@octomedia.com.au

JOURNALIST
Zilla Efrat
zilla@octomedia.com.au

ADVERTISING
Amir Engler                                                         FOREWORD
amir@octomedia.com.au                                               2016 certainly was a year that will stand out in recent history. Political upheavals,
Chris Samios                                                        the passing of notable popular culture icons and a series of tragic world events
chris@octomedia.com.au                                              left many grateful for its end. And whilst some retailers might also share
                                                                    this sentiment (as outlined in our ‘Winners and Losers’ scorecard), for many
GRAPHIC DESIGN                                                      operating in the Australian market there are potentially tougher times ahead.
Nguyen Pham                                                         The last 12 months were marked by the unfortunate demise of some iconic
nguyen@octomedia.com.au                                             brands such as Dick Smith, Laura Ashley and Payless Shoes. It wasn’t all bad
                                                                    news though. The likes of Dominos, Kogan and JB Hi-Fi were shining examples
                                                                    of home grown retail successes.
CEO
                                                                    2016 could also be considered the year of the bricks-and-mortar revival. Whilst
Oliver Ranck                                                        online retail is certainly providing a stronger growth trajectory for retail sales,
oliver@octomedia.com.au                                             local brands understand that brick-and-mortar stores still play an integral part
                                                                    in being able to deliver to the consumer a unique, exciting and seamless retail
FOR MEDIA RELEASES                                                  experience. Whilst the shopping centre of the future may look remarkably
irnews@octomedia.com.au                                             different, physical retail is still well and truly alive.
                                                                    The benchmark for Australian retail has now been set by big name international
                                                                    brands who have taken to the local market. This is set to continue with the
                                                                    anticipated arrival of Amazon this year. Rather than a threat, local retailers
Octomedia Pty Ltd accepts no liability for any errors,
                                                                    should consider this an opportunity to reassess their own business and strive
ommissions, or consequences, including any loss or damage,
                                                                    to deliver a service and offering which matches the expectations of the now
arising from reliance on information in this publication. The
                                                                    globally-minded Australian consumer.
views expressed in this publication reflect opinions of the         We wish all Australian retailers the very best for 2017.
writers and are not necessarily endorsed by Octomedia Pty

Ltd. We recommend obtaining professional advice from an                                        James Stewart
accredited advisor before relying on the information in this                                   Partner, Azurium
publication. Octomedia Pty Ltd reserves all copyright over the

content included in this publication. No part of this publication

may be reproduced, stored in a retrieval system, or transmitted

in any form, as per the Australian Copyright Act 1968.

 4 | AUSTRALIAN RETAIL OUTLOOK 2017                                                                                        www.insideretail.com.au
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RETAIL PREDICTIONS

                          IT’S TIME TO
                           BUCKLE UP
                              FOR 2017

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RETAIL PREDICTIONS

THE STATE OF PLAY
Buckle up for 2017. With choppy trading conditions ahead and the
possible entry of Amazon and other internationals into the market,
Australian retailers will need to lift their eCommerce game and find
their points of differentiation.

6 | AUSTRALIAN RETAIL OUTLOOK 2017                         www.insideretail.com.au
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RETAIL PREDICTIONS

2016
                           was a choppy      which lets people design their own        support Oxfam’s fair and ethical retail
                           year for          sports equipment. It smashed its tar-     business.
                           Australia’s       gets and grew its own retail presence        On the food side, Asian Restaurant
retailers as different categories faced      (see p34). DisruptSports.com has lots     Concepts hit its growth targets and
different trading conditions.                of new projects planned for this year,    now has 107 Noodle Box and Wok in
    Despite a slowdown in growth             including opening in Los Angeles and      a Box restaurants in Australia and
early in the year, Australian Bureau of      New York City. Elphick also expects       four Noodle Box restaurants in Saudi
Statistics (ABS) figures show that retail    to make waves with a game-changing        Arabia (see p28). Acting GM Michael
turnover had a 3.5 per cent seasonally       B2B integration platform and some         Standley says the group is targeting
adjusted year-on-year rise in October.       “really awesome” virtual reality custo-   growth of 15 per cent this year and
    According to Azurium’s James             misation tools.                           hopes to launch a third brand, still in
Stewart, 2016 had its share of retail            Mark Lincoln, a director of Lush      the Asian space, with two restaurants
winners and losers. Local brands who         Cosmetics Australia and New Zea-          by the end of the year.
embraced digital (e.g. Dominos and JB        land, says 2016 was an exceptionally
Hi-Fi) saw healthy sales growth whilst       good year for his business too, with
some retailers who have failed to adapt      three stores launched in the region
                                                                                       THE INTERNATIONAL
their business models (e.g. Myer) have       and other outlets undergoing refur-       INVASION
struggled. Geographically, retail spend-     bishments (see p30). And despite ex-
ing in the eastern states was buoyed         pecting a challenging retail environ-     The continued arrival last year of in-
by the housing boom, while WA and            ment this year, he believes his group     ternational retailers in Australia was
Queensland faltered amid the slow and        is well placed for strong growth. “The    noted in Inside Retail’s 2017 Retailer
steady mining bust.                          beauty category has always been an        Survey (see p12). An overwhelming
    This patchiness is reflected in the      intensely competitive market. The         43.5 per cent of the participants listed
mixed responses to Inside Retail’s 2017      challenge is to ensure we stay fo-        international entrants as one of the
Retailer Survey (see p12). For example,      cussed on delivering quality products     biggest challenges facing the retail
23.4 per cent of respondents to the an-      and the best customer service experi-     industry this year. A further 41.3 per
nual poll described trading conditions       ence in the industry,” says Lincoln.      cent said they were worried about
over the past 12 months as solid, 20.7           Meanwhile, Terry White Group          these newcomers compared to 28.5
per cent as ordinary and 25 per cent as      CEO Anthony White admits the retail       per cent last year, and those who
challenging. Likewise, 37 per cent felt      pharmacy market is tough, with phar-      were not worried slumped from 71.5
that the market was better than last         macists further hampered by severe        per cent last year to 58.7 per cent.
year, 20.1 per cent said it was worse        cuts to the Pharmaceutical Benefits       However, many respondents wel-
and a similar amount (20.7 per cent)         Scheme over the past year (see p22).      comed the heightened competition,
said it was about the same.                  But he says there are still opportuni-    some noting it will improve the retail
    Looking ahead, respondents were          ties “if retailers can evolve and offer   mix and enhance the retail experi-
not overly bullish about the prospects       value to their customers – and that’s     ence for Aussie shoppers.
for this year, with 35.9 per cent expect-    not only on price, but on service and         “International retailers force local
ing trading conditions to remain the         knowledge as well”. White’s key focus     retailers to improve their game,” said
same and 45.7 per cent expecting them        this year, however, will be bedding       one, while others noted that more
to improve a little. Only 4.3 per cent       down his group’s merger with Chem-        competition was needed in some of
believed conditions would improve a          mart, which has created a mega-chain      the retail categories that are dominat-
lot, while 14.1 per cent said they would     of 500 pharmacies with $2 billion in      ed by two large businesses.
become a little worse.                       annual turnover.                              In his commentary, Super Retail
    This sluggishness, however, is not           Julia Sumner, GM of Oxfam Austra-     Group’s Birtles observed: “We have
reflected by all the retailers participat-   lia Trading, also describes last year’s   highlighted for many years the
ing in the Australian Retail Outlook         retail environment as challenging (see    impact that international retailers
2017’s executive perspectives, with          p32). “With lower confidence in both      will have on the Australian retail
most participants looking back on last       the property market and household         market, whether through rolling out
year positively and embracing this           finances as well as low wage growth,      a network of stores or through an
year with optimism and enthusiasm.           we have seen a big impact on discre-      online presence. We are now seeing
    Peter Birtles, group MD/CEO of           tionary spend throughout the year.”       international retailers come into our
Super Retail Group, is pleased with          She says it has been quite a tough        segments, and we welcome the chal-
his group’s strong sales growth last         year for retail in general, with some     lenge that brings.
year (see p24) and says its key focusses     retailers going into liquidation in the       “We know we need to continue to
this year will be on understanding its       lead-up to Christmas. “That said, our     lift the standard of our businesses,
customer, building its omni-channel          organisation has had quite an exciting    which has to be good for the cus-
capabilities, developing its supply          year with the opening of two shops in     tomer. The strategies we have been
chain and engaging its staff. “Looking       Sydney, the launch of a new website       implementing over the past few years
ahead, we all know the dynamics of           and a successful year in our whole-       have been developed with interna-
the retail industry are changing – cus-      sale channel off the back of increased    tional competition in mind, so we
tomers have even more information            distribution through independent          don’t see any need to change our
at their fingertips as to who will best      supermarkets across Australia.”           strategic focus at this time. We have
meet their needs, and they have more             Off the back of unstable economic     the opportunity to turn our deeper
choices than ever before,” he says.          indicators throughout the past 12         understanding of the Australian
    Similarly, Gary Elphick, CEO and         months, Sumner says she cannot            marketplace, Australian conditions
founder of DisruptSports.com, says           make predictions for this year, but is    and the Australian customer to our
2016 was a great year for his company,       confident consumers will continue to      advantage.”

