September 6, 2023 • 49 mins
Dive into the world of retail as we unpack the impacts of the 2020 pandemic, the surge of the value-conscious consumer, and the unpredictable terrain of Australian retail in our latest video.
Join our host, Nigel Price, in a profound discussion with one of the industry's stalwarts, Phil Moujaes, CEO of PM Retail and Former GM of Bing Lee Electrics, as they untangle the intricate complexities of the retail landscape.
Notice: Before making any decisions regarding your ecommerce strategy, we strongly recommend you conduct your own in-depth research and seek expert advice.
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Episode Transcript
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(00:00):
Welcome to the show, Phil.
(00:24):
How are you going?
Thank you, Nigel.
Thank you for inviting me on your podcast.
You're welcome.
Going well.
I'm glad, glad to have you on the show.
Okay.
So, uh, if you'd like to just, uh, give a bit of a brief background of yourself
and your career in the, in the retail industry and what you're currently
doing at the moment, it'd be fantastic.
(00:45):
Well, I've worked all my career in retail in Australia.
Um, so I've had, um, 33 years in retail.
I've worked for BW back in the nineties.
I was a bar there from there.
I went to a Vox retail group who owned, um, many, uh, brand retailers
(01:07):
like Chandler's and Billy Guy at Vox retail.
Um, and it was a national retailer.
So I was there for about five years in a national bar, uh, role.
Um, and then from there I moved to Bingley in 1999 and I was there until 2021.
(01:28):
So about 22 years at Bingley's five or six years as a merchandise director,
17 years as a general manager.
Um, and I decided, uh, to take a bit of a break at the travel, which we did,
we had to delay it a bit because of COVID.
Um, and the restrictions and travel bans and everything else.
(01:51):
So we end up, uh, traveling in 2022 rather than 2020 and 21.
Um, and I was away for about six, seven months and, um, came back, uh, around
Christmas, I started my own consulting business in, um, 21 and, uh, that allowed
(02:13):
me as well to work as a digital nomad while I was traveling, uh, so earning a
little bit of an income when I was traveling.
Um, and I am still working, um, in my consulting firm, um, uh, at this point in time.
Yeah.
Fantastic.
Thanks so much for that.
Yeah.
I mean, you've had a very long, uh, career in, in retail and, you know, one of the
(02:37):
reasons why I'm really looking forward to having you on, um, because there's a
lot of talk at the moment.
I mean, this is a retail podcast, actually.
We're the first few episodes.
We've been talking about, um, cybersecurity and things because that's been on the
minds of people, but now I can see, you know, with interest rates and, you know,
the current retail environment at the moment, it looks like it's, um, uh, you
(02:58):
know, moving into what could be considered some pretty tough times.
Um, you know, I just wanted to go into, if we could jump straight into it, you
know, your thoughts around the current retail outlook in Australia at the moment.
I mean, the climate seems to be one minute, they're holding off on interest rates.
Next minute, the endless seems what is an endless cycle of increases.
(03:20):
Um, what do you think of some of these, you know, trends and challenges and
potentially some of these opportunities that are currently available at the
moment for, for retailers?
Uh, look, I mean, the last, uh, five years or four years since 2020, uh, what we have
seen in general in the economy, um, and in retail in particular is, is a once
(03:44):
in a hundred year event.
Um, uh, I mean, no one predicted, uh, a pandemic, uh, in, uh, 2020, nobody
predicted the impact and the reaction to that pandemic, uh, and, and the travel
bands and, and, and the bands from leaving your home, um, and, and, and,
(04:05):
and everything else.
So, so the impact of that on many industries has been profound.
And I think in, in the retail, that impact has been phenomenal.
Um, because what we saw in during that period of travel restrictions and, and
(04:26):
working from home and studying from home, uh, and the fact that people, uh, really
couldn't spend their money on travel or on, or, or going out, eating out or
anything like that, um, what we saw is probably the biggest boom in retail that
we have ever seen in my lifetime anyway, my working time and, um, and that boom,
(04:50):
uh, went on for pretty much about 18 months, 19 months at the same time when,
when there was a lot of spending happening in retail at the same time,
because of, uh, the pandemic, uh, there was supply restrictions.
So there was issues in shipping, there was issues in manufacturing, there
(05:12):
was issues in sourcing, uh, material.
So as such, the demand outweighed supply in a big way, um, to, to, like, to an
extent that we haven't seen before and, and it led to obviously the inflation,
um, um, uh, Gini coming out of the bottle.
(05:34):
Yep.
Yep.
Uh, and that inflation, um, started to, um, um, to appear in 21, uh, whereby,
you know, uh, people were paying more for goods because they just wanted it.
And the choice was much smaller because of the high demand and low supply.
(05:54):
Um, uh, and the, uh, all the input cost, um, was high.
So as such inflation kicked on and, um, and in my opinion, um, the, the, um, the,
you know, the, the amount of free money that was pumped into the economies with
(06:15):
zero percent interest rates, uh, has led to, um, to a big, uh, big spending.
And as such, um, inflation, um, um, went up significantly.
Uh, and now what we are seeing is that, um, um, governments and, and, and central
(06:35):
banks around the world and in Australia, putting interest rates up to try to tame
inflation because inflation is much harder than, than, than what, what it needs to be.
Um, and, um, in Australia, you know, inflation went up to around 8% at its peak.
Uh, it needs to be around two to 3%.
(06:56):
That's what the reserve bank policy is.
It needs to be between two and 3%.
Yep.
So as such, we've seen 12 months, 12, 12 consecutive interest rate import, 12
interest rate increases in 15 months, uh, which I don't think we have seen before.
And as such, um, what we are seeing now in retail is that, uh, people are starting
(07:22):
now to hold back on spending in retail.
Yep.
Uh, and we are starting to see, um, the impact of, uh, inflation or interest rates
going up, mortgages, repayment going up.
Yep.
Um, everything else related to that.
So, uh, so as such, yeah, retail is starting to suffer.
(07:44):
Uh, but at the same time, when you think about, um, the amount of spending that
happened during the pandemic period, um, it is something that is, is that was expected.
So the slowdown that we are seeing now is expected.
Yep.
How long the slowdown is going to go for, um, how much it, like how deep is it going
(08:07):
to be it's still early days.
Um, I think it's going to be quite significant, uh, and probably more in
some industries than other industries or sectors in retail.
Um, and definitely the sector, uh, that you and I worked in, which is appliances
and electronic, um, those categories, you have seen a very big boom during COVID.
(08:32):
Um, because people were buying, um, office equipment.
Yeah.
Yeah.
Cameras, TVs, uh, even, uh, they were spending money on coffee machines and
operating fridges and everything else.
So, yeah, so I think the downturn in that industry is going to probably to be
significant and it's going to go for a, for, for, uh, you know, for a fair bit of time.
(08:57):
Um, and, um, and it's going to impact on retailers out there.
No doubt about that.
Yeah.
Yeah.
Well, I mean, there's a lot, there's so much going on, isn't there for
retailers at the moment?
I mean, I think you spoke about, you know, that, that, uh, sort of once in a lifetime,
it was a bit of an opportunity for both online retailers and offline
(09:19):
retailers and, and multi-channel retailers as such to capitalize on that,
um, additional spending that was going on at the time during the, the
lockdowns and things.
And I think that, um, sort of the, the bit of the postmortem to that is that a lot of
the, uh, inventory management systems and things sort of overstocked a lot of
retailers as well.
So it's a bit of a double whammy too, isn't it?
At the moment, I'm hearing that there's quite a bit of stock with some, some
(09:42):
within some categories, um, retail categories, and you've got this sort of
contraction going on in spending and it's sort of like, okay, well, how do you,
how do you clear this stock out?
And it's, um, you know, it ends up being a lot of, um, reduced margins and, and a
lot of discounting going on in the retail sector.
And, and a lot of discounting going on to try and keep people spending.
(10:05):
And I think one of the stats you told me, this is prior to the podcast was there
was around one third of people are still spending and though they, those people
are the ones without mortgages, but the people with mortgages, I just say, you
know, that with the 12 consecutive interest rate increases, it's, um, they're
the ones that are sort of sitting there counting their pennies a little bit more
considering the cost of homes and things and living and that inflation.
(10:26):
So it's a significant challenge for retailers.
And maybe it is the, you could almost say it is that return again of, um, back
in, you know, I think it was 20, just before the, um, the financial crisis
happened, uh, that value conscious consumer that was out there was always
looking for discounts and the rise of sites like catch and, um, and eBay were
(10:49):
really, really cranking at that point in time because people were looking for
discounts and we could maybe see us another cycle of that, um, given that
people are looking for discounts.
What are your thoughts about that?
And is there opportunities there for retailers to try and bank, you know,
some still some margin and keep turning boxes out of warehouses and so on?
Look, no doubt.
Um, the issues related to inventory, uh, are real.
(11:14):
Um, but it varies, uh, by retail sector.
Yep.
I think from what I'm hearing from my, um, you know, my understanding and
talking to retailers of the furniture, retailers are probably the
ones that have accumulated the biggest amount of inventory because obviously
they saw also an increase in demand during COVID and, um, and, and, and
(11:39):
their, um, uh, supply chain is, uh, is much longer.
Uh, so, uh, you know, in, in on average, I think it's about six months from when
they ordered the stock to when they receive it and, uh, enduring COVID, uh,
obviously with the restrictions in manufacturing and everything else, they
(12:00):
placed big orders thinking that the demand will continue the reopening of
economies, people getting back to normal.
