The Trouble with Retail

The Trouble with Retail

Even the most casual observer of economic news could not have avoided the media reports surrounding the collapse of some very large Australian retail brands in the past month. Harris Scarfe, McWilliam’s Wines and Jeanswest all announced administrations or receiverships in what is normally a busy time for retail.

These failures come in addition to big names like EB Games announcing the closure of 19 stores across the country, Bardot closing 58 and Australian Geographic closing 63 stores. 

Whilst retail has been a tough game for decades, littered with the successes and failures of mum and pop shops, the latest round of closures continue what has been a worrying trend in recent years namely the failure of household names that have been around for decades.

Whilst now owned by private equity out of Hong Kong, Jeanswest opened its first store in Perth in 1972 and McWilliam’s was considered to be one of Australia’s first families of wine with Samuel McWilliam having planted his first vines in 1877.

It would appear no-one is safe, including department store stalwarts such as Myer, David Jones and Big W who have all experienced heavy declines in profitability and now command only a fraction of the retail market they once did.

The opinions of retail commentators as to why the failures are occurring are as varied as the product types that the failed companies are selling. Reduced wage growth, job uncertainty and subdued economic growth are all contributors to poor retail figures however, there is also another common theme to all these business failures and that is a reticence to change.

Whilst it is easy for Australian retailers to blame the online shopping platforms of the American behemoths for all of their woes, some of the blame must lie with the way they are conducting their business.  Whilst it is true that online retailers operate with lower overheads allowing them to supply goods at cheaper prices, it is also true that their dominant position has been a long time in the making (Amazon starting selling books online in 1994 and moved to music, videos and other products in 1997), so retailers have had decades to get their house in order and in a position to compete.

These days’ customers are fickle and are constantly demanding an improved experience as well as a reduced price.  Online retailers know this and are constantly changing their offers as well as improving their back of house to keep prices down.  In contrast, Australian retailers have been slow to make improvements in store layouts, distribution networks and staff training and often only react when new competitors enter their space. 

This criticism has been targeted at all our biggest names at one time or another including Coles, Woolworths, Myer and David Jones. Discounting will only get you so far and it can be a race to the bottom if that is a store’s only plan to drive sales.

It is clear that we have not seen the end of the business failures in the retail arena, but it is also evident that they will continue to occur until business owners stop blaming external factors and start looking inwards at what needs to be done to compete in the modern world.

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