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RETAIL PREDICTIONS

                                                                                         tial for major market disruptions is
                                                                                         huge. We are already seeing retailers
                                                                                         setting up task forces to assess the
                                                                                         potential impact of an Amazon mar-
                                                                                         ket entry, but it’s not yet clear what
                                                                                         exactly the company has planned for
                                                                                         Australia.
                                                                                            “What we do know is that where
                                                                                         Amazon has entered new markets,
                                                                                         the impact on local retailers has been
                                                                                         seismic and has impacted almost all
                                                                                         categories and channels. So retailers
                                                                                         can’t afford to wait and see what Am-
                                                                                         azon does – they need to be develop-
                                                                                         ing strategies and taking action now.”
                                                                                            In his commentary, Azurium’s
                                                                                         Stewart says Amazon is likely to be
                                                                                         a game-changer in the Australian
                                                                                         market and accelerate the pace of
                                                                                         online growth. It could perhaps
                                                                                         also be the catalyst that brings the
                                                                                         Australian eCommerce economy up
                                                                                         to international benchmarks. “We
                                              doesn’t believe he has seen anything       expect retailers in all sectors to invest
                                              revolutionary from any of the inter-       heavily in securing their marketing
    "Retailers can’t                          national players. “Whatever we learn
                                              from the overseas brands’ influence
                                                                                         channels in an attempt to fend off
                                                                                         the American heavyweight, which is
 afford to wait and                           on the local retail scene, one rule that
                                              never changes is that if you simply
                                                                                         expected to undercut prices through
                                                                                         cost efficiencies.”
 see what Amazon                              stand still and watch, you are going
                                              backwards,” he warns.                      POINT OF
  does – they need                               In response to the trends created
                                              by the overseas arrivals, he expects       DIFFERENCE
  to be developing                            smaller, bespoke and more person-
                                              alised fashion brands to pop up, keen
                                                                                         To withstand the many threats com-

     strategies and                           to offer something different that will
                                              not be found in the malls.
                                                                                         ing their way, retailers will need to
                                                                                         work on standing out from the pack.

taking action now."                              Zelman Ainsworth, head of retail
                                              brokerage leasing at CBRE Mel-
                                                                                         As Anthony White notes, one of the
                                                                                         biggest challenges for retailers – and
                                                                                         also one of the biggest opportunities
                                              bourne, says that if 2016 was the year
                                                                                         – in the coming year will be to have
                                              of the international retailer, 2017 will
      Deloitte’s David White expects                                                     a clear point of difference and to be
                                              be the year when domestic players
   the influx of international retailers to                                              highly responsive to the ever-chang-
                                              rise to the challenge, with the emer-
   continue this year and beyond (see                                                    ing needs of customers.
                                              gence of micro-stores helping to even
   p60) on the back of Australia’s strong                                                    Similarly, Birtles says: “Our job
                                              the playing field between local and
   economic conditions, high consumer                                                    is to ensure we stand out from the
                                              offshore brands (see p72).
   demand for international brands and                                                   crowd with an offer that inspires and
                                                 “This trend is good news for
   relative proximity to Asia.                                                           engages at a broader level than prod-
                                              everyone,” he says. “Not only do
      “One of the key differentiators                                                    uct and price. As long as we continue
                                              micro-stores promote a more rich and
   international retailers have brought to                                               to provide the solutions and expe-
                                              diverse retail sector, characterised by
   Australia is in their store design and                                                riences that help our customers to
                                              boutique and independent stores, this
   customer-experience model, lever-                                                     make the most of their leisure time,
                                              concept also offers fiscal perks. These
   aging their experience from larger                                                    we are confident we can continue to
                                              include lower capital outlay costs,
   markets. However, we are seeing                                                       achieve growth.”
                                              lower overheads and the opportunity
   Australian retailers slowly starting                                                      This theme is echoed by Brian
                                              to have multiple tenancies in different
   to fight back, with investments rising                                                Walker, founder and CEO of the Re-
                                              locations – opposed to just one large
   in store design, and concept and                                                      tail Doctor Group, who predicts that
                                              store.”
   flagship stores. So these new entrants                                                successful retailers this year will be
   will find Australian retailers better                                                 heavily focussed on the uniqueness
   prepared and skilled to take on this       ELEPHANT IN THE                            of their offerings and will increasing-
   new challenge compared to five years                                                  ly turn to fields such as neuroscience
   ago.”
                                              ROOM                                       to understand consumers with far
      Mark McConnell, design director         Deloitte’s David White says that           more alacrity and accuracy (see p58).
   at Mima Design, acknowledges that          if Amazon is not on the agenda                 To create a buzz with customers
   the internationals are bringing new        at board meetings for Australian           this year, Paul Greenberg, executive
   store experiences for us to engage         retailers, then it should be. “With the    director of Nora.org.au, expects to
   with (see p68). “Think what Apple          rumoured arrival of the US giant to        see more retailers using new apps,
   did and now Tesla,” he says. But he        Australia’s shores this year, the poten-   trials, promotions and technolo-