Uh, and as such, what happened love that inventory and up coming at the same
time or rubbing at the same time.
So suddenly they were overstocked and demand dropped off significantly.
So that industry has love excess stock out there.
(12:24):
Uh, other industries may be not impacted so much because their supply chain
is, uh, on much shorter lead times.
Yep.
Um, but there is no doubt that this period of, um, you know, of, uh, slow
slow down in demand is going to see activities get back to pre COVID levels
(12:46):
where we're going to see significant amount of discounting significant amount
of impacting to, uh, of marketing around discounts and everything else to try to
entice consumer to spend.
And I'm hearing that really love the spending now is happening when,
when products are discounted.
Um, people are not really being, uh, uh, buying when, when there is no
(13:12):
discounts, uh, and it's in some categories, it's worse than other categories.
So I think this is going to impact retail and it's going to obviously, um, you
know, the, the retailers that have, uh, better understanding of their, uh,
inventory that manage their inventory better that have the technology to
(13:34):
manage their inventory better that they have a real time, um, real time reports
on their inventory and sell through will handle this down to a lot better than
retailers that do not have, uh, that did not invest in technology and haven't
can not really be, uh, that they don't have the visibility that, uh, other
(13:56):
retailers do such, we will probably see that some retails will get through this
period, you know, to, to trade.
Yeah.
Yeah.
And do you think that the, um, the, the customer experience is still for a lot
of these guys, um, is sort of a bit of a way to, um, you know, keep their
customers and lower their marketing costs and, and try and keep, I suppose,
(14:21):
just keep customers in general.
Cause we, we, we all know that it's twice as expensive to acquire new
customers versus retaining customers.
What are your thoughts about a lot of these retailers that have a lot of this
stock sitting in warehouses and, you know, the front end of their, either
their website or their, their install point of sale system is not the best in
terms of customer experience.
(14:41):
What are, what are your thoughts about that?
Look, I think that when you consider, uh, the slow down, um, it has impacted,
uh, a bit more on, um, on online, uh, traders during the COVID period, uh,
people could not get, go out to the shops.
So, so there was a bigger demand on, on, um, uh, people buying online.
(15:06):
And as such, we saw a very big, um, growth, uh, in online sales.
Uh, from what I'm seeing now that the economies have reopened, um, customers
are going back to the shops, uh, they are enjoying the experience going back to
the shops and as such, uh, the pure online retailers have, um,
(15:29):
are probably seeing a bigger downturn than the multi-channel retailers.
Um, however, you know, those, uh, people that have, um, uh, better
understanding of their customers and understanding what, what their customers
want, uh, and can target their customers in, uh, more with more, uh, content
(15:56):
that they are looking for.
Uh, I mean, obviously those retailers are going to pick up market share
in this environment and those retailers that haven't, don't have the systems
to allow them to, um, to communicate with their customers in a meaningful way
are going to find that, that they're going to have to obviously leverage
(16:17):
the discounting more to try to be able to, uh, attract, uh, a business
in, in this, in this downturn.
Yeah.
Yeah, that's right.
Um, yeah.
All right.
Well, we might move on to just another topic and I think this is sort of, again,
sort of goes towards, um, you know, channel growth and moving towards, um,
(16:38):
creating, uh, opportunities to, for, for, for a business, um, you know, sitting
there as a, as a general manager or a C level executive or someone, you know,
you're thinking about, you know, you cost side of your balance sheet and you're,
you know, your revenue side of your balance sheet and you sort of going, okay,
well, we don't want to cut too much on the, on the cost side because we have to
(16:58):
move, you know, move the stock that's coming in.
Then you've got the, um, on the revenue side, you've got, okay, well, how do
we open up new channels?
How do we do it?
Potentially do it, um, in a way that is, um, complimentary or, or to, to the
existing business model that these businesses have.
And it sort of leads me to this sort of bit of a trend where brands are starting
(17:18):
to move towards selling directly to consumers, um, via, um, you know, the
online side of things, um, or specific locations and so on.
What, um, what are your thoughts around sort of that sort of, um, that model
where brands potentially do have the opportunity to now start, uh, selling
(17:41):
directly to consumers where, you know, they saw that demand, um, back 2019,
late 2019, 2020, uh, people, you know, just staying at home, not going in, not,
not discovering their products and services and their ranges so much as, um,
via their website.
What, what is your thoughts now that they've potentially built up this
kind of audience now?
(18:02):
Um, you know, obviously retailers have an extremely important part of, um, the
retail landscape, of course, but, um, I've noticed there's a bit of a little bit
of a trend towards this, um, sort of going brands going directly to consumers.
What are your, um, your thoughts around that?
Uh, look, uh, I think your observation is, uh, a hundred percent accurate.
(18:26):
I think that trend has started many years ago.
I think it, um, it varies by retail sector, uh, but there is no doubt.
I think that, um, when a number of our department stores in Australia have
started reducing the service levels in their shops, um, the, uh, David Jones
(18:47):
of this world and the Maher of this world 10, 15 years ago, and they started
reducing service levels in their shops.
I think, uh, some of, uh, their suppliers, uh, started, uh, seeing that
and probably receiving complaints from, from customers about the fact that they
are not getting the service level that they, they would like to see.
(19:13):
Yep.
So I think that has, um, has, uh, encouraged some of those suppliers
to look at, uh, going direct to those customers and setting up, uh, initially
started with experience centers, uh, trying to have an experience center
where, where customers can walk into a, like an app store, uh, and, uh,
(19:37):
like an Apple shop or a Samsung shop or a Dyson store or a Louis Vuitton shop
or a, um, um, you know, um, some of the clothing brands, um, and, uh, and, uh,
they said, okay, well, we will set up experience stores and, um, we will show
(20:00):
our full range of products because again, you know, law retailers pick and
choose what they want to sell from the suppliers or from a manufacturer's range.
Um, so they said, okay, we want to show our full width of, uh, products,
merchandise, and we want to have experienced sales staff that are trained
(20:22):
that can answer questions and, uh, from customers.
Yeah.
And also we want to give them a nice shop with a nice, uh, you know,
shopping experience as such that trend started, uh, with those type of
intentions, um, and I think that from there, I think that trend has, has,
(20:45):
uh, increased those suppliers, uh, saw some success with that.
They saw that, okay, if we can avoid paying a retail margin, um, then, you
know, we can set up those shops and, you know, give the customers what they want,
but at the same time, improved our profitability.
And, um, and, uh, we saw many of those shops opening around, uh, Sydney
(21:10):
and Melbourne and other places.
And then obviously with the e-commerce and with the, uh, popularity of e-commerce,
many of those, uh, brands decided to set up their own, uh, e-commerce sites and
sell direct to customers and, um, and bypass the retailer.
(21:31):
And, um, so when you look at that now, when you look at the, uh, the market
and the strategies, um, this is a part of parcel of doing business.
So it seems to be centered around the customer experience, doesn't it?
I mean, if it, you know, if, if a good point, um, about the training and, and,
and product knowledge and understanding it's during COVID, you've got people
(21:54):
coming in and out of your business, your retail business, and then you've got
these, as you say, these complaints potentially starting around not having
enough knowledge, um, the online chat is not always a great forum to try and
explain to someone, you know, the complexities around a particular product.
And, uh, the, these, these brands normally had, um, better product,
(22:16):
uh, product pages on their websites.
They usually had better, uh, information.
It was, it seemed like a, a natural progression or a law of process where
they would just naturally go, okay, well then why don't we just front load
our business just a little bit and say, okay, we'll bring in, um, some, some
people to man some, some, um, or look after some chat and then we'll, you
(22:37):
know, if anybody has an issue of a particular product and it kind of, it
forced a lot of these brands to actually pick their game up digitally, didn't it?
In terms of the online game.
Um, so I mean, on that point, I mean, uh, there's a lot of really
good nuggets in there for that.
I'd love to dive into, um, a lot of that, but, um, for the sake of time, I
just want to kind of move on to just that point of online retail.
(22:59):
And, um, obviously you were, uh, you were there during the, um, the growth
of, of Bing Lee at the time.
Um, and you saw the business go just, you know, go from, uh, from where it was to,
you know, I won't say exactly, but it was pretty, pretty amazing numbers.
Um, what do you think is sort of this next evolution now in terms of the
(23:22):
growth and for online retailers, given, you know, the current trends at the
moment with spending and things, have you got any, um, nuggets you can provide
the audience or any insights or any future predictions that, you know, I know
you don't have a crystal ball and won't hold you to it, but what do you think?
I think that, um, um, the, uh, the pandemic and what happened during the
(23:45):
pandemic has disrupted, uh, the evolution as well of online retail or e-commerce.
Um, because the growth that e-commerce saw during that period where people
could not go out to the shops, uh, was much bigger, um, than, than everybody
was expecting, um, you know, everybody was expecting growth to continue, you
(24:10):
know, 5%, 10%, 15%, but during that period, the growth was 50%, 60%, 70%
because people would not go to the shops, buy from the shops and many retailers
as well introduce the frictionless, um, uh, frictionless pickup in the shops
(24:32):
where you buy your order online and then you give us a time of when you're going
to drive to the shop and we'll leave it for you at the front, we, without us
interacting with you, uh, so we can keep that COVID, uh, COVID safe distance.
