Paul Keane's picture
Paul Keane

Change coming? Retailers must adapt!

The scale of the impact of Amazon arriving in Australia and its psychological impact on major retailers both in New Zealand and Australia is like nothing I have ever seen before. Australian retailers are literally knocking at the knees in grim preparation for the Amazon arrival. I really wonder what this does to the shareholders confidence of a major company like Wesfarmers which owns Bunning's, Kmart and Coles, when its Managing Directors is reported extorting grim tidings for retailers.

I commented a few weeks ago in respect of similar grim forecasts from The Warehouse camp in New Zealand. There is no doubt that the Amazon format will make retailers stand up and take notice, but I am not convinced that the bugle for retreat should be sounded just yet. Fundamentally, Amazon will enrich the opportunities for consumers. However, for some to predict that the "Large Format Store concept" is at an end is media trivia or, in Donald Trump’s words, "fake news". 

In the 1990s when the Large Format Stores emerged, many thought that the small speciality store concept would die. That didn't happen.

The expansion of major stores like The Warehouse, Briscoes, Harvey Norman, Kmart and Farmers Trading did not see the reduction in speciality store concepts, in fact quite the opposite. What we saw in the late 1990s and into the 2000s was a significant emergence of high quality speciality stores. Examples in New Zealand today are H & M, Zara, and Top Shop to name a few. Retailers still need Bricks and Mortar stores.

On the reverse side of the coin, just over the past weekend, the owners of "Farro" a Gourmet specialist food retailer with a number of stores in Auckland, announced that its stores were about to top over $100 million in sales. Farro has been a client of RCG since its inception, and its growth is due to hard work by its owners. It is a good example of a couple of individuals opening Gourmet Stores in the face of severe local dominance by the two major Supermarket Chains.

The Farro emergence and success demonstrated that if the offering to the consumer is well targeted then success will follow. 

Amazon is another wakeup call for retailers operating in Australia and New Zealand. It is however, not the end of retail trading as we know it. In days past, when horses were the common means of transport, "Merchants" built hitching rails outside their stores to accommodate customers horses, for convenience. Over time, horses were replaced with car parks, again for convenience. I suspect that the arrival of Amazon is a bit like that analogy. Amazon may well end up delivering with Drones, but there will be nothing to match the need for personal communication, and interaction. 

by Paul Keane, director

Sharewatch | Amazon

Amazon is a $442 billion company, based on its market capitalisation. This makes it the 4th most valuable company in the world, behind Apple, Alphabet (formerly Google) and Microsoft. These are tech company valuations, not retail ones.

Amazon posted sales of $136 billion in 2016 (up 27.1%), and made profits of $2.4 billion, its best ever performance. Sales are still growing exponentially, even in North America where Amazon has been since inception. The company continues to have a larger influence on retail, and it isn’t slowing down. Retailers around the world, including New Zealand, need to be attuned to this, and have a defensible business model.


In the Press

Local media highlights 26 Apr - 2 May 2017

Ryman begins building its biggest village

New Zealand's biggest retirement village owner-operator Ryman Healthcare has started construction work on its largest project to date, the $360 million Brandon Park in Melbourne where more than 700 residents will live.

(Source: NZ Herald) 

New cruise $56m cruise ship berth for the Port of Lyttelton

The Port of Lyttelton will be able to handle some of the world's largest cruise liners when a new $56 million cruise ship berth opens in two-and-a-half years time.
Since the 2011 earthquakes, most cruise vessels have bypassed the Christchurch port and gone to Akaroa instead.


New dwelling consents pick up in March, but still not enough to solve Auckland's housing shortage 

The number of new homes being consented rose for the third month in a row in March, with 2779 new dwelling consents issued, compared with 2418 in February and 1752 in January, according to Statistics NZ.

(Source: interest.co.nz)

52-level NDG tower and Ritz Carlton hotel gets approval

A long-awaited $350 million tower block including a Ritz Carlton hotel in Auckland has been given approval by the Overseas Investment Office.
The 52-storey building is set to be built by Furu Ding's company NDG on a long-vacant corner bounded by Elliott, Albert and Victoria streets.

(Source: Stuff)

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