    8 | AUSTRALIAN RETAIL OUTLOOK 2017                                                              www.insideretail.com.au
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RETAIL PREDICTIONS

gy, “given that many shoppers are         tor of retail services at Savills, forecasts   retail sales are still only marginal
itching for innovation and change”        that local malls will increasingly em-         compared to those of traditional
(see p59).                                brace things that cannot be replicated         bricks-and-mortar sales. Analysis
   “Myer and eBay’s virtual reality       online or delivered by drone.                  by Citibank suggests Australia’s 10
store last year was a fine example           “What we will we see be things              largest retailers derive not quite 6 per
of this. Did it change the world?         that are experiential, personal, or            cent of all sales from online channels.
No, but it was a lot of fun for the       of a service nature. The space will            That number is almost double in the
teams of both businesses to develop,      respond uniquely to the trade area             US at 11 per cent.
customers had a fantastic play, and       demographic instead of the ‘one                   Stewart from Azurium notes that
the media went into meltdown with         size fits all’ current model of shop-          the strong growth shown by the eCom-
excitement. No losers here, and my        ping-centre leasing and develop-               merce sector and the enormous shift in
prediction is that this could quite       ment,” he says.                                consumer behaviour in the US toward
well develop to be a significant nee-                                                    mobile eCommerce is a warning
dle mover.”                                                                              bell for Australian brick-and-mortar
   Similarly, in her forecast, Norrelle
                                          ONLINE GROWTH                                  retailers.
Goldring, APAC region shopper lead        In his commentary (see p38), Azuri-               Roy Morgan reveals that 16.5 mil-
at GFK, advises retailers to focus on     um’s Stewart discusses the exponen-            lion Australians (85 per cent) shopped
creating experiences, not just selling    tial growth of Australian retailers            at one or more shopping centres in
stuff. “Tell a story, provide a theme –   through online channels over the               an average four-week period in the
for example, by apportioning a part       past five years, noting that this has          financial year to June 2015. So while
of your store to themes and seasonal      been largely spurred on by the in-             some people proclaim physical retail
items. Ensure your experiential mar-      creased consumption of online media            is dead, Stewart says these figures
keting activities are shareable, and      (music, movies, e-books and so on).            show that bricks-and-mortar are still
that sharing is encouraged,” she says        This growth was also picked up              truly alive and well.
(see p62).                                in the 2017 Retailer Survey (see p12).            However, Ryan Murtagh, CEO of
   Our experts say that shopping          Here, 31.5 per cent said their sales           Neto, says retailers need to stop fo-
centres also need to work on their        from eCommerce grew over the                   cussing on sales channels as separate
points of difference. Azurium’s James     past year as a percentage of overall           businesses with separate strategies
Stewart and Denis Carruthers warn         revenue while 17.9 per cent expe-              (see p73). Instead, they should recog-
that while model innovation will be       rienced no change. Interestingly,              nise the value of all customer contact
key for centre operators in the future,   most retailers polled only earned              − in-store, online or mobile − as part
success will also rely on a trait that    up to a quarter of their total revenue         of a continuous shopping flow. But
has never changed (see p53). “Every       from eCommerce. Only 10.3 per cent             he says that a key part of an effective
shopping centre needs to stand for        earned more than that with 3.8 per             omnichannel strategy is to rethink
something – it’s unique selling prop-     cent earning more than 50 per cent.            the bricks-and-mortar outlet.
osition needs to be clearly under-           According to Azurium’s Stew-                   “It’s not just a point of sale any
stood by customers in its main and        art, Australian retailers lag behind           more – it’s anything you want it
secondary trade areas.”                   the rest of the world in adapting              to be. It’s a service base. It’s a user
   Likewise, Leighton Hunziker, direc-    to omni-channel sales, and online              experience lounge. It’s a fulfilment

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RETAIL PREDICTIONS

centre. It’s a pop-up shop that spends       in the short term with the longer-term         Australian retailers remain relatively
a month in each city around the coun-        outlook being uncertain.                       positive while many are expecting
try. It’s a boutique mart. There’s no            “While interest rates are at re-           to be able to grow and expand their
script to follow – it doesn’t even need      cord lows, consumers continue to be            businesses. However, competition
to be in a shopping mall,” he says.          impacted by some of the lowest levels          will be fiercer than ever and, even if
                                             of wages growth in recent times, even          Amazon doesn’t enter the market this
                                             though unemployment continues to               year, Australian retailers need to be
RENTAL                                       ease. Adding to wages pressure has             planning for change - disruption is
Again, rental overheads emerged as           been the continued domestic and glob-          now the norm, not the exception.”
the major issue keeping retail execu-        al economic uncertainty, particularly             However, White says the wealth
tives up at night. In this year’s Retailer   in the past 12 months.”                        factor created by rising house prices
Survey, 44.6 per cent respondents cited          Most of the retailers in Inside Retail’s   in New South Wales will slow down
it as among the biggest challenges fac-      2017 Retailer Survey expect trading            as house price growth is expected
ing the retail industry – slightly down      conditions to either stay the same this        to moderate. “Therefore, retail sales
from 50.3 per cent last year.                year (35.9 per cent) or improve a little       growth in 2017 in New South Wales
    In a similar vein, Leighton Hun-         (45.7 per cent). A far smaller group (14.1     will more likely match rather than
ziker, director of retail services at        per cent) expected things to become            exceed the national average.”
Savills, reckons it is not sustainable       a little worse. Yet in its 2016 Retailers         He says potential over-building
for landlords to keep driving specialty      Christmas Survey (see p60), Deloitte           of apartments and the closure of car
store rents at CPI + 2 per cent increases    found that 64 per cent of respondents          manufacturers could slow down
a year in an environment where sales         expected their earnings to increase by 5       growth in Victoria this year. Western
growth has not kept pace (see p66).          per cent or more this year, with levels of     Australia continues to feel pressure
    “Investors’ desire for never-ending      optimism at their highest since it started     from the downturn in the mining
rental growth has meant that special-        this survey five years ago.                    sector, and trading conditions are
ty rental growth has outpaced sales              “We can expect a steady improve-           expected to be challenging there this
growth, leading to a combination of          ment in retail sales through this year,        year. Queensland has a more positive
retailer margin erosion, higher prod-        which is likely to coincide with a mod-        outlook, with its retailers expected
uct prices and now, courtesy of access       est improvement in wage growth over            to benefit from a rise in tourists and
to information and macro-economic            time,” says Deloitte’s David White.            students across the state, thanks to a
forces, customers reaching a point-of-       “As we head into 2017, prospects for           lower Australian dollar.
purchase resistance.”
    The result? “Retailers are stressed
because they are being squeezed by
unsustainable cost escalations on one
end and tapering sales growth at the          "As the Australian economy
other end,” says Hunziker.
                                              remains sluggish, the
THE ECONOMY
Looking ahead, the outlook for Aus-
                                              expectation is that the retail
tralian retailers does not appear too
rosy in the near term, but could im-
                                              sector will stay tough in the
prove later in the year. In its economic
update (see p50), Azurium’s Stewart
                                              short term with the longer-term
observes: “As the Australian economy
remains sluggish, the expectation is
                                              outlook being uncertain."
that the retail sector will stay tough

1 0 | AUSTRALIAN RETAIL OUTLOOK 2017                                                                   www.insideretail.com.au
RETAILER SURVEY 2017

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RETAILER SURVEY 2017

NOT SO TOUGH
Trading conditions are less tough now than last year, according to our
annual retailer survey. However, higher rents and inflexible landlords are
listed as the main grievances.

T
                             here is good news in Inside Retail’s 2017 retailer survey - trading condi-
                             tions are reportedly not as tough as they were last year.
                             Here is an overview of the results from the 15-question survey.