Uh, so there was, there was a lot that happened during that period.
(24:52):
Um, also, uh, things like, um, you know, the shops were closed, but people
were working in the shops, they were receiving customer orders either on
the phone or online and they were packing the goods and then obviously,
uh, making it available for those customers to pick up without having
(25:12):
the shops open.
Yeah.
All that, what we saw during, during, uh, COVID was not something that
was predicted before COVID.
I mean, on that point with the click and collect, I remember clearly a
number of times, um, we, I think we had 30 minute click and collect and a lot
of businesses did one or two hour click and collect.
And then, I mean, as soon as the pandemic hit, all of a sudden, um,
(25:36):
everybody was trying to do 15 minute click and collect or some almost like a
race to see how quickly you could get your click and collect, but none of them
were actually thinking about the customer experience.
They were more thinking about the message, not, not the actual experience.
And one thing we knew is, is we'd already done the work upfront to work
out exactly how long it did take.
And we had a service level agreement with the customer at the time.
And a lot of businesses didn't have the time to do that.
(25:59):
And hence why a lot of them were getting complaints and things on
Facebook, but that ability to pivot really quickly in the times of a
pandemic, I mean, it just shows, goes to show how important it really is to
have your online presence in my mind.
Um, you know, uh, I wouldn't say to industry standard, cause there is no
(26:22):
industry standard, it's more about what the customer expectations are and
making sure that you're on the path of your customers, because I think a lot
of the times retailers don't realize that their customers have moved off the
path of where they think they're going.
And in actual fact, they've gone on a completely different path altogether.
And, um, you know, they're focusing on trying to get click and click down to
10 minutes or five minutes, but in actual fact, they want something completely
(26:46):
different, like a better delivery service or a cheaper delivery service.
And going back to the point about, um, retailers making sure that they've
got their online presence, uh, up to date.
I think one of the things we saw during COVID was there was a huge
investment in online and, um, you know, a lot, I know a lot of the
retail retailers, um, and heads of, and, uh, directors in the digital space are
(27:09):
under a lot of pressure to try and expand into things like marketplaces
and, and try and get a return back on their business.
But, um, I don't think a lot of them have done the actual groundwork to
understand, is that actually where the customer's path is at the moment?
It's like, you've got to focus on what you have and try to make the most of
what you have and, um, you know, get that, uh, really singing nicely.
(27:32):
And then you move on to the next, uh, you know, the next thing, I feel like
a lot of it was crammed during the pandemic, a bit like the overstocking
and the algorithms, um, a lot of it from, you know, no one had a crystal ball
at the time, we didn't really know what was going to happen, but, um, you know,
I think having that ability to be able to pivot quickly and, and, uh, meet
the customers with, with what they're really looking for, um, during these times,
(27:57):
um, is, is super important.
Thanks.
Thanks so much for that, Phil.
Now there are a lot of, um, a lot of, uh, I think opportunities.
It's really about focusing on what you're doing well.
Um, in my mind, you know, from a retail execution point of view and making the
most of what you have in the warehouse or, you know, what you have working really
well from a marketing perspective or even a technology perspective, there is
(28:20):
a famous quote out there that, um, you know, you focus on the problem you're
trying to solve and the technology and the tools will become apparent to you.
And I don't think a lot of businesses actually try and focus on the problems
that they're trying to solve.
They, they tend to focus so much on the technology or the tools for their problems.
And, um, I think for me, a good, a tip would be to actually sit down and work
(28:43):
out what your problems actually are, and then work on what tools you need to
solve those problems.
So, all right.
So, so the second part of the show, I'd like to just go back if we could, please,
just to talk quickly about, um, the, uh, macro and sort of micro economic factors
that are there in play at the moment, um, outside of, you know, interest rates and
(29:04):
what we spoke about before with the increased inflation and so on.
What other, um, issues are you sort of seeing at the, or even potential
opportunities, but issues are you seeing at the moment, um, with the economy?
Yeah, look, I mean, from a retail perspective, obviously, uh, you have,
uh, the, the downturn in demand and you have the, uh, uh, basically the interest
(29:27):
rates and mortgage repayments, uh, you know, uh, utilities and everything
else that are impacting on customers ability to spend.
So I think for law retailers now, it's really all about understanding their
business, understanding their cost base, making sure that their, uh,
their cost base, the relationship between cost and revenue is under control.
(29:53):
So if there is a reduction in revenue, then you're looking at your cost of
doing business and making sure that stays in line, uh, with the reduction
in revenue to ensure that your profitability is not impacted too much.
I think that, uh, obviously managing inventory is going to be key in this
period, so as such, those retailers that have invested in technology to be able
(30:18):
to understand their inventory and understand, um, you know, uh, be able to
have a real time view into their inventory and have a work, good working
relationship with their suppliers.
They work on shorter lead times.
I think, um, those retailers will, will, will get through this period much
(30:38):
better than those retailers that do not control their inventory as well, or
have a much longer lead times, uh, with their, uh, with their suppliers.
Uh, I think that, uh, the other side of it as well is the marketing and, um,
uh, obviously customers will be looking for value now.
(31:01):
Uh, they will be very much, uh, looking at value, looking at, uh, at your
communication with your customers has to be about that, ensuring that, you
know, if the customer has less money to spend, for example, on a TV and they
can't afford to go and buy a premium TV, then, then ensure that you have an
(31:25):
offer around the budget, uh, product, uh, to ensure that you have the stock that,
uh, in the shops, uh, and you don't have too much of the premium goods, which is,
which are not selling, um, from what I'm hearing, the premium end of the market
has been impacted a fair bit more than the budget end.
(31:45):
And now there is a probably more focus on private label, for example.
Uh, I think, uh, when you look at, uh, at the supermarket industry that you see
now that the gap in pricing between a supermarket like Aldi and supermarket
like Woolworths and Coles is quite significant.
(32:06):
Yeah.
Um, and, uh, and you, you read also about, um, you know, uh, management, uh,
team in, in the Coles and Woolworths saying that there is a, been a shift in,
uh, in the, in the customer, um, and they are now looking for more value.
And as such, they are also going to be investing in those products to make sure
(32:29):
that they are giving customers what they want.
And obviously the other side of it as well as keeping improving your technology
in the business to be able to understand your customer and, and that has becomes
very important now, uh, understanding, you know, all the data that comes through
your point of sale, you want to understand you've been able to digest it,
(32:49):
to be able to communicate and execute a lot better in your business.
Um, so I think that really, you know, times are now changing again,
and I think those retailers that are, uh, more flexible, um, and have, uh, you
know, very good understanding of their business and their customers will,
(33:10):
will do a lot better.
Yeah, they'll do well.
Yeah.
Well, it was only just the other day, you're speaking of Aldi that I, and I
have to say, I love Aldi's marketing.
I think it's, it is fantastic.
I think they've really absolutely nailed it from the start to, to even just,
just recently, um, some of their commercials are just fantastic.
Um, I went there for the first time in a while, my wife shops there.
(33:32):
Um, and they've got self-service checkouts now.
And I don't know if you know, if you, yeah, I didn't see that.
Yeah.
Yeah.
So they, they do, and I use them and I hate them to be honest.
I don't really like them, you know, cause I don't really have a lot, but.
Oh, great.
I just went straight through.
Um, yeah, no issues at all.
I mean, I've been a big W and then, and I've had a nightmare with trying to
(33:54):
check out with things in and out of the store, but I've been able to, I've
been out, you know, the item back.
Oh, so annoying.
God's not scanning.
I think scanning wrong prices coming up.
Yeah.
But no LD was fantastic.
It was really good.
A retailer that actually has introduced, uh, self checkout and their technology
is a lot better than, um, than the supermarket is Uniqlo.
(34:18):
I don't know if you, yeah.
Yeah.
Yeah.
Yeah.
They use RFID.
They are if I be, so whatever you put in that, in that box, that's
their scans without you having to, to get the product or the barcode close to
a scanner, it scans on its own.
And then obviously RFID is the technology they're using.
(34:38):
Um, yeah.
So, yeah, thanks very much for that.
I think it's, um, gives us a really good insight, I think, to where
things are headed at the moment.
And, um, I mean, only time will tell, of course.
Do you have any, um, any sort of, uh, I don't know, predictions for Christmas?
I mean, I know we're still a while away from Christmas, but do you, had it,
what's your general feeling about, um, you know, the, the Christmas coming up
(35:03):
and you think it's going to be early with the discounting normally when we've
seen this value conscious consumer in the market, and then we see retailers
going early on discounts and really trying to own the custom early where
there's more, uh, online advertising through Google, um, display networks
and things and, and AdWords and all of the other, um, sort of online channels.
(35:26):
Um, do you feel that it's gonna, it's gonna, uh, drop early, um, maybe even
above the line with catalogs and things, you know, um, what's your general
feeling, um, about it at the moment?
I think that the trend that we have seen, um, in the last five, six years
is going to continue and probably keep evolving towards black Friday.
(35:47):
I think that is not that, that black Friday has changed, uh, pre-Christmas
trading in a big way, the impact of black Friday has been significant.
People are shopping around the black Friday period, around those four days
between the black Friday and cyber Monday.
And the spend is quite significant.
(36:09):
And it is now probably the biggest trading period in retail.
So as such, what it's done is brought business forward, um, because of the
deals that retailers offer around that time.
And then what we have seen is that pre-Christmas trade is not as significant
as it used to be.
Yeah.
