Join my conversation about Uniqlo

Hi patient blog readers,

I’ve been making noise over at The Conversation again, this time about the arrival of various international retailers to Australia, including one of Japan’s finest: Uniqlo.

“Japanese fashion label Uniqlo and homeware store Muji will enter the Australian market next year, following other recent arrivals H&M, Topshop and Zara. Despite the purported decline of brick and mortar stores, Australian shoppers will finally be able to shop at stores they’d once only encountered overseas. It seems a far cry from only a few years ago…”

Read more here, make comments, tell you friends etc…

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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?

Making a case for Aldi

While I’ve been criminally quiet around here lately, two of my colleagues (one a coauthor, one my PhD Student) have been busy penning a mighty fine teaching case about the Aussie endeavours of German supermarket giant Aldi.

For a lengthy discussion of Tom Osegowitsch and Markus Goelz’s Aldi Australia case see here.

Of course, I’ve been blabbering on about said mob for ages (back when I used to blog!), although mainly in the US context (weirdly):

See here, here and here.

See Dick jump, see Dick rant

Perennial soundbite provider Dick Smith has been very vocal in the past couple of days about the prospect of his namesake retail business falling into ‘foreign hands’. Despite him selling the electronics chain to Woolworth’s two decades ago, he is threatening to ‘trash the brand‘ if some foreign mob tries to buy it.

The logic he throws around on this (and other ‘buy Australian’ campaigns) is spurious at best.  It is very unclear why so much importance is placed on the specific ownership structure of such businesses.  Perhaps it reflects Dick’s own background as a business owner (and therefore someone who derived their income from the ‘surplus’ or profits of the firm). But for almost all stakeholders in the firm, and the overall health of the economy, the question of the location of the major shareholders (and principal decision-makers) should be of little importance.

Consider the Dick Smith Electronics case.

The firm operate 433 stores across Australia and NZ (we’ll get back to this Trans-Tasman dimension in a second), and made $1.8b in sales last year.  The economic and societal impact on Australia of these operations is most heavily felt in terms of the 5300+ employees and the wages they earn (and then spend/invest), the flow of moneys to landlords, supply chain participants and other ancillary service providers.  The ‘earnings’ of the firm (i.e. the ‘surplus’ or ‘profit extracted by Woolworth’s) last year was a paltry $20m or so.

If Dick Smith Electronics were sold to a non-Australian entity, they would be buying the right to extract such profit, but also taking on the role of paying a wages bill that presumably exceeds $250m, and feeding through a lot of income to the other parts of the Dick Smith sphere of activity.  The firm would still pay taxes, rents, and provide consumers with access to products. The firm might remit profits offshore, but it’s just as likely said profits would be reinvested in Australian in an attempt to improve the business and its performance. This is hardly a case of ‘selling the farm’.

There is also one clearly irreconcilable contradiction in the jingoistic rants of Smith and other mercantilists: outward foreign direct investment.

If the logic says Aussie interests are hurt by any sort of inward investment (e.g. by acquisitions of local firms by big bad foreign folks), then surely any instance when an Australian firm expands offshore is similarly deleterious to the host nation. Where was Dick when his namesake firm made their imperialistic entre into NZ?  And when they signed agreements to ally with Tata in India?

More from me on e-commerce and retailers

My piece on the Conversation has generated a bit of interest from business reporters.  Here’s a piece from the Brisbane Times that resulted from a phone interview. I got to bandy around terms like “disruptive technology” and delve deeper into the scope for bricks and clicks to coexist (for some).