                                                                                                                                 Q.1
  WORST I HAVE EXPERIENCED

                                                                                                       BEST I HAVE EXPERIENCED   HOW WOULD YOU
                                                                                                                                 DESCRIBE TRADING
                                                                                                                                 CONDITIONS IN THE
                                                                                                                                 PAST 12 MONTHS?
                                        CHALLENGING

                                                                                                                                 Fewer respondents to the survey
                                                                                                                                 describe trading conditions as
                                                                  ORDINARY

                                                                                                                                 “challenging” than they did last
                                                                                                                                 year – 30.9 per cent compared to 31.8
                                                                                         SOLID
                                                      POOR

                                                                                                                                 per cent. Yet only 28.9 per cent saw
                                                                                                                                 the market as solid, compared with
                                                                                                                                 25.8 per cent in last year’s survey.
                                                                                                                                 That said, there has been a rise in the
                                                                                                                                 number who say the market is the
                                                                                         2 8. 9%
                                                                  2 5.5 %
                                        3 0.9 %

                                                      3. 4%

                                                                                                       3.4%
  8 .1%

                                                                                                                                 worst they have experienced – 8.1 per
                                                                                                                                 cent versus 3.97 per cent last year.
Respondents to this question only includes retailers

Q.2
                                                                                                                                         47.5 %
                                                                                           BETTER
                                                                                             THAN
                                                                                              20 15
HOW DID YOUR FULL YEAR
COMPARE TO 2015?

                                                                                                                                        25.9 %
                                                                                             WORSE
47.5 per cent of respondents believe they will have done                                      THAN
better last year than in 2015. Last year, 47.6 per cent                                        20 15
believed they had turned in a better performance than
in 2014. However, only 25.9 per cent of retailers expect to

                                                                                                                                        26.6 %
have fared worse last year, down from the 27.15 per cent                                      ABOUT
who predicted a drop in earnings in last year’s survey.                                         THE
                                                                                               SAME

                                                                                                   Respondents to this question only includes retailers

                             www.insideretail.com.au                                                AUSTRALIAN RETAIL OUTLOOK 2017 | 1 3
R E T A I L E R S U R V E Y 201 7

             Q.3                                  45.7 %
                                                   IMPROVE
                                                   A LITTLE
                                                              35.9 %
             IN THE YEAR AHEAD,                                 REMAIN
                                                               THE SAME
             HOW DO YOU
             EXPECT TRADING
             CONDITIONS TO
             CHANGE?
                                                                                                              14.1 %
             On a brighter note, most of the                                                                  GET A
             retailers polled expected trad-                                                                  LITTLE
             ing conditions to either stay the
             same this year (35.9 per cent) or                                      4.3 %                     WORSE

             improve a little (45.7 per cent).                                       IMPROVE
             Only 14.1 per cent expected things                                        A LOT
             to become a little worse.

                                                                          Respondents to this question only includes retailers

44
       .6%
              RENTAL OVERHEADS
43
     . 5%
              INTERNATIONAL ENTRANTS
41 .
       8%
41 .          OFFSHORE ONLINE RETAILERS
       8%
              ENDEMIC DISCOUNTING
41 .
       3%
              LOW CONSUMER CONFIDENCE
41 .
       3%
              HIGH LABOUR COSTS
28
     . 3%
              GLOBAL ECONOMIC TROUBLE
2 7.
       7%
              VALUE OF THE AUSTRALIAN DOLLAR
16.
       8%
              TAXES AND OVERHEADS
14.
       7%
              THE RISE OF PRIVATE LABELS                      Just like last year, rental overheads emerged as the major is-
10.                                                           sue keeping retail executives up at night. In notable swings
       3%
                                                              this year, concern among retailers about international en-
              GOV. RESTRICTIONS
 8.7                                                          trants, offshore online retailers and global economic trouble
        %                                                     was higher than last year, but anxiety about the value of the
              OTHER
  1.6                                                         Australian dollar and high labour costs eased.
        %                                                        Some of the other worries retailers listed were a drop
              NO CONCERNS
                                                              in Chinese tourism dollars, political incompetence at both
                                                              state and federal levels, and higher energy costs.

                                                  Q.4
                                                                 One retailer bemoaned the trend for landlords to in-
                                                              crease the food/retail tenancy mix, therefore diluting that
                                                              sector and decreasing turnover on a store-by-store basis.
                                                                 Another worried about the upsurge of selling on a pleth-
                                                              ora of Facebook sites by individuals rather than businesses,
                                                              while yet another fretted about the growing number of
                      WHAT ARE THE BIGGEST                    Australian online sales, such as Black Friday, where suppli-
                                                              ers were undercutting retailers.
                     CHALLENGES FACING THE                       Grocery deflation and the duopoly of the supermarkets
                  RETAIL INDUSTRY THIS YEAR?                  driving down pricing were also seen as causes for concern.

             1 4 | AUSTRALIAN RETAIL OUTLOOK 2017                                              www.insideretail.com.au
R E T A I L E R S U R V E Y 20 1 7

                                          Like last year, the top priority of respon-                     30.5 %
                                          dents by a long shot was increasing sales,                      INCREASING SALES
                                          followed by improving margins and
                                          raising stock turnover.
                                              The percentages of those wanting to
                                          prioritise new markets, expand their store

               Q.5
                                          networks, build an eCommerce presence
                                          or implement an omni-channel structure
                                          all dropped from last year’s survey.
                                              No respondents expected to focus on
                                          rebranding, compared to nearly 6 per cent
                                          last year. Only 1.9 per cent saw closing
  WHAT WILL BE                            stores as an important activity this year,
THE TOP PRIORITY                          down from 9.93 per cent last year.
                                              Other priorities listed included inter-
                                                                                                          12.4 %
                                                                                                          INCREASING MARGIN
 OF YOUR RETAIL                           national expansion, improving the supply
                                          chain, finding new distribution channels,
   BUSINESS THIS                          running a more efficient business and
          YEAR?                           reducing store locations and size.

                                                                                                          10.5 %
                                                                                                          INCREASING STOCK
                                                                                                          TURNOVER

    Q.6
                             DO YOU PLAN TO CHANGE
                             YOUR NUMBER OF STORES
                             THIS YEAR?                                                                   9.5 %
                                                                                                          BUILDING AN
                                                                                                          ECOMMERCE PRESENCE
    As with last year, most retailers polled intended to maintain store numbers at
    last year’s levels. More planned to add stores (42.5 per cent compared to last
    year’s 17.2 per cent) and far fewer expected to reduce store numbers (9.2 per
    cent compared to a whopping 11.26 per cent the year before).                                          9.5 %
                                                                                                          IMPLEMENTING AN
                         47.1 % – Maintain store numbers                                                  OMNI-CHANNEL STRUCTURE

                                 1.1% – Pure-play retailer
                                                                                                          8.6 %
                                                                                                          EXPANDING THE STORE
                                                                                                          NETWORK

                                                                                                                 5.7 %
                                                                                                                 NEW MARKETS

                                                                                                                 2.9 %
                                                                                                                 EXPANDING
                                                                                                                 PRODUCT RANGE

                                                   42.5% – Add more stores                                       1.9 %
                                                                                                                 CLOSING STORES

                                                                                                                 1.0%
                                                                                                                 REDUCING PRODUCT
                                                                                                                 RANGE

                                        9.2% – Reduce store numbers                                                     0.0  %
                                                                                                          7.6 %         REBRANDING
                                                                                                          OTHERS
Respondents to this question only includes retailers                                    Respondents to this question only includes retailers

      www.insideretail.com.au                                                   AUSTRALIAN RETAIL OUTLOOK 2017 | 1 5
R E T A I L E R S U R V E Y 201 7