And as such, law retailers now have to bring inventory early to make sure
(36:33):
that they have enough inventory to be able to sustain the demand of black
Friday.
And then obviously after that, there is a pause in, in, in, in, in trading.
And then we see a pickup in the few days before Christmas and then
boxing day is another big event.
Yeah.
Yeah.
There's no doubt that when we look at, um, at, um, you know, at the slowdown
(36:58):
in retail, I think we're going to see more focus on black Friday.
We're going to see that the Friday, the black Friday, uh, the slowdown
in the deals will be quite significant, but potentially that will be, would
mean that Christmas trade will be, uh, quite modest.
(37:20):
Yep.
Uh, and, uh, and as such, then be an impact on retail margin, because
there's obviously when you are offering goods at black Friday, your
margin is not very low.
And then from there we go into boxing day and that'd be another set of
discount around that time.
There's no doubt that, that this year around that period, they will be more
(37:41):
pressure on, on the retailers margin at that time.
Um, and I think that the demand will probably be low expectations as well.
Hmm.
Yeah.
Yep.
That makes total sense.
Yeah.
And, and from a retail sort of media perspective, I know you've got quite a
bit of experience on the media buying side of things, do you, if businesses
(38:02):
have held out for a little bit, hoping, um, for the business to pick up a little
bit, what's your advice to them?
Do you think it's, you know, I'm sorry.
I mean, most of it would be locked in now for Christmas advertising, you
know, traditionally, but I mean, online, the options, I think are going to be
pretty, pretty hot and Google's going to win that battle that always does.
(38:23):
But, um, it's, it's a major, major channel.
Do you think that it's, it's best for people, uh, for businesses to, to
remain a little bit fluid with the situation at the moment with their,
with their marketing spend to, to remove that inventory that's been sitting
there since, you know, that lead time issue with COVID and so on, or
what's your feeling about that?
Look, uh, I think that in, in the retail, um, when you have a downturn, you
(38:48):
have retailers that pull back on their marketing spend, uh, and then you
have retailers that see the opportunity and continue, uh, to be aggressive in
their marketing and in their messaging to customers.
I think that, you know, in, in that time, when there is less customers on the
(39:10):
market, I think you need to be visible.
You need to be out there.
People need to see you.
They need to see what your offer is and what you stand for.
So I think, um, it is important to continue to, uh, be active in, in that space.
Um, obviously you need to keep, uh, uh, you know, to keep things in perspective,
(39:32):
uh, as far as the relationship between the marketing, uh, cost and the revenue.
Um, but yeah, I mean, my experience is that you cannot pull back too much.
You need to be out there.
You need to be promoting aggressively and you need to, uh, to direct those
customers to your business rather to your competitors business, if they
(39:54):
are spending more than you.
Yeah.
Yeah.
I mean, we've seen that in the past, haven't we, with, um, diminishing
returns, sort of kicking in and, and even it's sort of finding the right balance
between spending enough to be seen and heard and, and, and, you know, and not
spending enough to get a return.
Um, you know, it's, it's, it's definitely a fine line and remaining profitable with
(40:16):
all the discounting going on and the margins and so on.
So you trading costs and things of cost of doing business is super important,
you know, at that time.
And obviously in, in that time as well, there's retailers that tend to reduce,
uh, cost in their shops, try to start stuff free and things like that.
(40:38):
So again, you gotta be very careful there because there's a risk that
you could cut back too much.
So it's important that, um, you know, you have managed through that period.
Um, and, and, and you make sure that you don't cut back too much.
Yeah.
Well, that's right.
I mean, as, as you were saying before the, the quality of the service,
especially during COVID, we saw that drop 2020, 21, you know, all the
(41:02):
way through, um, 22, it started to pick up again, as people were going back
in stores, you start cutting your staff costs at the store level, you then
risk run that risk of having a poor customer experience and pushing
people back online again.
And if your online presence is poor, you get stuck in this sort of vicious
cycle, don't you?
You don't, um, you tend to lose customers more than you acquire them.
(41:26):
So no doubt.
I mean, you talked that we touched on that before when we, uh, were talking
about brands going direct to customers, setting up their own shops or their
own e-commerce site.
I mean, that all started with the, um, with the, uh, retailers that cut back
on their service levels and as such customers were having bad experience.
(41:48):
And the most brands could see that and that's what, uh, where they invested
the money in, in shops and showrooms and e-commerce.
So it's important that, that, that retail has maintained their service
levels, especially in these difficult times.
Yeah.
Yep.
It's all about remaining sort of dynamic, isn't it?
(42:08):
Hmm.
All right.
That's great advice.
Thanks very much for that, Phil.
So we sort of covered Christmas.
Uh, we sort of jumped to that, but.
Getting back to the macro economic side of things.
And I mean, just how this sort of downturn that we sort of seeing a
little bit here in the retail and how long do you think it's, um, set
to stick around for?
(42:28):
Uh, look, I think that from, from looking at, um, you know, at the last 15
months and the interest rates, um, going up 12 times and now we have had July
and August where, uh, interest rates have been kept on hold.
Um, inflation is still in Australia, even though it has come down, it's
(42:51):
still sitting at 6%, which is way above criteria for the, um, uh, our central bank.
My fear is that, um, this period could go for a longer because of the fact that,
um, um, the inflation is still high interest rates, you know, we don't
(43:15):
know if they're going to go up more.
I mean, a lot of the economists are still predicting one to two interest rate
heights, but we've had two months where we haven't seen anything.
So my prediction is that period of pain or slowdown in retail is going to go for
longer, um, it's going to be, um, a little bit longer than it was in the
(43:38):
beginning of the year, but I think that it's going to be going into 2024.
No doubt about that.
From what I can see, I think that we are not going to see, um, a reduction
in interest rates, definitely this year.
And we probably not going to see anything in the first six months of next year.
Um, so I think that the, the, the slowdown in the retail will probably go well into
(44:04):
it all really depends on how, you know, where, where inflation is going to be
next year, are we going to see it going back to normal, uh, to that two to 3%
band or can come, can I continue to be high?
So I think from a retail perspective, um, yeah, we, we are in for a longer
period of slowdown and potentially for most of next year, 2024.
(44:29):
Hmm.
Yeah.
Well, I tend to, I agree with you, Phil.
I think, um, sort of, you know, you have far more, um, knowledge around the, the,
the economy and so on, but I can definitely see from a, you know, from a family of six,
uh, six people, um, you know, with the cost of living and everything that's
going on in the moment, um, you know, I can definitely tell you that it's going
(44:52):
to take a while for people to start to build up their savings again as well.
Um, and I think that's a significant issue.
A lot of people starting to dip into their savings to cover the cost of those
interest rates increases.
And you know, that's what's leading to the, to those that one third that do have
mortgages out there that are holding back and not spending as much.
And I know for a fact, we don't sort of spend as much on going out and so on, but
(45:15):
we still enjoy ourselves, but it's just, it's just what you do in these times.
You know?
Yeah.
Interesting that, uh, when you look at the, uh, retail, um, retail figures, um,
the restaurant spend is still quite high.
It's about 36%.
So that's restaurant cafes take away still about 36% higher than pre COVID
(45:39):
level.
So, I mean, as we said before, um, you know, roughly the third of the households
have a mortgage, a third rent and a third, uh, are net savers to a certain extent,
um, without any big financial commitment.
So there's no doubt there is still an, an element out there.
(46:02):
Yeah.
Spending, which will, um, obviously make it, uh, uh, much harder for, uh, the
reserve bank to bring things back into, uh, the target level.
Yeah, exactly.
Well, I think we got used to actually going out during COVID, um, or after
COVID, so all of a sudden we could go back out to restaurants and we started,
(46:23):
we've started enjoying that again.
And I think it's one of the things that we don't want to cut back.
And, um, we, we saw a lot of the pain that small businesses were going through
with their, you know, these beautiful cafes that are, were, you know, with
the chairs or stacked up at the front.
And I think we all saw those pictures and it's quite, um, you know, harrowing,
you know, your heart sings for these businesses because, you know, the pain
(46:46):
that they're going through, I mean, you can feel it.
Um, and now that they're open again, you want to support your local businesses as
much as you can, you want to get out there and, and, and spend money in the
hospitality and, and as you say, cafes and restaurants and so on.
So, but, um, you know, it's, I think it's almost one of the things would be last
on our list to cut back on, I think if we, you know, if there were, uh, if
(47:08):
times got a little bit tougher and, you know, I think, um, I think a lot of
Australians still want to make sure that they're supporting Australian businesses
and local in their local communities and so on.
I think it's super important.
No doubt that that element is there.
And I think that, uh, that, that is, uh, spot on because I think that that period
(47:29):
of lockdowns where people were not allowed to eat out, I think that's
reflected in the, in those retail figures.
The fact that people are still spending in the restaurants and cafe and take away.
I mean, it's, it's really related to that, to that period where, where
you couldn't go out, um, but you know, I think eventually it is going to get back
(47:54):
to normal.
There is no doubt about that with the higher cost of living.
Yeah.
Yep.
That's right.
Fantastic.
Okay.
Phil.
Well, thank you, um, so much for your, for your time and your insights today.
It's been great having you on the show.
I really appreciate you coming on and having a chat.
I'd love to have you back on again at some point.
Um, just to let you know, every, every one of my guests get one of these, um,
(48:18):
beautiful mugs.
So I'll send you, I'll send you one of those.
