Sam Dickie: Fisher Funds expert on the rise in global retail giants moving into New Zealand

Over the last few years, more international retail giants have moved to establish themselves in New Zealand.

Costco opened its first store in West Auckland a couple of years ago, and Ikea is set to open up its first New Zealand-based store in Auckland in December.

Fisher Funds expert Sam Dickie reveals why these changes are taking place.

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Episode Transcript

Speaker 1 (00:00):
Now over the last few years we've managed to pull
a couple of retail giants too sure and that changing
our shopping landscape. We've got Costco opening its first store
on wes Stalkland in twenty twenty two, and now i
Kia is going to be opening up at Sylvia Park
in December this year. Sam Dickey from Fisher Funds is
with us.

Speaker 2 (00:14):
Hello Sam, good evening, Heather.

Speaker 1 (00:16):
Now, these are really really big business is very successful.
What makes them so formidable?

Speaker 2 (00:22):
Formidable? Indeed, they are phenomenal businesses. So Costco half a
trillion dollar company share price up around almost four thousand
percent in the last twenty years, and I here the
biggest furniture retailer in the world. Costco is obsessive about
its customers. So when they go into any board meeting,
any management meeting, they always talk about how they can

(00:44):
drive down the price of their goods for their customers.
They never talk about how they can gouge more profit
or margin out of you and I. And that's called
scale economy shared and its feeds on itself and it's
very hard for smaller players to compete with and that's
why they were still constores booming and IKEA's motors is
also at sheer scale, so four hundred and twenty two
stores across sixty odd countries. What's really interesting about Ikea, though,

(01:09):
is its unique ownership structure, and that's kind of a
competitive advantage. So it is owned by Dutch and Swiss foundations,
and the Dutch foundation model makes selling Ikea more or
less impossible, which ensures independence from shareholders and that silly
quarterly pressure, and it allows them to take a one
hundred year strategic view while competitors chase short term gains.

Speaker 1 (01:29):
Interesting and why are they interested in coming to New Zealand?

Speaker 2 (01:33):
Yes, well, it is interesting because global behemoths have sort
of ignored New Zealand for the last fifty years because
it's it's so small until now. And you know, you
think about the biggest retailers in the world, warm Amazon
Home Depot, none of them have ventured down here with
local operations. So so Costco, the third biggest retailer in
the world, is here. And that's because New Zealand is
an attractive market because it's dominated by it sort of

(01:55):
a small handful a cartel or an oligopoly of duopoly
in each segment, so a small handful of supermarkets for
Costco to disrupt, a small handful of furniture players for
Ike to disrupt, and plus iqre side of the government's
streamlined approval process to encourage overseas competition in retail. And
of course it's a point in time thing. So New
Zealand is in Auckland is a compact, affluent market. And

(02:18):
while we're not number one on the global expansion list
for these these great companies, they do get to us eventually.

Speaker 1 (02:24):
Should retailers here in this country be worried?

Speaker 2 (02:28):
The look? I do think they have been sheltered, these
oligopolies until now from these global bohemoths, so that the
news is not quite as rosy and they're gonna have
to run really fast to our compete these companies. And
remember that they only have one store each by the
end of this year, butt Costco's planning another one in
South Auckland and another one in christ To, so they
kind of have a land and expand model that they

(02:49):
don't really come down here just to have one store.

Speaker 1 (02:52):
And what about consumers? Should we be as stoked as
we are? Yeah?

Speaker 2 (02:56):
I think so it's great news for us. So again,
Costco's obsessive about us, about you and I, and using
its scale to drive down prices for us every day.
That's nice to have and choice is always good. We've
been restricted to a small handful of supermarket players and
IKE runs exceptionally lean profit margin and uses its massive
scale to offer very low prices. In that mantra that

(03:17):
there's nothing free in life, but the best price you
can get is when you do as much as you
can yourself. So that's pretty exciting. So I think it's
good news for us.

Speaker 1 (03:25):
So what does it mean for investors.

Speaker 2 (03:28):
Well, for investors in Costco, doesn't mean much at all
really because New Zealand's pretty tiny and we can't invest
in the IKE, but it means quite a bit for
investors in New Zealand companies. So on the good news
front for Main Freight, allegedly, I think there's been another press.
They've apparently won the IKE in New Zealand logistics contract
and apart from being the best logistics operator in New Zealand,

(03:50):
I suspect Main Freights pretty unique hundred year vision gelled
quite well with IKE is pretty unique kind one hundred
year vision. It's pretty rare to have that long term
vision but for investors in listed retailers that cross swords
with IKEA companies like the warehouse Harvey Norman, they should
Those investors should revisit their investment thesis and make sure

(04:11):
they're factored in a significant step up in competition from
global winners.

Speaker 1 (04:15):
Yeah, hey, Sam, as always really appreciated Sam. Dicky Fisher
Funds will talk to you again in a week's time.

Speaker 2 (04:20):
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