Retail is alive and kicking

Congratulations to our winners and finalists in the BRW and AMP Capital Shopping Centres Australian Retailer of the Year Awards 2012. Designed to showcase the best of retail, these awards do more than this: they remind us that in a sector often considered moribund and struggling, there are still pockets of innovation and outperformance that should serve to inspire the rest.

Economic commentators have it in for retailers these days. Any report on the sector refers to it as “troubled” or “in the doldrums” so it’s rare to see coverage that holds the sector up. At BRW, however, we love success. Where some see the retail glass as half empty, we know it is really half full.

Where does our positive approach come from? Well, partly it’s from the numbers – employment figures have been stronger than expected and retail spend was up in the last quarter, only slightly, but at least it is trending in the right direction as consumers begin to relax at the thought that, despite poor global news, the financial sky might not actually fall in.

Second, it’s based on the recognition that the fundamentals of exchange – the buy and the sell – are still as strong a pillar of human behaviour as ever. What consumers buy might be changing, however, with affluent Western consumers seeking experiences over material goods – which is one of the reasons that the spending figures have shown such a strong performance in the food and restaurant sector.

But for savvy retailers this is a challenge that can be overcome. We see this already with stores such as the pharmacy chain Priceline moving away from just offering a product (cosmetics) to offering a service (beauty advice). The ability to combine face-to-face advice with well-priced products available in the store and potentially discounted online is something that only physical retailers with a presence on the ground will be able to offer.

And third, it’s in the huge surge of innovation that we see in the retail sector. Online shopping has brought prices down, forcing retailers to restructure their back end to protect margins. The resulting investment in technology and process is revolutionising the industry as retailers discover that the upside to having better systems is having a stronger oversight of their business. This is resulting in a trend towards shallower inventory which takes money out of working capital and enables it to be spent elsewhere.

Furthermore, new technology is enabling super-fast delivery to consumers. This started in the UK but has now reached our shores, with e-tailers such as www.theiconic.com.au offering three-hour delivery in the major centres. The focus on delivery and logistics could give some of the struggling major brands a look-in if they get their houses in order. These brands with a physical infrastructure across Australia stand to gain if they can offer same-day delivery – and this would make ordering from offshore less attractive.

BRW is not saying that the worst is over – during the boom years retail became a fat and lazy sector and some of the worst operators will not survive this current period. We’ve already seen a number of high street names close their doors and the uncertainty in Europe combined with the slowdown of China and the continued strong dollar means that retailers will remain at the sharp end of the economy. However, there’s life in the sector yet and the winners highlighted in this week’s issue prove it.

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