Thank you again for the opportunity, Nigel and good luck with everything you're
doing.
Thank you so much.
And, um, to all the listeners out there, just a reminder for you, for you guys to,
um, like and subscribe as they say, and, um, thanks very much, Phil.
(48:40):
And that's a wrap.
Thank you.
Welcome to the show, Phil.
(00:24):
How are you going?
Thank you, Nigel.
Thank you for inviting me on your podcast.
You're welcome.
Going well.
I'm glad, glad to have you on the show.
Okay.
So, uh, if you'd like to just, uh, give a bit of a brief background of yourself
and your career in the, in the retail industry and what you're currently
doing at the moment, it'd be fantastic.
(00:45):
Well, I've worked all my career in retail in Australia.
Um, so I've had, um, 33 years in retail.
I've worked for BW back in the nineties.
I was a bar there from there.
I went to a Vox retail group who owned, um, many, uh, brand retailers
(01:07):
like Chandler's and Billy Guy at Vox retail.
Um, and it was a national retailer.
So I was there for about five years in a national bar, uh, role.
Um, and then from there I moved to Bingley in 1999 and I was there until 2021.
(01:28):
So about 22 years at Bingley's five or six years as a merchandise director,
17 years as a general manager.
Um, and I decided, uh, to take a bit of a break at the travel, which we did,
we had to delay it a bit because of COVID.
Um, and the restrictions and travel bans and everything else.
(01:51):
So we end up, uh, traveling in 2022 rather than 2020 and 21.
Um, and I was away for about six, seven months and, um, came back, uh, around
Christmas, I started my own consulting business in, um, 21 and, uh, that allowed
(02:13):
me as well to work as a digital nomad while I was traveling, uh, so earning a
little bit of an income when I was traveling.
Um, and I am still working, um, in my consulting firm, um, uh, at this point in time.
Yeah.
Fantastic.
Thanks so much for that.
Yeah.
I mean, you've had a very long, uh, career in, in retail and, you know, one of the
(02:37):
reasons why I'm really looking forward to having you on, um, because there's a
lot of talk at the moment.
I mean, this is a retail podcast, actually.
We're the first few episodes.
We've been talking about, um, cybersecurity and things because that's been on the
minds of people, but now I can see, you know, with interest rates and, you know,
the current retail environment at the moment, it looks like it's, um, uh, you
(02:58):
know, moving into what could be considered some pretty tough times.
Um, you know, I just wanted to go into, if we could jump straight into it, you
know, your thoughts around the current retail outlook in Australia at the moment.
I mean, the climate seems to be one minute, they're holding off on interest rates.
Next minute, the endless seems what is an endless cycle of increases.
(03:20):
Um, what do you think of some of these, you know, trends and challenges and
potentially some of these opportunities that are currently available at the
moment for, for retailers?
Uh, look, I mean, the last, uh, five years or four years since 2020, uh, what we have
seen in general in the economy, um, and in retail in particular is, is a once
(03:44):
in a hundred year event.
Um, uh, I mean, no one predicted, uh, a pandemic, uh, in, uh, 2020, nobody
predicted the impact and the reaction to that pandemic, uh, and, and the travel
bands and, and, and the bands from leaving your home, um, and, and, and,
(04:05):
and everything else.
So, so the impact of that on many industries has been profound.
And I think in, in the retail, that impact has been phenomenal.
Um, because what we saw in during that period of travel restrictions and, and
(04:26):
working from home and studying from home, uh, and the fact that people, uh, really
couldn't spend their money on travel or on, or, or going out, eating out or
anything like that, um, what we saw is probably the biggest boom in retail that
we have ever seen in my lifetime anyway, my working time and, um, and that boom,
(04:50):
uh, went on for pretty much about 18 months, 19 months at the same time when,
when there was a lot of spending happening in retail at the same time,
because of, uh, the pandemic, uh, there was supply restrictions.
So there was issues in shipping, there was issues in manufacturing, there
(05:12):
was issues in sourcing, uh, material.
So as such, the demand outweighed supply in a big way, um, to, to, like, to an
extent that we haven't seen before and, and it led to obviously the inflation,
um, um, uh, Gini coming out of the bottle.
(05:34):
Yep.
Yep.
Uh, and that inflation, um, started to, um, um, to appear in 21, uh, whereby,
you know, uh, people were paying more for goods because they just wanted it.
And the choice was much smaller because of the high demand and low supply.
(05:54):
Um, uh, and the, uh, all the input cost, um, was high.
So as such inflation kicked on and, um, and in my opinion, um, the, the, um, the,
you know, the, the amount of free money that was pumped into the economies with
(06:15):
zero percent interest rates, uh, has led to, um, to a big, uh, big spending.
And as such, um, inflation, um, um, went up significantly.
Uh, and now what we are seeing is that, um, um, governments and, and, and central
(06:35):
banks around the world and in Australia, putting interest rates up to try to tame
inflation because inflation is much harder than, than, than what, what it needs to be.
Um, and, um, in Australia, you know, inflation went up to around 8% at its peak.
Uh, it needs to be around two to 3%.
(06:56):
That's what the reserve bank policy is.
It needs to be between two and 3%.
Yep.
So as such, we've seen 12 months, 12, 12 consecutive interest rate import, 12
interest rate increases in 15 months, uh, which I don't think we have seen before.
And as such, um, what we are seeing now in retail is that, uh, people are starting
(07:22):
now to hold back on spending in retail.
Yep.
Uh, and we are starting to see, um, the impact of, uh, inflation or interest rates
going up, mortgages, repayment going up.
Yep.
Um, everything else related to that.
So, uh, so as such, yeah, retail is starting to suffer.
(07:44):
Uh, but at the same time, when you think about, um, the amount of spending that
happened during the pandemic period, um, it is something that is, is that was expected.
So the slowdown that we are seeing now is expected.
Yep.
How long the slowdown is going to go for, um, how much it, like how deep is it going
(08:07):
to be it's still early days.
Um, I think it's going to be quite significant, uh, and probably more in
some industries than other industries or sectors in retail.
Um, and definitely the sector, uh, that you and I worked in, which is appliances
and electronic, um, those categories, you have seen a very big boom during COVID.
(08:32):
Um, because people were buying, um, office equipment.
Yeah.
Yeah.
Cameras, TVs, uh, even, uh, they were spending money on coffee machines and
operating fridges and everything else.
So, yeah, so I think the downturn in that industry is going to probably to be
significant and it's going to go for a, for, for, uh, you know, for a fair bit of time.
(08:57):
Um, and, um, and it's going to impact on retailers out there.
No doubt about that.
Yeah.
Yeah.
Well, I mean, there's a lot, there's so much going on, isn't there for
retailers at the moment?
I mean, I think you spoke about, you know, that, that, uh, sort of once in a lifetime,
it was a bit of an opportunity for both online retailers and offline
(09:19):
retailers and, and multi-channel retailers as such to capitalize on that,
um, additional spending that was going on at the time during the, the
lockdowns and things.
And I think that, um, sort of the, the bit of the postmortem to that is that a lot of
the, uh, inventory management systems and things sort of overstocked a lot of
retailers as well.
So it's a bit of a double whammy too, isn't it?
At the moment, I'm hearing that there's quite a bit of stock with some, some
(09:42):
within some categories, um, retail categories, and you've got this sort of
contraction going on in spending and it's sort of like, okay, well, how do you,
how do you clear this stock out?
And it's, um, you know, it ends up being a lot of, um, reduced margins and, and a
lot of discounting going on in the retail sector.
And, and a lot of discounting going on to try and keep people spending.
(10:05):
And I think one of the stats you told me, this is prior to the podcast was there
was around one third of people are still spending and though they, those people
are the ones without mortgages, but the people with mortgages, I just say, you
know, that with the 12 consecutive interest rate increases, it's, um, they're
the ones that are sort of sitting there counting their pennies a little bit more
considering the cost of homes and things and living and that inflation.
(10:26):
So it's a significant challenge for retailers.
And maybe it is the, you could almost say it is that return again of, um, back
in, you know, I think it was 20, just before the, um, the financial crisis
happened, uh, that value conscious consumer that was out there was always
looking for discounts and the rise of sites like catch and, um, and eBay were
(10:49):
really, really cranking at that point in time because people were looking for
discounts and we could maybe see us another cycle of that, um, given that
people are looking for discounts.
What are your thoughts about that?
And is there opportunities there for retailers to try and bank, you know,
some still some margin and keep turning boxes out of warehouses and so on?
Look, no doubt.
Um, the issues related to inventory, uh, are real.
(11:14):
Um, but it varies, uh, by retail sector.
Yep.
I think from what I'm hearing from my, um, you know, my understanding and
talking to retailers of the furniture, retailers are probably the
ones that have accumulated the biggest amount of inventory because obviously
they saw also an increase in demand during COVID and, um, and, and, and
(11:39):
their, um, uh, supply chain is, uh, is much longer.
Uh, so, uh, you know, in, in on average, I think it's about six months from when
they ordered the stock to when they receive it and, uh, enduring COVID, uh,
obviously with the restrictions in manufacturing and everything else, they
(12:00):
placed big orders thinking that the demand will continue the reopening of
economies, people getting back to normal.
Uh, and as such, what happened love that inventory and up coming at the same
time or rubbing at the same time.
So suddenly they were overstocked and demand dropped off significantly.
So that industry has love excess stock out there.
