This year has seen several high-profile Australian retailers announcing major restructures. In June we saw Premier, Country Road and David Jones all facing major senior management shakeups. Meanwhile, a major downturn of sales in David Jones came, just three months after the department store was purchased by private equity firm Anchorage Capital Partners for about $100 million, with the retail giant in the press again for axing 100 jobs.
The plot thickened in early August, with Bunnings revealing it eliminated a layer of senior manager roles as part of a restructure, as the hardware giant set its sights on lowering shelf prices. For added drama in the same month, Australian retail conglomerate Wesfarmers said it would merge the business units of its budget department store Kmart and discount retailer Target, as the group attempts to reduce losses amid persistently high inflation.
So what are the observations and learnings?
The challenges retailers are facing in Australia are not just due to discretionary spending, but also due to the rapid shifts in consumer behaviour across popular ecommerce platforms like Amazon.
Many Australian retailers are either experiencing or expect to experience challenging conditions, in particular those selling discretionary consumer products. While the impact of rising interest rates is often mentioned, we should also acknowledge the increasing market share of Amazon.
Amazon reported a near-doubling of Australian sales in 2022 to $2.63 billion and is on track to reach $10 billion by 2025. At this level Amazon will be taking significant sales from incumbent Australian retailers and mostly in sectors that are already facing tough headwinds.
But it isn’t all doom and gloom. There are many Aussie retailers currently investing in digital transformation and tackling these challenges head on to attract and retain customers, while enhancing loyalty and omnichannel experiences.
Myer is an example of a local retailer that is meeting the challenge head on through a dramatic increase in its online sales to around 20% of total turnover, which has more than offset challenges faced in its store trading.
Big W is another retailer that is on the right track, having invested significantly in its personalised marketing capability. Members of the Everyday Rewards program now regularly receive targeted personalised points ‘Booster’ offers.
This is a great example of how retailers are now tapping into supplier advertising and marketing funds that were previously directed to digital-first players like Amazon, Facebook and Google. David Jones is now also making a great start here as well with the exciting launch of its Amplify retail media business targeting Australia’s premium shoppers.
Australian retailers can also learn from their global counterparts across regions like Europe and North America, who have also had to adapt to these shifts in consumer behaviour.
An interesting case study from overseas is UK grocery and general merchandise retailer Asda which is giving its shoppers completely personalised ‘missions’ to trial new categories and products and rewarding them with a ‘cashpot’ bonus to spend with the retailer. This is another example of a retailer adopting the same digital marketing tools that Amazon and the e-commerce pure-lye take for granted.
Jonathan Reeve is vice president of APAC at Eagle Eye.