                                     Q.7
                                                             DOES THE INFLUX OF
                                                             INTERNATIONAL RETAILERS
                                                             TO AUSTRALIAN SHORES
                                                             WORRY YOU?
                                  With international retailers increas-          to be better - the best retailers (local
                                     ingly eyeing the lucrative Austra-          or international) will continue to
                                        lian market, there has been a            prosper"
                                           surge in concern about their        • "The competition provided by
                                              presence. This year, 41.3 per      international retailers with a global
                                               cent said they were wor-          perspective, who are constantly
                      41.3 %                     ried compared to 28.48
                                                  per cent last year. And
                                                                                 evolving the use of technology to
                                                                                 improve their business and engage-
                        SAID THEY
                          WERE                     the number who were           ment with consumers, will push
                        WORRIED                    not worried slumped           those Australian retailers who have
                                                    from 71.52 per cent last     not felt the need to improve their
                                                    year to 58.7 per cent.       businesses as rapidly."
                                                    However, many              • "International retailers give shop-
 58.7 %                                            respondents welcomed          pers diversity and put pressure on
   SAID THEY                                      the heightened competi-        Australian retailers to deliver the
   WERE NOT                                      tion. Some said it would        experience shoppers expect and
   WORRIED                                      improve competition and          that shoppers in other markets
                                              enhance the retail expe-           already enjoy"
                                            rience and mix for Aussie          • "As a shopfitter, I welcome it."
                                         shoppers.
                                                                               NEGATIVE COMMENTS
                                      POSITIVE COMMENTS                        INCLUDED:
                                     INCLUDED:                                 • "They take shoppers away from
                                     • "More variety and competition can         other areas"
                                       expose new customers to other           • "The influx creates a skills shortage
                                       offerings"                                with big-box retailers paying more
                                     • "The market needs competition.            for the talent pool. The recruitment
                                       Some categories are owned by two          of good people is difficult"
                                       large businesses"                       • "It leads to margin pressure"
                                     • "This cuts both ways. There is no       • "Customers flock to what"s new,
                                       reason why Australian retailers           abandoning retailers who, in our
                                       should not compete internationally"       case, have indented stock six to
                                     • "International retailers force local      nine months prior"
                                       retailers to improve their game"        • "It has a potential impact on local
                                     • "Locals who can"t compete should          retailers and the Australian econo-
                                       not be operating to begin with"           my – locals pay adequate taxes."
                                     • "This will challenge local retailers

               Q.8
                                     Like last year, opinion was closely       Australia’s competitiveness.
                                     split on how the Australian retail
                                     market is placed compared to other        TOP COMMENTS
                                     international markets – 26.1 per cent
                                     saw it as better placed, 26.6 per cent    INCLUDED:
                                     said it was the same, and 25 per          • It’s very expensive to buy pretty
                                                                                 much anything when compared
           HOW DO                    cent said it was worse placed. With
                                                                                 to London, where I lived previ-
                                     opinions being so closely divided, it’s
   YOU BELIEVE THE                   probably not surprising that 22.3 per       ously. Retailers rely on higher
                                                                                 margins at the expense of volume.
 AUSTRALIAN RETAIL                   cent were not sure.
                                                                                 Offshore and online retailers will
                                        Some respondents noted that
  MARKET IS PLACED                   Australia’s small population was a          change that dynamic with Aus-
                                                                                 tralian retailers having to rely on
COMPARED TO OTHER                    limiting factor. “Most of our suppliers
                                                                                 higher volume at lower margins
                                     say we are negligible, maybe 2 per
    INTERNATIONAL                    cent of the global market,” said one.       to compete.
                                        Others noted that higher rents, la-    • Australia is the second most
         MARKETS?                    bour and other costs of business limit      retailed market after the US.

 1 6 | AUSTRALIAN RETAIL OUTLOOK 2017                                                      www.insideretail.com.au
A U ST R A LIA N R E T A IL OU T LOOK 20 17

                                                                 Q.9
25.3%                                                  68.1%
YES, LANDLORDS                            NO, LANDLORDS DID
WERE MORE                                   NOT OFFER MORE
HELPFUL                                  FLEXIBILITY OR HELP

                                                                 DID YOU FIND THAT YOU
                                                                 RECEIVED MORE FLEXIBILITY
                                                                 AND HELP FROM LANDLORDS
                                                                 LAST YEAR?
                                                                 Like last year, most retailers (68.1 per cent of
                                                                 respondents) said their landlords did not offer more
                                                                 flexibility or help over the past year. Only 25.3 per
                                                                 cent found that their landlords were more helpful. A
                                                                 few noted that they owned their premises.

                                                                 TOP COMMENTS INCLUDED:
                                                                 • "Our landlord is totally inflexible, refusing to
                                                        6.6%       acknowledge the difficulties we face at this time."
                                                                 • "Most landlords are not cognisant of industry or
                                                I AM AN ONLINE
                                                      RETAILER     government pressure."
Respondents to this question only includes retailers

   There is too much floor space.
   As eCommerce increases and
   retailers invest in technology and                            25%              26.6%             26.1%
                                                                                  THE SAME
   in in-store experience, we will
   see a shrinking of retail stores
                                                       22.3%      WORSE                              BETTER

                                                       UNSURE
   in favour of a better outcome for
   shoppers and retailers. This is not
   a particularly good situation for
   landlords, who need to catch up
   by remixing and improving their
   customer proposition for both
   retailers and shoppers. Australia
   is effectively two to three years
   behind other major markets such
   as the UK, US, Singapore, France,
   the UAE and South Korea.

      www.insideretail.com.au                                          AUSTRALIAN RETAIL OUTLOOK 2017 | 17
R E T A I L E R S U R V E Y 201 7

Q.10
HOW DO YOU                                                                                       9.6%
                                                                                              GET BETTER
EXPECT LEASING
TERMS TO CHANGE
THIS YEAR?
Moving into 2017, only 9.6 per cent
                                                                             25.0%
of retailers expect leasing terms to                                        GET WORSE
change for the better – down from
12.58 per cent last year. While 25
per cent say leasing terms will
become more challenging, that is                                                                65.4%
lower than the 21.85 per cent who                                                               STAY THE SAME
said so last year. “We try to re-
main positive, but don’t have our
fingers crossed,” one respondent       Respondents to this question only includes retailers
observed.

                                  "If a retailer is seeing decking online
                                  sales at this point, it's because there
                                      is a problem with its eCommerce
                                          infrastructure and marketing."
1 8 | AUSTRALIAN RETAIL OUTLOOK 2017                                                          www.insideretail.com.au
A U ST R A LIA N R E T A IL OU T LOOK 20 17

Q.11
                           HOW WILL THE VALUE
                           OF THE AUSTRALIAN DOLLAR
                           IMPACT YOUR BUSINESS                                                                  13%
                           THIS YEAR?                                                                          POSITIVELY

Almost half of the retailers surveyed,      our margins"
47.8 per cent, believe fluctuations in    • "A mixed bag. Retailers who import
the value of the Australian dollar will     will have to pay more to buy stock.
have no discernible impact on their         Locally made stock will be cheaper"
business this year. In contrast, 39.2     • "A declining Australian dollar
per cent expected to be hurt by the         tends to see our eCommerce in-
value of the Australian dollar. That        crease, which we interpret to mean             39.2%
                                                                                            NEGATIVELY
is a big improvement from last year         it’s more expensive to source from
when 58.28 per cent said the impact         our overseas competitors"
would be negative.                        • "Current conditions favour Austra-
                                            lian-made"
                                          • "It depends on which way it goes.
TOP COMMENTS                                For retailers who mainly import
• "I expect the Australian dollar to
                                            their finished product from China,
  fall further, which will help tour-
                                            a rise in the dollar will be good
  ism in particular"
                                            and a decline will be bad"
• "I buy in US dollars from overseas
  suppliers, so a lower Australian
                                          • "As our products are from overseas                         47.8%
                                            this changes the costings per prod-                          NO DISCERN-
  dollar hurts my margin big time"                                                                       IBLE IMPACT
                                            uct, which depend on the Aussie
• "We are an importer, so any drop
                                            dollar being competitive."
  in the Australian dollar will affect

                                    Q.12
                                                                Respondents’ sales from eCommerce grew 31.5 per cent
                                                                over the past year, as a percentage of overall revenue.
                                                                Only 2.7 per cent of retailers experienced a drop, which
                                                                is a better outcome than last year when 6.62 per cent saw
                                                                sales from eCommerce fall.
                                                                “There is a clear trend in consumer behaviour with a pro-
   HOW HAS YOUR REVENUE FROM                                    pensity to buy online for convenience,” said one survey
    ECOMMERCE CHANGED IN THE                                    participant. “If a retailer is seeing decking online sales at
                                                                this point, it’s because there is a problem with its eCom-
              PAST 12 MONTHS?                                   merce infrastructure and marketing.”