(12:24):
Uh, other industries may be not impacted so much because their supply chain
is, uh, on much shorter lead times.
Yep.
Um, but there is no doubt that this period of, um, you know, of, uh, slow
slow down in demand is going to see activities get back to pre COVID levels
(12:46):
where we're going to see significant amount of discounting significant amount
of impacting to, uh, of marketing around discounts and everything else to try to
entice consumer to spend.
And I'm hearing that really love the spending now is happening when,
when products are discounted.
Um, people are not really being, uh, uh, buying when, when there is no
(13:12):
discounts, uh, and it's in some categories, it's worse than other categories.
So I think this is going to impact retail and it's going to obviously, um, you
know, the, the retailers that have, uh, better understanding of their, uh,
inventory that manage their inventory better that have the technology to
(13:34):
manage their inventory better that they have a real time, um, real time reports
on their inventory and sell through will handle this down to a lot better than
retailers that do not have, uh, that did not invest in technology and haven't
can not really be, uh, that they don't have the visibility that, uh, other
(13:56):
retailers do such, we will probably see that some retails will get through this
period, you know, to, to trade.
Yeah.
Yeah.
And do you think that the, um, the, the customer experience is still for a lot
of these guys, um, is sort of a bit of a way to, um, you know, keep their
customers and lower their marketing costs and, and try and keep, I suppose,
(14:21):
just keep customers in general.
Cause we, we, we all know that it's twice as expensive to acquire new
customers versus retaining customers.
What are your thoughts about a lot of these retailers that have a lot of this
stock sitting in warehouses and, you know, the front end of their, either
their website or their, their install point of sale system is not the best in
terms of customer experience.
(14:41):
What are, what are your thoughts about that?
Look, I think that when you consider, uh, the slow down, um, it has impacted,
uh, a bit more on, um, on online, uh, traders during the COVID period, uh,
people could not get, go out to the shops.
So, so there was a bigger demand on, on, um, uh, people buying online.
(15:06):
And as such, we saw a very big, um, growth, uh, in online sales.
Uh, from what I'm seeing now that the economies have reopened, um, customers
are going back to the shops, uh, they are enjoying the experience going back to
the shops and as such, uh, the pure online retailers have, um,
(15:29):
are probably seeing a bigger downturn than the multi-channel retailers.
Um, however, you know, those, uh, people that have, um, uh, better
understanding of their customers and understanding what, what their customers
want, uh, and can target their customers in, uh, more with more, uh, content
(15:56):
that they are looking for.
Uh, I mean, obviously those retailers are going to pick up market share
in this environment and those retailers that haven't, don't have the systems
to allow them to, um, to communicate with their customers in a meaningful way
are going to find that, that they're going to have to obviously leverage
(16:17):
the discounting more to try to be able to, uh, attract, uh, a business
in, in this, in this downturn.
Yeah.
Yeah, that's right.
Um, yeah.
All right.
Well, we might move on to just another topic and I think this is sort of, again,
sort of goes towards, um, you know, channel growth and moving towards, um,
(16:38):
creating, uh, opportunities to, for, for, for a business, um, you know, sitting
there as a, as a general manager or a C level executive or someone, you know,
you're thinking about, you know, you cost side of your balance sheet and you're,
you know, your revenue side of your balance sheet and you sort of going, okay,
well, we don't want to cut too much on the, on the cost side because we have to
(16:58):
move, you know, move the stock that's coming in.
Then you've got the, um, on the revenue side, you've got, okay, well, how do
we open up new channels?
How do we do it?
Potentially do it, um, in a way that is, um, complimentary or, or to, to the
existing business model that these businesses have.
And it sort of leads me to this sort of bit of a trend where brands are starting
(17:18):
to move towards selling directly to consumers, um, via, um, you know, the
online side of things, um, or specific locations and so on.
What, um, what are your thoughts around sort of that sort of, um, that model
where brands potentially do have the opportunity to now start, uh, selling
(17:41):
directly to consumers where, you know, they saw that demand, um, back 2019,
late 2019, 2020, uh, people, you know, just staying at home, not going in, not,
not discovering their products and services and their ranges so much as, um,
via their website.
What, what is your thoughts now that they've potentially built up this
kind of audience now?
(18:02):
Um, you know, obviously retailers have an extremely important part of, um, the
retail landscape, of course, but, um, I've noticed there's a bit of a little bit
of a trend towards this, um, sort of going brands going directly to consumers.
What are your, um, your thoughts around that?
Uh, look, uh, I think your observation is, uh, a hundred percent accurate.
(18:26):
I think that trend has started many years ago.
I think it, um, it varies by retail sector, uh, but there is no doubt.
I think that, um, when a number of our department stores in Australia have
started reducing the service levels in their shops, um, the, uh, David Jones
(18:47):
of this world and the Maher of this world 10, 15 years ago, and they started
reducing service levels in their shops.
I think, uh, some of, uh, their suppliers, uh, started, uh, seeing that
and probably receiving complaints from, from customers about the fact that they
are not getting the service level that they, they would like to see.
(19:13):
Yep.
So I think that has, um, has, uh, encouraged some of those suppliers
to look at, uh, going direct to those customers and setting up, uh, initially
started with experience centers, uh, trying to have an experience center
where, where customers can walk into a, like an app store, uh, and, uh,
(19:37):
like an Apple shop or a Samsung shop or a Dyson store or a Louis Vuitton shop
or a, um, um, you know, um, some of the clothing brands, um, and, uh, and, uh,
they said, okay, well, we will set up experience stores and, um, we will show
(20:00):
our full range of products because again, you know, law retailers pick and
choose what they want to sell from the suppliers or from a manufacturer's range.
Um, so they said, okay, we want to show our full width of, uh, products,
merchandise, and we want to have experienced sales staff that are trained
(20:22):
that can answer questions and, uh, from customers.
Yeah.
And also we want to give them a nice shop with a nice, uh, you know,
shopping experience as such that trend started, uh, with those type of
intentions, um, and I think that from there, I think that trend has, has,
(20:45):
uh, increased those suppliers, uh, saw some success with that.
They saw that, okay, if we can avoid paying a retail margin, um, then, you
know, we can set up those shops and, you know, give the customers what they want,
but at the same time, improved our profitability.
And, um, and, uh, we saw many of those shops opening around, uh, Sydney
(21:10):
and Melbourne and other places.
And then obviously with the e-commerce and with the, uh, popularity of e-commerce,
many of those, uh, brands decided to set up their own, uh, e-commerce sites and
sell direct to customers and, um, and bypass the retailer.
(21:31):
And, um, so when you look at that now, when you look at the, uh, the market
and the strategies, um, this is a part of parcel of doing business.
So it seems to be centered around the customer experience, doesn't it?
I mean, if it, you know, if, if a good point, um, about the training and, and,
and product knowledge and understanding it's during COVID, you've got people
(21:54):
coming in and out of your business, your retail business, and then you've got
these, as you say, these complaints potentially starting around not having
enough knowledge, um, the online chat is not always a great forum to try and
explain to someone, you know, the complexities around a particular product.
And, uh, the, these, these brands normally had, um, better product,
(22:16):
uh, product pages on their websites.
They usually had better, uh, information.
It was, it seemed like a, a natural progression or a law of process where
they would just naturally go, okay, well then why don't we just front load
our business just a little bit and say, okay, we'll bring in, um, some, some
people to man some, some, um, or look after some chat and then we'll, you
(22:37):
know, if anybody has an issue of a particular product and it kind of, it
forced a lot of these brands to actually pick their game up digitally, didn't it?
In terms of the online game.
Um, so I mean, on that point, I mean, uh, there's a lot of really
good nuggets in there for that.
I'd love to dive into, um, a lot of that, but, um, for the sake of time, I
just want to kind of move on to just that point of online retail.
(22:59):
And, um, obviously you were, uh, you were there during the, um, the growth
of, of Bing Lee at the time.
Um, and you saw the business go just, you know, go from, uh, from where it was to,
you know, I won't say exactly, but it was pretty, pretty amazing numbers.
Um, what do you think is sort of this next evolution now in terms of the
(23:22):
growth and for online retailers, given, you know, the current trends at the
moment with spending and things, have you got any, um, nuggets you can provide
the audience or any insights or any future predictions that, you know, I know
you don't have a crystal ball and won't hold you to it, but what do you think?
I think that, um, um, the, uh, the pandemic and what happened during the
(23:45):
pandemic has disrupted, uh, the evolution as well of online retail or e-commerce.
Um, because the growth that e-commerce saw during that period where people
could not go out to the shops, uh, was much bigger, um, than, than everybody
was expecting, um, you know, everybody was expecting growth to continue, you
(24:10):
know, 5%, 10%, 15%, but during that period, the growth was 50%, 60%, 70%
because people would not go to the shops, buy from the shops and many retailers
as well introduce the frictionless, um, uh, frictionless pickup in the shops
(24:32):
where you buy your order online and then you give us a time of when you're going
to drive to the shop and we'll leave it for you at the front, we, without us
interacting with you, uh, so we can keep that COVID, uh, COVID safe distance.
Uh, so there was, there was a lot that happened during that period.
(24:52):
Um, also, uh, things like, um, you know, the shops were closed, but people
were working in the shops, they were receiving customer orders either on
the phone or online and they were packing the goods and then obviously,
uh, making it available for those customers to pick up without having
(25:12):
the shops open.
Yeah.
