Does everyone hate Woollies?

I had a brief email exchange with a journalism student last week, and I thought I would share my views with you (my verrrrry patient readers).

The background is that market research had been recently released indicating 72% of Australians don’t trust Coles or Woolworths and these levels of distrust have gone up since last year.

Q. How do you think Woolworths are faring in the Retail sector/Stock market?

Me:  Woolworths had been a darling of the stockmarket until quite recently.  Their main rival, Coles Myer performed poorly for many years, and Woolworths was much quicker in adopting and adapting ‘best practice’ from offshore (most notably through a close alliance with Wal-Mart).  Much of these practices are on the warehousing/stock management side of things.  Woolworths grew faster than Coles Myer and had better margins.  It made some strong moves in the non-supermarket space – with alcohol sales being particularly strong.

The split up of Coles Myer and the acquisition of the non-Department business by Wesfarmers has negatively affected Woolworths. The revamp of both the Coles supermarket business and K-Mart variety stores have put pressure on Woolworths’ (and Big W’s) margins and curbed their growth.  At the same time, Woolworths has been burnt by the poor performance of the Dick Smith business, and the large investments in a rival to Wesfarmers’ Bunnings are a long way from paying off.

Q. What implications might these figures of the survey have for the company and it’s competitors?

Me: As for the distrust aspect, this is far from surprising.  The supermarket sector in Australia is one of the most concentrated in the world.  The attempts by both Coles and Woolworths to further squeeze suppliers (as part of the drive to improve margins) have coincided with a period of perceived price inflation (although I’m not convinced the latter is actually occurring).

Consumers have apparently resigned themselves to the idea that these two duopolists are not really competing too hard. Stories of struggling suppliers seem to have fuelled this animosity.

But like the big banks, I’m not sure customer dissatisfaction will genuinely translate into consumer action.  There is a strong tendency to ‘stick around’ while grumbling.  Any incursion by Aldi (or to a much lesser extent Costco) is unlikely to have a big impact given the sheer weight of numbers (in terms of stores and ease of accessibility).

What do you lot think?

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More conversation about Dick’s adventures

I expanded yesterday’s post about the Dick Smith anti-FDI stance for the Conversation wbsite.  Click here to read it.

Melbourne > Sydney

This blog is not above fanning a little inter-city rivalry.  A recent released study of the economic performance of 150 cities over the 1993-2010 period shows Melbourne to have consistently outpunched its Northern rival Sydney.

The report from the Brookings Institute is focussed on the variation in recovery between cities around the world (and also within countries), and thus reports the cities’ performances (in terms of Economic Value Added per capita) over three distinct (but overlapping) periods

– Pre-Recession (1993-2007 – I guess that dotcom thingie was just a blip),
– the Recession (2007-2010), and
– the Recovery (2009-2010)

Melbourne (47th/150, 22nd & 14th respectively) outranks Sydney (76th, 30th & 45th) during all three epochs.  Indeed, Melbourne is only outpaced by a single developed world city – Singapore (#4) in the  Recovery phase. The remainder is a mix of BRIC cities and a few similarly emerging burghs (Istanbul and Santiago).

I don’t have any particular profound insights into Melbourne’s success here.  It remains unclear how Economic Value Added is apportioned – I do wonder whether we might be riding on the back of BHP’s (partial) head office being here.

Nor am I sure we’ll stick it out near the top if the big hit to international student revenues continues, but I’ll bask in the  ‘victory’ for now. And for those wondering, Perth isn’t one of the cities they measure (Brisbane is – #27, #23, #64).

At a less parochial level, I do find the approach of assessing and ranking cities a fascinating and much-needed one.  There is a big danger in treating a country as a homogenous unit of analysis (in the same way that treating the world as a one-size-fits-all marketplace for anything is perilous).

There are substantial variations in the resources and opportunities from city to city within and across countries. These may be driven by geography, infrastructure, culture, history, chance, entrepreneurial efforts and/or governmental actions (or inactions).  We do know that multinationals (and domestic firms) make very conscious choices to locate ‘bits’ of their business in particular cities.  Indexes like this go some way towards tracking/assisting this process.

The report helpfully provides an excellent reference list of similar efforts from other research teams:

“Metropolis Now: The Global Cities Index 2010.” Foreign Policy, September/October 2010.
“Cities of Opportunity” (Partnership for New York City and PriceWaterhouse Coopers, 2010).
“Winning in Emerging-Market Cities: A Guide to the World’s Largest Growth Opportunity” (Boston Consulting Group, 2010).

I haven’t looked up the Melbourne-Sydney comparisons on any of these, but presume we win out each time 🙂

Myer SEZ no-more GST

The recent rise in the Aussie dollar (especially the psychological fillip that was our brief flirtation with parity with the US$), has drawn a lot of attention to the effectively tax-free status of purchasing online from offshore vendors.

Indeed, Australia’s most outspoken retailing billionaire Gerry Harvey has been calling for imposition of the Goods and Services Tax (GST) on all such purchases (the Tax Office sensibly warns that pursuit of last revenue from these transactions would be mightily onerous).

But, with Aussie department store giant Myer indicating it is looking to launch an online site based in China to retail goods to Aussie online customers the war has moved beyond rhetoric. Myer will be turning the rest of world into an effective Special Economic Zone relative to the bricks and mortar land of Australia.

It is also intriguing that Myer are reportedly partnering up with a government-owned entity in Australia Post to facilitate this duping of the Australian Tax Office (and thus denying the Australian government revenue).

As for business model itself, it is far from ideal in terms of economies of scale etc, as instead of shipping goods from China in bulk via containers to Australia, the goods would be mailed (most likely by air, but possibly by ship) individually.  But as long as those postage costs do not exceed 10 percent (the typical GST rate imposed) of the instore price in Australia, there is a pretty good incentive for Aussie consumers to consider the offer.

One final aside, it will be an interesting test of the much-espoused hostility of some consumers to ‘foreign goods’ to see how consumers react to such an unavoidable acknowledgement of the source (China) of so many consumer products.

2009 in Review

Ooops, I’m a little later this year with my reflections on 2009 as a blogger (last year I managed to do it on New Years Day – oh well, better late than never).

I can tell you that I post exactly 100 times (but 42 of those were in the first 3 months), and that there were just over 14,300 visits to the site. January and December were the two busiest months, with about 2000 visits each. The busiest day was Dec 2 when this post got over 200 clicks.

The most popular posts from 2009 were:

#1 Can Aldi beat Wal-Mart?

#2 A juicy tale of international expansion (about Boost Juice)

and very strangely, one about toilets at #3 Toto, we’re not in Tokyo anymore…

The aforementioned Dec 2 post Why don’t more producers sell on-line? came in at #4 (and thus has the highest average visitors per day).

#5 confirms a retailing bias with Capabilities do matter (about Zara, Ikea & H&M)

And the post from 2008 asked is there Too much Wii in this Blue Ocean? still attracts loads of readers.

Thank you to all who have visited, commented, argued and critiqued. I relish the engagement and the challenge. Here’s to a great 2010…