      31.5%                                                                                              42.9%
    SALES FROM                                                                                         I DO NOT SELL
    ECOMMERCE                                                                                             ONLINE
    ARE UP AS A
    PERCENTAGE
    OF OVERALL
     REVENUE

                               17.9%
                                   NO
                                 CHANGE
                                                                                  2.7%
                                                       4.9%                   SALES FROM
                                                                              ECOMMERCE
                                                     I AM A PURE-            ARE DOWN AS
                                                    PLAY RETAILER            A PERCENTAGE
                                                                              OF OVERALL
                                                                                REVENUE

      www.insideretail.com.au                                              AUSTRALIAN RETAIL OUTLOOK 2017 | 1 9
R E T A I L E R S U R V E Y 201 7                         3.8%
                                                            MORE
                                                            5 0 P E RT H A N
                                                                      CE NT

                                                                                                                 89.7%
                                                                                                                0 -2 5
                                                                                                                PE R CE N
                                                                                                                            T
                                                                          6.5%
   Q.13                                                                   25 -5 0
                                                                          PE R CE N
                                                                                    T

   WHAT PERCENTAGE                                   Australian retailers continue to lag behind the rest of the world in adopting
                                                     eCommerce, with online retail sales remaining only marginal compared to
   OF YOUR TOTAL                                     those of traditional bricks-and-mortar sales. Almost nine out of 10 retailers
   REVENUE COMES FROM                                polled earned a quarter or less of their total revenue from eCommerce. Only
                                                     10.3 per cent earned more than that, with 3.8 per cent earning more than 50
   YOUR ECOMMERCE                                    per cent. The expected arrival of Amazon, however, is likely to shake things
   CHANNEL?                                          up and accelerate the growth in eCommerce.

Australia’s top brands:
                                                                              Q.14
BUNNINGS                                                                      WHAT IS THE BEST AUSTRALIAN

ALDI                                                                          RETAIL BRAND FOR 2016?

COLES/KMART
                                                                              Wesfarmers has emerged as the owner of three of
                                                                              Australia’s four top brands: Bunnings, Coles and
                                                                                                        Kmart. But Target, a strong

COTTON ON/JB HI-FI/MYER
                                                                                                        performer last year, didn’t get a
                                                                                                        look in this year.
                                                                                                          Bunnings rose from third

WOOLWORTHS                                                                                              place last year to scoop our
                                                                              top slot as Australia’s best brand. Aldi was voted the

DAVID JONES/PRICELINE                                                         second most popular, while Coles slipped from last
                                                                              year’s top spot to equal Kmart in third place and, like
                                                                              last year, outstrip Woolworths.
AESOP/CHEMIST WAREHOUSE/CUE/                                                    Myer, which did not feature strongly last year, made
DAN MURPHY’S/SMIGGLE                                                          a huge leap to overtake David Jones this year.

   Q.15                                        70.1% — FACEBOOK

                                                                    43.5% — INSTAGRAM

   WHICH ARE THE MOST EFFECTIVE
                                                                                                19% — LINKEDIN
   SOCIAL MEDIA CHANNELS YOUR
   RETAIL BUSINESS USES?                                                                              11.4% — TWITTER

   Yet again, Facebook emerged as the most effective social-media                              11.4% — ONLINE BLOG
   channel, used by 70.1 per cent of retailers. Instagram was a poor
   second, used by 43.5 per cent, followed by LinkedIn with 19 per
                                                                                                         1.6% — PINTEREST
   cent. Twitter tied with online blogs in effectiveness. Only 1.6 per
   cent of retailers used Pinterest, compared to 13.25 per cent in last
                                                                                                15.2% — DON’T USE
   year’s survey. And surprisingly, given how vital and cost-effective
                                                                                                    SOCIAL MEDIA
   social media is in retail marketing, 15.2 per cent didn’t use it at all.

   2 0 | AUSTRALIAN RETAIL OUTLOOK 2017                                                                    www.insideretail.com.au
EXECUTIVE PERSPECTIVE

www.insideretail.com.au   AUSTRALIAN RETAIL OUTLOOK 2017 | 2 1
EXECUTIVE PERSPECTIVE: TERRY WHITE GROUP

                                          Anthony White
                                          Chief Executive Officer
                                          Terry White Group

JUST WHAT THE
CUSTOMER ORDERED...
After more than doubling in size through its merger with Chemmart and
enduring severe cuts to the PBS, community pharmacy group TerryWhite
has had a big year. Now it hopes its extensive marketing plans and ambitious
growth strategy will further cement it as a household name in Australia.

WAS 2016 A GOOD                           ing a highly sophisticated retail model      ers, and significant scale advantages.
YEAR FOR YOUR RETAIL                      to provide our pharmacy owners with          We were also focussed on ensuring
BUSINESS?                                 a solid, diversified revenue stream to       we had a highly competitive retail
                                          help offset the impact of the ongoing        pharmacy business model through
It was a great year for our company,      reforms. As a result, we reported an         systems that increased in-pharmacy
both operationally and financially.       above-market increase in like-for-like       efficiencies, freeing up our phar-
It was the most significant in our        retail sales across the pharmacies           macists to spend more time with
almost 60-year history, and through       within our network last year.                customers. This enabled the group to
our merger with Chemmart, we have                                                      achieve strong financial performance,
more than doubled in size and now         DID YOU GROW OR                              above-market sales growth and a
work as 500-strong group of commu-        CONSOLIDATE YOUR RETAIL                      strengthened market position.
nity pharmacies. We also announced
                                          PRESENCE?
our new brand, TerryWhite Chem-                                                        HAVE YOU NOTICED ANY
mart, which has already started roll-     We completed our merger with Chem-           INTERESTING SHIFTS IN
ing out across our national network.      mart during the year, which provided
                                                                                       CONSUMER BEHAVIOUR
                                          us with a truly comprehensive national
                                                                                       OVER THE PAST YEAR?
WHAT WERE YOUR BIGGEST                    footprint and significant scale. This fur-
CHALLENGES?                               ther increased the competitiveness of        Much has been said about the growth
                                          all of our pharmacies within the retail      of online shopping, but what I have
Over the next decade, the pharmacy        marketplace. We are now Australia’s          found interesting is the move by
and pharmaceutical sectors are set        largest pharmacy network.                    online stores to start opening up
to deliver more than $20 billion in                                                    bricks-and-mortar shopfronts, be
savings via reforms to the Pharma-        WHAT STRATEGIES DID YOU                      it a pop-up or a permanent shop.
ceutical Benefits Scheme (PBS). Last                                                   This shows that consumers are
                                          USE TO GROW OR MAINTAIN
year our industry was impacted by the                                                  still looking for a traditional retail
most severe round of funding cuts to      YOUR BUSINESS?
                                                                                       experience, but in a 21st-century
the PBS ever. This placed significant     Over the past 12 months we contin-           environment. This has never been
pressure on our pharmacy owners.          ued to execute our growth strategy           more true than now for pharmacies,
   As an organisation though, we          to achieve a more competitive market         as customers increasingly look to
have invested significantly in develop-   proposition for our pharmacy own-