All that, what we saw during, during, uh, COVID was not something that
was predicted before COVID.
I mean, on that point with the click and collect, I remember clearly a
number of times, um, we, I think we had 30 minute click and collect and a lot
of businesses did one or two hour click and collect.
And then, I mean, as soon as the pandemic hit, all of a sudden, um,
(25:36):
everybody was trying to do 15 minute click and collect or some almost like a
race to see how quickly you could get your click and collect, but none of them
were actually thinking about the customer experience.
They were more thinking about the message, not, not the actual experience.
And one thing we knew is, is we'd already done the work upfront to work
out exactly how long it did take.
And we had a service level agreement with the customer at the time.
And a lot of businesses didn't have the time to do that.
(25:59):
And hence why a lot of them were getting complaints and things on
Facebook, but that ability to pivot really quickly in the times of a
pandemic, I mean, it just shows, goes to show how important it really is to
have your online presence in my mind.
Um, you know, uh, I wouldn't say to industry standard, cause there is no
(26:22):
industry standard, it's more about what the customer expectations are and
making sure that you're on the path of your customers, because I think a lot
of the times retailers don't realize that their customers have moved off the
path of where they think they're going.
And in actual fact, they've gone on a completely different path altogether.
And, um, you know, they're focusing on trying to get click and click down to
10 minutes or five minutes, but in actual fact, they want something completely
(26:46):
different, like a better delivery service or a cheaper delivery service.
And going back to the point about, um, retailers making sure that they've
got their online presence, uh, up to date.
I think one of the things we saw during COVID was there was a huge
investment in online and, um, you know, a lot, I know a lot of the
retail retailers, um, and heads of, and, uh, directors in the digital space are
(27:09):
under a lot of pressure to try and expand into things like marketplaces
and, and try and get a return back on their business.
But, um, I don't think a lot of them have done the actual groundwork to
understand, is that actually where the customer's path is at the moment?
It's like, you've got to focus on what you have and try to make the most of
what you have and, um, you know, get that, uh, really singing nicely.
(27:32):
And then you move on to the next, uh, you know, the next thing, I feel like
a lot of it was crammed during the pandemic, a bit like the overstocking
and the algorithms, um, a lot of it from, you know, no one had a crystal ball
at the time, we didn't really know what was going to happen, but, um, you know,
I think having that ability to be able to pivot quickly and, and, uh, meet
the customers with, with what they're really looking for, um, during these times,
(27:57):
um, is, is super important.
Thanks.
Thanks so much for that, Phil.
Now there are a lot of, um, a lot of, uh, I think opportunities.
It's really about focusing on what you're doing well.
Um, in my mind, you know, from a retail execution point of view and making the
most of what you have in the warehouse or, you know, what you have working really
well from a marketing perspective or even a technology perspective, there is
(28:20):
a famous quote out there that, um, you know, you focus on the problem you're
trying to solve and the technology and the tools will become apparent to you.
And I don't think a lot of businesses actually try and focus on the problems
that they're trying to solve.
They, they tend to focus so much on the technology or the tools for their problems.
And, um, I think for me, a good, a tip would be to actually sit down and work
(28:43):
out what your problems actually are, and then work on what tools you need to
solve those problems.
So, all right.
So, so the second part of the show, I'd like to just go back if we could, please,
just to talk quickly about, um, the, uh, macro and sort of micro economic factors
that are there in play at the moment, um, outside of, you know, interest rates and
(29:04):
what we spoke about before with the increased inflation and so on.
What other, um, issues are you sort of seeing at the, or even potential
opportunities, but issues are you seeing at the moment, um, with the economy?
Yeah, look, I mean, from a retail perspective, obviously, uh, you have,
uh, the, the downturn in demand and you have the, uh, uh, basically the interest
(29:27):
rates and mortgage repayments, uh, you know, uh, utilities and everything
else that are impacting on customers ability to spend.
So I think for law retailers now, it's really all about understanding their
business, understanding their cost base, making sure that their, uh,
their cost base, the relationship between cost and revenue is under control.
(29:53):
So if there is a reduction in revenue, then you're looking at your cost of
doing business and making sure that stays in line, uh, with the reduction
in revenue to ensure that your profitability is not impacted too much.
I think that, uh, obviously managing inventory is going to be key in this
period, so as such, those retailers that have invested in technology to be able
(30:18):
to understand their inventory and understand, um, you know, uh, be able to
have a real time view into their inventory and have a work, good working
relationship with their suppliers.
They work on shorter lead times.
I think, um, those retailers will, will, will get through this period much
(30:38):
better than those retailers that do not control their inventory as well, or
have a much longer lead times, uh, with their, uh, with their suppliers.
Uh, I think that, uh, the other side of it as well is the marketing and, um,
uh, obviously customers will be looking for value now.
(31:01):
Uh, they will be very much, uh, looking at value, looking at, uh, at your
communication with your customers has to be about that, ensuring that, you
know, if the customer has less money to spend, for example, on a TV and they
can't afford to go and buy a premium TV, then, then ensure that you have an
(31:25):
offer around the budget, uh, product, uh, to ensure that you have the stock that,
uh, in the shops, uh, and you don't have too much of the premium goods, which is,
which are not selling, um, from what I'm hearing, the premium end of the market
has been impacted a fair bit more than the budget end.
(31:45):
And now there is a probably more focus on private label, for example.
Uh, I think, uh, when you look at, uh, at the supermarket industry that you see
now that the gap in pricing between a supermarket like Aldi and supermarket
like Woolworths and Coles is quite significant.
(32:06):
Yeah.
Um, and, uh, and you, you read also about, um, you know, uh, management, uh,
team in, in the Coles and Woolworths saying that there is a, been a shift in,
uh, in the, in the customer, um, and they are now looking for more value.
And as such, they are also going to be investing in those products to make sure
(32:29):
that they are giving customers what they want.
And obviously the other side of it as well as keeping improving your technology
in the business to be able to understand your customer and, and that has becomes
very important now, uh, understanding, you know, all the data that comes through
your point of sale, you want to understand you've been able to digest it,
(32:49):
to be able to communicate and execute a lot better in your business.
Um, so I think that really, you know, times are now changing again,
and I think those retailers that are, uh, more flexible, um, and have, uh, you
know, very good understanding of their business and their customers will,
(33:10):
will do a lot better.
Yeah, they'll do well.
Yeah.
Well, it was only just the other day, you're speaking of Aldi that I, and I
have to say, I love Aldi's marketing.
I think it's, it is fantastic.
I think they've really absolutely nailed it from the start to, to even just,
just recently, um, some of their commercials are just fantastic.
Um, I went there for the first time in a while, my wife shops there.
(33:32):
Um, and they've got self-service checkouts now.
And I don't know if you know, if you, yeah, I didn't see that.
Yeah.
Yeah.
So they, they do, and I use them and I hate them to be honest.
I don't really like them, you know, cause I don't really have a lot, but.
Oh, great.
I just went straight through.
Um, yeah, no issues at all.
I mean, I've been a big W and then, and I've had a nightmare with trying to
(33:54):
check out with things in and out of the store, but I've been able to, I've
been out, you know, the item back.
Oh, so annoying.
God's not scanning.
I think scanning wrong prices coming up.
Yeah.
But no LD was fantastic.
It was really good.
A retailer that actually has introduced, uh, self checkout and their technology
is a lot better than, um, than the supermarket is Uniqlo.
(34:18):
I don't know if you, yeah.
Yeah.
Yeah.
Yeah.
They use RFID.
They are if I be, so whatever you put in that, in that box, that's
their scans without you having to, to get the product or the barcode close to
a scanner, it scans on its own.
And then obviously RFID is the technology they're using.
(34:38):
Um, yeah.
So, yeah, thanks very much for that.
I think it's, um, gives us a really good insight, I think, to where
things are headed at the moment.
And, um, I mean, only time will tell, of course.
Do you have any, um, any sort of, uh, I don't know, predictions for Christmas?
I mean, I know we're still a while away from Christmas, but do you, had it,
what's your general feeling about, um, you know, the, the Christmas coming up
(35:03):
and you think it's going to be early with the discounting normally when we've
seen this value conscious consumer in the market, and then we see retailers
going early on discounts and really trying to own the custom early where
there's more, uh, online advertising through Google, um, display networks
and things and, and AdWords and all of the other, um, sort of online channels.
(35:26):
Um, do you feel that it's gonna, it's gonna, uh, drop early, um, maybe even
above the line with catalogs and things, you know, um, what's your general
feeling, um, about it at the moment?
I think that the trend that we have seen, um, in the last five, six years
is going to continue and probably keep evolving towards black Friday.
(35:47):
I think that is not that, that black Friday has changed, uh, pre-Christmas
trading in a big way, the impact of black Friday has been significant.
People are shopping around the black Friday period, around those four days
between the black Friday and cyber Monday.
And the spend is quite significant.
(36:09):
And it is now probably the biggest trading period in retail.
So as such, what it's done is brought business forward, um, because of the
deals that retailers offer around that time.
And then what we have seen is that pre-Christmas trade is not as significant
as it used to be.
Yeah.
And as such, law retailers now have to bring inventory early to make sure
(36:33):
that they have enough inventory to be able to sustain the demand of black
Friday.
And then obviously after that, there is a pause in, in, in, in, in trading.
And then we see a pickup in the few days before Christmas and then
boxing day is another big event.
Yeah.
Yeah.
