Sole focus on competition ‘dangerous’

Taking your eye off the customer and only focusing on competitors, such as Amazon, is dangerous, according to new Wesfarmers CEO Rob Scott.

Amid escalating speculation about Amazon’s launch date in Australia, Scott told a business breakfast last week that Wesfarmers – which includes Coles, Kmart, Bunnings and Officeworks – was more paranoid about ensuring the offer to customers was as good as it could possibly be.

“We look at hundreds of competitors all the time all over the world,” he told the breakfast organised by Morgans.

“I was just speaking to the Bunnings team the other day. In the past years, they have had 50 of their team members all around the world – in the US, Canada, Continental Europe, South America, UK and Asia – looking at different formats.

“We are paranoid about every competitor in the market, including Amazon. We have studied what they have done in various countries around the world and the experience has been quite different in countries around the world.

“But we think it is dangerous to only focus on competitors and not customers.”

Scott said the company would continue to focus on improving its customer offer and benchmarking against competitor offers.

“If you think about some of the disruptive trends we are seeing in retail, one of the most disruptive is the focus on deep discount,” he said. “And some of the fastest growing retailers in the world don’t even have online capabilities.”

“Groups like Aldi are a good example in the supermarket space. We need to make sure we maintain very strong value credentials in our business. I think the businesses where we have strong leadership in value are Kmart and Bunnings.”

With 4000 retails sites around the country and with strong logistics and supply chain capabilities, Scott said Wesfarmers was well positioned to continue to service demand from customers for online sales.

Scott says that while online transactions and home delivery was more important to customers in some categories than others, Wesfarmers was one of the largest online retailers in Australia with over a billion dollars of online sales.

Delivering his first official address as managing director of Wesfarmers, Scott quipped that he had his ‘training wheels on’ since he was handed the Wesfarmers reins on November 16 from CEO Richard Goyder.

He said the economy was in reasonably good shape at the national level, although WA was the softest market when it came to consumer spending.

“Customers are prepared to spend money. They come into our stores or get on our websites and buy products but they are more and more discerning – so retailers have to be on their game.

“We have some retail businesses growing at 10 per cent per annum. Where sales aren’t growing, their offer is clearly not resonating enough with customers.

“It is challenging. We are finding this trend of customers trading down in value – being more value conscious – is increasingly relevant across a lot of areas of retail.

“That is why we keep focusing on businesses like Coles, Bunnings, Kmart to make sure we help customers help their budgets go further.

“Overall we’re reasonably optimistic of trading through Christmas.”

Unleash trading hours for retailers

CCI Chief Economist Rick Newnham has encouraged the State Government to review it’s the Retail Trading Hours Act and remove restrictions on trading hours.

“Amazon doesn’t have governments telling them to hit the off switch at 5pm, and neither should WA businesses,” he said.

A recent report by UBS estimated that earnings for Australia’s major listed retailers will fall as much as 20 per cent by 2023, with JB Hi-Fi, Myer and Super Retail Group expected to have the largest bite taken from their profit margins.

The Act currently restricts what shops can sell at certain times and what products different types of shops can sell. For example, the regulations allow some shops to sell light bulbs but not light fittings, outdoor lighting but not indoor lighting, kitchen sinks but not dishwashers. Online stores, including online stores based overseas, are not subject to the same restrictions.

“This debate has gone on for far too long and WA businesses can’t afford to wait. They need to have every tool at their disposal to not only stay afloat but to thrive,” Mr Newnham.

“CCI looks forward to continuing to work with the Government to reform WA’s outdated retail trade regulations to ensure brick and mortar retailers can continue to compete.”

As WA’s peak business advocate, CCI works to elevate the concerns of WA industry to key nationwide decision-makers. Find out more about our advocacy efforts here.

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