2 2 | AUSTRALIAN RETAIL OUTLOOK 2017                                                              www.insideretail.com.au
EXECUTIVE PERSPECTIVE: TERRY WHITE GROUP

pharmacists to provide trusted health       marketing and let us be much more         to consumers. That’s how we manage
advice and patient-centred healthcare       competitive.                              to consistently stay ahead.
services in a highly accessible way.           Our new brand, TerryWhite Chem-
                                            mart, stands for value and health, and    WHAT IS YOUR TOP
HOW DO YOU BELIEVE                          we will be pushing hard into further      OVERALL PRIORITY AS
THE RETAIL MARKET WILL                      expanding the important role our          A RETAIL BUSINESS THIS
PERFORM THIS YEAR                           pharmacists play in the delivery of
                                                                                      YEAR?
                                            frontline health services to consumers,
COMPARED TO LAST?
                                            to deliver a really strong and differ-    We will continue to focus on integrat-
There's no hiding the fact that the re-     entiated value proposition within our     ing the two businesses following our
tail market is tough, but there are still   industry. We will roll out our new        merger with Chemmart, and rolling
opportunities if retailers can evolve       brand and concept stores this year.       out our new brand across about 500
and offer value to their customers –                                                  pharmacies to ensure we have strong
and that's not only on price, but on        ARE YOU FACING ANY                        brand recognition, supported by a
service and knowledge as well. In           THREATS FROM NEW                          significant investment in above-the-
the pharmacy space, that has never          MARKET ENTRANTS, AND IF                   line marketing. We will continue to
been more accurate. People are living                                                 pursue consolidation with like-mind-
                                            SO, HOW DO YOU PLAN TO
longer and looking to lead healthier                                                  ed pharmacy groups as we work to-
lives, and these factors, combined          FIGHT BACK?                               ward continuing to grow our national
with the expansion of chronic health        Community pharmacy is highly              footprint.
conditions and an ageing population,        competitive and fragmented. We
are contributing to the strength of the     have competing banner groups and          WHERE DO YOU HOPE YOUR
sector and offer prospects for future       competition from both supermarkets        BUSINESS TO BE THIS TIME
growth and industry expansion.              and new market entrants. Given the        NEXT YEAR?
                                            already high levels of competition
WHAT DO YOU EXPECT                          within our industry, any new en-          Twelve months from now, we’d like
TO BE THE BIGGEST                           trants will need to have an incredibly    to see TerryWhite Chemmart as a
                                            strong offer to be able to compete        household name with high levels of
CHALLENGES FOR
                                            with the established groups. We are       brand recognition and a national net-
RETAILERS OVER THE NEXT                                                               work of pharmacies that has contin-
                                            focussed on supporting our members
12 TO 18 MONTHS?                                                                      ued to grow.
                                            to achieve success by having a highly
As retailers, we need to have a clear       competitive and differentiated offer
point of difference and be highly re-
sponsive to the ever-changing needs
of our customers. Consumers are very
savvy – they want more from their
shopping experience. In my view, one
of the biggest challenges for retailers,
and one of the biggest opportunities,
will be tapping into that sentiment
and providing that experience.
   We have designed our pharmacies
to ensure the pharmacist is front and
centre, and highly accessible. Also,
in response to increased customer
demand for the delivery of frontline
health services, by far most of the
pharmacies within our network have
a clinic room, which has been a great
success in supporting the delivery of
preventative health services, includ-
ing heart health, asthma, weight
management and flu vaccinations.

HOW DO YOU EXPECT TO
CHANGE YOUR BUSINESS                        "We were focussed on ensuring
STRATEGY TO STAY AHEAD
THIS YEAR?
                                            we had a highly competitive retail
Knowing where we want to go, and            pharmacy business model through
why, is what inspires us every day
and drives us as a company. We have
a really ambitious growth strategy
                                            systems that increased
and want to continue to aggressively
increase our network size and market
                                            in-pharmacy efficiencies, freeing
share. The scale we achieved last year
will allow us to significantly increase
                                            up our pharmacists to spend
our investment in above-the-line            more time with customers. "
      www.insideretail.com.au                                                AUSTRALIAN RETAIL OUTLOOK 2017 | 2 3
EXECUTIVE PERSPECTIVE: SUPER RETAIL GROUP

                                          Peter Birtles
                                          Group MD/CEO
                                          Super Retail Group

CHANGING DYNAMICS
After strong sales growth last year, Super Retail Group will this year focus
on understanding its customer, building its omni-channel capabilities, devel-
oping its supply chain and engaging is staff.

WAS 2016 A GOOD                           new Rays brand and store format, at        PRESENCE, AND WHAT
YEAR FOR YOUR RETAIL                      the same time as converting some           FACTORS PLAYED A ROLE IN
BUSINESS?                                 Ray’s Outdoors stores to BCF Boating       THIS?
                                          Camping Fishing Stores.
We have been pleased with our per-           At the same time, BCF has been          We are always looking for ways to
formance through the year. We have        working to broaden its customer base       optimise our store portfolio and
generated strong like-for-like sales      from passionate fishermen to a much        strengthen the group’s overall foot-
growth across all our retail business-    wider cross-section of participants        print. This year we grew the network
es and have made good progress with       in outdoor leisure activities. So far so   of stores in our Amart Sports, BCF
our key strategic initiatives: building   good with the new-format Rays stores       Boating Camping Fishing, Rebel and
our omni-channel offer, developing        attracting tremendous feedback from        Supercheap Auto businesses. Notably,
our supply chain, reinvigorating our      customers, and both businesses gen-        that included extending our brands
leisure business, which includes the      erating good underlying like-for-like      into new geographies, such as launch-
BCF Boating Camping Fishing and           growth and improved profitability.         ing BCF Boating Camping Fishing
Rays brands, and seeing real progress         Looking ahead, we all know the         in Tasmania and Amart Sports in
in building customer-centricity and       dynamics of the retail industry are        Western Australia. At the same time,
safety awareness across our team.         changing – customers have even             we achieved strong growth in online
                                          more information at their fingertips       sales across all brands.
WHAT WERE YOUR BIGGEST                    as to who will best meet their needs          We continue to see opportunity to
CHALLENGES OVER THE                       and they have more choices than ever       open stores across all our brands, as
YEAR?                                     before. Our job is to ensure we stand      there are many areas in the country
                                          out from the crowd with an offer that      in which not all of our brands are
We started the year recognising that      inspires and engages at a broader          present. There are many oppor-
we needed to reinvigorate the perfor-     level than product and price. As long      tunities for retail space growth in
mance of the two businesses in our        as we continue to provide the solu-        large-format retail locations that suit
leisure division: BCF Boating Camp-       tions and experiences that help our        many of our businesses.
ing Fishing and Ray’s Outdoors. We        customers to make the most of their
accelerated the major transformation      leisure time, we are confident we can      DID ANYTHING SURPRISE
underway for the division, which          continue to achieve growth both this       YOU ABOUT YOUR BUSINESS
included a significant repositioning      year and beyond.                           OR THE RETAIL LANDSCAPE
and refurbishment program for the
old Ray’s Outdoors business. This                                                    LAST YEAR?
                                          DID YOU GROW OR
meant accelerating the roll-out of the                                               Across the retail landscape there
                                          CONSOLIDATE YOUR RETAIL