There's no doubt that when we look at, um, at, um, you know, at the slowdown
(36:58):
in retail, I think we're going to see more focus on black Friday.
We're going to see that the Friday, the black Friday, uh, the slowdown
in the deals will be quite significant, but potentially that will be, would
mean that Christmas trade will be, uh, quite modest.
(37:20):
Yep.
Uh, and, uh, and as such, then be an impact on retail margin, because
there's obviously when you are offering goods at black Friday, your
margin is not very low.
And then from there we go into boxing day and that'd be another set of
discount around that time.
There's no doubt that, that this year around that period, they will be more
(37:41):
pressure on, on the retailers margin at that time.
Um, and I think that the demand will probably be low expectations as well.
Hmm.
Yeah.
Yep.
That makes total sense.
Yeah.
And, and from a retail sort of media perspective, I know you've got quite a
bit of experience on the media buying side of things, do you, if businesses
(38:02):
have held out for a little bit, hoping, um, for the business to pick up a little
bit, what's your advice to them?
Do you think it's, you know, I'm sorry.
I mean, most of it would be locked in now for Christmas advertising, you
know, traditionally, but I mean, online, the options, I think are going to be
pretty, pretty hot and Google's going to win that battle that always does.
(38:23):
But, um, it's, it's a major, major channel.
Do you think that it's, it's best for people, uh, for businesses to, to
remain a little bit fluid with the situation at the moment with their,
with their marketing spend to, to remove that inventory that's been sitting
there since, you know, that lead time issue with COVID and so on, or
what's your feeling about that?
Look, uh, I think that in, in the retail, um, when you have a downturn, you
(38:48):
have retailers that pull back on their marketing spend, uh, and then you
have retailers that see the opportunity and continue, uh, to be aggressive in
their marketing and in their messaging to customers.
I think that, you know, in, in that time, when there is less customers on the
(39:10):
market, I think you need to be visible.
You need to be out there.
People need to see you.
They need to see what your offer is and what you stand for.
So I think, um, it is important to continue to, uh, be active in, in that space.
Um, obviously you need to keep, uh, uh, you know, to keep things in perspective,
(39:32):
uh, as far as the relationship between the marketing, uh, cost and the revenue.
Um, but yeah, I mean, my experience is that you cannot pull back too much.
You need to be out there.
You need to be promoting aggressively and you need to, uh, to direct those
customers to your business rather to your competitors business, if they
(39:54):
are spending more than you.
Yeah.
Yeah.
I mean, we've seen that in the past, haven't we, with, um, diminishing
returns, sort of kicking in and, and even it's sort of finding the right balance
between spending enough to be seen and heard and, and, and, you know, and not
spending enough to get a return.
Um, you know, it's, it's, it's definitely a fine line and remaining profitable with
(40:16):
all the discounting going on and the margins and so on.
So you trading costs and things of cost of doing business is super important,
you know, at that time.
And obviously in, in that time as well, there's retailers that tend to reduce,
uh, cost in their shops, try to start stuff free and things like that.
(40:38):
So again, you gotta be very careful there because there's a risk that
you could cut back too much.
So it's important that, um, you know, you have managed through that period.
Um, and, and, and you make sure that you don't cut back too much.
Yeah.
Well, that's right.
I mean, as, as you were saying before the, the quality of the service,
especially during COVID, we saw that drop 2020, 21, you know, all the
(41:02):
way through, um, 22, it started to pick up again, as people were going back
in stores, you start cutting your staff costs at the store level, you then
risk run that risk of having a poor customer experience and pushing
people back online again.
And if your online presence is poor, you get stuck in this sort of vicious
cycle, don't you?
You don't, um, you tend to lose customers more than you acquire them.
(41:26):
So no doubt.
I mean, you talked that we touched on that before when we, uh, were talking
about brands going direct to customers, setting up their own shops or their
own e-commerce site.
I mean, that all started with the, um, with the, uh, retailers that cut back
on their service levels and as such customers were having bad experience.
(41:48):
And the most brands could see that and that's what, uh, where they invested
the money in, in shops and showrooms and e-commerce.
So it's important that, that, that retail has maintained their service
levels, especially in these difficult times.
Yeah.
Yep.
It's all about remaining sort of dynamic, isn't it?
(42:08):
Hmm.
All right.
That's great advice.
Thanks very much for that, Phil.
So we sort of covered Christmas.
Uh, we sort of jumped to that, but.
Getting back to the macro economic side of things.
And I mean, just how this sort of downturn that we sort of seeing a
little bit here in the retail and how long do you think it's, um, set
to stick around for?
(42:28):
Uh, look, I think that from, from looking at, um, you know, at the last 15
months and the interest rates, um, going up 12 times and now we have had July
and August where, uh, interest rates have been kept on hold.
Um, inflation is still in Australia, even though it has come down, it's
(42:51):
still sitting at 6%, which is way above criteria for the, um, uh, our central bank.
My fear is that, um, this period could go for a longer because of the fact that,
um, um, the inflation is still high interest rates, you know, we don't
(43:15):
know if they're going to go up more.
I mean, a lot of the economists are still predicting one to two interest rate
heights, but we've had two months where we haven't seen anything.
So my prediction is that period of pain or slowdown in retail is going to go for
longer, um, it's going to be, um, a little bit longer than it was in the
(43:38):
beginning of the year, but I think that it's going to be going into 2024.
No doubt about that.
From what I can see, I think that we are not going to see, um, a reduction
in interest rates, definitely this year.
And we probably not going to see anything in the first six months of next year.
Um, so I think that the, the, the slowdown in the retail will probably go well into
(44:04):
it all really depends on how, you know, where, where inflation is going to be
next year, are we going to see it going back to normal, uh, to that two to 3%
band or can come, can I continue to be high?
So I think from a retail perspective, um, yeah, we, we are in for a longer
period of slowdown and potentially for most of next year, 2024.
(44:29):
Hmm.
Yeah.
Well, I tend to, I agree with you, Phil.
I think, um, sort of, you know, you have far more, um, knowledge around the, the,
the economy and so on, but I can definitely see from a, you know, from a family of six,
uh, six people, um, you know, with the cost of living and everything that's
going on in the moment, um, you know, I can definitely tell you that it's going
(44:52):
to take a while for people to start to build up their savings again as well.
Um, and I think that's a significant issue.
A lot of people starting to dip into their savings to cover the cost of those
interest rates increases.
And you know, that's what's leading to the, to those that one third that do have
mortgages out there that are holding back and not spending as much.
And I know for a fact, we don't sort of spend as much on going out and so on, but
(45:15):
we still enjoy ourselves, but it's just, it's just what you do in these times.
You know?
Yeah.
Interesting that, uh, when you look at the, uh, retail, um, retail figures, um,
the restaurant spend is still quite high.
It's about 36%.
So that's restaurant cafes take away still about 36% higher than pre COVID
(45:39):
level.
So, I mean, as we said before, um, you know, roughly the third of the households
have a mortgage, a third rent and a third, uh, are net savers to a certain extent,
um, without any big financial commitment.
So there's no doubt there is still an, an element out there.
(46:02):
Yeah.
Spending, which will, um, obviously make it, uh, uh, much harder for, uh, the
reserve bank to bring things back into, uh, the target level.
Yeah, exactly.
Well, I think we got used to actually going out during COVID, um, or after
COVID, so all of a sudden we could go back out to restaurants and we started,
(46:23):
we've started enjoying that again.
And I think it's one of the things that we don't want to cut back.
And, um, we, we saw a lot of the pain that small businesses were going through
with their, you know, these beautiful cafes that are, were, you know, with
the chairs or stacked up at the front.
And I think we all saw those pictures and it's quite, um, you know, harrowing,
you know, your heart sings for these businesses because, you know, the pain
(46:46):
that they're going through, I mean, you can feel it.
Um, and now that they're open again, you want to support your local businesses as
much as you can, you want to get out there and, and, and spend money in the
hospitality and, and as you say, cafes and restaurants and so on.
So, but, um, you know, it's, I think it's almost one of the things would be last
on our list to cut back on, I think if we, you know, if there were, uh, if
(47:08):
times got a little bit tougher and, you know, I think, um, I think a lot of
Australians still want to make sure that they're supporting Australian businesses
and local in their local communities and so on.
I think it's super important.
No doubt that that element is there.
And I think that, uh, that, that is, uh, spot on because I think that that period
(47:29):
of lockdowns where people were not allowed to eat out, I think that's
reflected in the, in those retail figures.
The fact that people are still spending in the restaurants and cafe and take away.
I mean, it's, it's really related to that, to that period where, where
you couldn't go out, um, but you know, I think eventually it is going to get back
(47:54):
to normal.
There is no doubt about that with the higher cost of living.
Yeah.
Yep.
That's right.
Fantastic.
Okay.
Phil.
Well, thank you, um, so much for your, for your time and your insights today.
It's been great having you on the show.
I really appreciate you coming on and having a chat.
I'd love to have you back on again at some point.
Um, just to let you know, every, every one of my guests get one of these, um,
(48:18):
beautiful mugs.
So I'll send you, I'll send you one of those.
Thank you again for the opportunity, Nigel and good luck with everything you're
doing.
Thank you so much.
And, um, to all the listeners out there, just a reminder for you, for you guys to,
um, like and subscribe as they say, and, um, thanks very much, Phil.
(48:40):
And that's a wrap.
Thank you.
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