24 | AUSTRALIAN RETAIL OUTLOOK 2017                                                             www.insideretail.com.au
EXECUTIVE PERSPECTIVE: SUPER RETAIL GROUP

was nothing necessarily surprising.       really embraced our focus in two         which is based around understand-
However, you have to be impressed         areas: safety and customer-centricity.   ing the customer, building a great
with the way retail businesses are        We have seen a significant reduction     omni-channel experience, developing
adopting advances in technology to        in our lost-time injury frequency        a highly effective supply chain and
provide a better customer experience.     rate, but, as importantly, the team      building strong operating founda-
It is a challenge for all of us to de-    has recognised the importance of         tions.
termine how, where and when – but         being safety aware and we have              Each of our brands has a clear
more particularly why – we will use       seen an exponential increase in our      pathway to growth ahead – our
technology. It is important to never be   reporting of near misses. We have        strategic focus continues to be in
complacent about the market or cus-       also seen our net promoter score         realising the potential for profitable
tomer expectations. The only constant     for all our brands improve through       growth across the group. Our brands
in retail is constant change, and the     the year, and we were particularly       have a range of growth levers at their
key to success in retail is being able    pleased that every brand recorded a      disposal, including our continued ex-
to identify and respond to market         score of more than 50 toward the end     pansion into “Do It For Me” services,
changes and new developments as           of the year.                             optimising our online channels, and
they occur.                                                                        expanding our private labels, exclu-
    Within our group, I have been         WHAT STRATEGIES DID YOU                  sive partnerships and so on.
very surprised at the strong growth       USE TO GROW OR MAINTAIN                     In Australia, the sectors we work
we have generated in the sales of car     YOUR BUSINESS LAST YEAR,                 in are still highly fragmented in
audio products, despite the declin-                                                many cases. We see significant po-
                                          AND WHAT WERE YOUR KEY
ing market. This just shows what                                                   tential to bring to bear our scale and
can be done when you have a great
                                          AREAS OF FOCUS?                          maturity, and the advantages that of-
merchandise team that really un-          The core focus across each of our        fers in terms of supply chain, capital
derstands the customers and builds        businesses is to move from being         resources and marketing, to continue
strong relationships with tremendous      a product provider to a solution         to grow our business.
trade partners.                           provider. This means engaging and
                                          inspiring our customers around their     HAVE YOU NOTICED ANY
WHAT DID YOUR BUSINESS                    passions, whether that be tuning the     INTERESTING SHIFTS IN
DO REALLY WELL LAST                       performance or maintaining the look      CONSUMER BEHAVIOUR
YEAR?                                     of their Monaro, catching the biggest    OVER THE PAST YEAR?
                                          “barra” of their life or beating their
I always take the biggest pride in        lifetime best for the half-marathon.     As I go around the stores, I sense that
our team, and in the past year it has     This underpins our strategic focus,      customers are becoming ever more

      www.insideretail.com.au                                              AUSTRALIAN RETAIL OUTLOOK 2017 | 2 5
EXECUTIVE PERSPECTIVE: SUPER RETAIL GROUP

 “mission focussed”. They have al-         We have a clear vision set out for the    leisure time, we are confident we can
 ready made their mind up about what       business and we are not anticipating      continue to achieve growth across
 they want to buy, they know what          any significant changes to our strate-    our business.
 they are prepared to pay for it and       gy this year. Our focus will continue
 have generally chosen where they are      to be on understanding our customer,      ARE YOU FACING ANY
 going to buy it. I think the amount of    building our omni-channel capabil-        THREATS FROM NEW
 time spent browsing is going to keep      ities, developing our supply chain,       MARKET ENTRANTS, AND IF
 reducing, and retailers are going to      and engaging our team to be able to
                                                                                     SO HOW DO YOU PLAN TO
 see even less footfall – but a contin-    deliver inspiring and engaging solu-
 ued increase in average customer          tions for our customers.
                                                                                     FIGHT BACK?
 spend per visit. Our challenge as             As we head into a period of low       We have highlighted for many years
 retailers is to engage the customer       inflation, it will be our ability to      the impact international retailers
 when they are deciding what to buy        embrace the changing dynamics of          will have on the Australian retail
 and where to buy it – before they         the retail industry that will enable us   market, whether through rolling out
 come to our stores.                       to outpace the markets in which we        a network of stores or online. We are
                                           work. The macro trend toward solu-        now seeing international retailers
 HOW DO YOU BELIEVE                        tions and services leaves our business    coming into our segments, and we
 THE RETAIL MARKET WILL                    well-placed to capture the revenue,       welcome the challenge that brings.
 PERFORM THIS YEAR?                        customer and margin growth offered        We know we need to continue to
                                           by the shift from products toward         lift the standard of our businesses,
 Consumer sentiment appears to be          the solutions-centric offering that is    which has to be good for the cus-
 generally positive across Australia,      already well underway across the          tomer.
 but what we’re focussed on as a           group.                                        The strategies we have been imple-
 business is continuing to work hard                                                 menting over the past few years have
 to better inspire and engage our cus-     ARE THERE ANY EXTERNAL                    been developed with international
 tomers. At the end of the day, it’s our   FACTORS STRAINING YOUR                    competition in mind, so we don’t
 relationships and connection with                                                   see any need to change our strategic
                                           BUSINESS, SUCH AS STAFF
 our customers that will drive our                                                   focus at this time. We have the op-
 success as a retail business.             COSTS, THE AUSTRALIAN
                                                                                     portunity to capitalise on our deeper
                                           DOLLAR, TAX, RENT,
                                                                                     understanding of the Australian
 WHAT DO YOU EXPECT                        AVAILABILITY OF SUITABLE
 TO BE THE BIGGEST                         LOCATIONS?
 CHALLENGES FOR                            As a major importer, we have seen
 RETAILERS OVER THE NEXT                   the cost of our products increase as
 12 TO 18 MONTHS?                          the Australian dollar has weakened
                                           against the US dollar. However,
 I see the biggest challenge being the     through a combination of our hedg-
 need to evolve the traditional retail     ing programs and fine-tuning our
 business model to accommodate the         pricing and promotions strategies,
 full impact of digital across all areas   we have been able to manage the
 of the organisation, and to evolve the    impact on our business. We are not
 traditional retail culture from being     seeing other factors have a signifi-
 predominantly product-centric to be       cant impact on our business – it’s all
 truly customer-centric.                   about connecting with customers and
                                           meeting or exceeding their expecta-
 HOW DO YOU EXPECT TO                      tions. As long as we are continuing to
 CHANGE YOUR BUSINESS                      provide the solutions and experiences
 STRATEGY TO STAY AHEAD?                   that help them make the most of their

                    "We as retailers
  must earn the right to be invited
    by our customer to fulfil one of
their needs how, when and where
  it best suits them, and unless we
    can do this well, our customers
     have plenty of other choices."
2 6 | AUSTRALIAN RETAIL OUTLOOK 2017                                                           www.insideretail.com.au
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