With the end of the mining boom comes reality. Our policy makers and corporate leaders wasted decades of wealth. Our manufacturing has been decimated through the tacit acceptance of our state and federal politicians of the forces of globalism. Similarly consecutive governments have failed to capitalise on our agricultural assets and know how. In comparison New Zealand produces 30% of the world's milk and its economy exceeds ours in terms of agricultural initiative.
Coupled with failed energy policies and lack of coordinated control and investment Australia is facing a crisis on many fronts.
We are not a nation of agriculture, science, manufacturing, leading infrastructure, technology and innovation nor of world class services. Yes we have pockets of expertise and achievement but our policy makers are myopic, risk averse and short term thinkers. They are focused on winning political office and retaining personal power and position.
We are a nation dependent on housing, consumerism and government hand outs and subsidies. In terms of being consumers the goods we buy are not manufactured in Australia.
With a housing price that is dangerously unstable and household debt rising retail is of significant importance. When we fail to consume Australia's economic well being falls. Our retail is strangled by poor management and a failure to show imagination and innovation.
Australian company executives running our retail sector do not spend much on research and development or innovation in products and services. They focus on new business models, systems integration, and high performance work and management practices. They seem to have self belief that they are consumate retail mangers.
"For decades, Woolworths and Coles have been in a dominant position in the supermarket arena. For a long time, Coles was on top and Woolworths was struggling. Then fortunes changed: it was Woolworths on top and Coles struggled. In the process both companies developed an arrogant management style that took advantage of their dominant position. Suppliers suffered. It was a culture that did not transplant easily to other retail forms, so when Coles expanded into Kmart in the 1960s and took over Myer in the 1980s, both non-supermarket retailers struggled.
Coles’ supermarket mentality did not transplant into running Myer. For a time, Kmart was successful, but as the years went by, it too fell into disrepair. At the time the generally held view was that the Coles management was simply not up to standard. But in fact they had defeated Woolworths in supermarkets, which is why they will be looking to expand into other retail areas.
When Woolworths reversed its fortunes and took the top supermarket spot, it found itself running Big W, Dick Smith and later Masters. It made a hash of all three of them. Once again, we blamed the hubris of the Woolworths management for the mistakes. But I think it was just another example of how the skills in supermarkets do not necessarily transplant into other forms of retailing." (Robert Gottliebsen, Australian Business Review, January 6, 2016)
They are technocrats.
“The Australian Business Foundation found that Australia continued to rank poorly in management capability, and that our managers were “good at solving tactical and operational problems in a creative way, but lacked the ability to sustain innovation in a strategic way”. The Business Council of Australia and Society for Knowledge Economics argued that, “the emphasis of economic reform will need to evolve to a new stage – the leadership and management of Australian organisations, and the educational infrastructure and programs required to support the development of innovative capabilities within organisations”. (Innovation in Australia, How We Measure Up, Professor Roy Green and Dr Danielle Logue, https://www.uts.edu.au/sites/default/files/CEDA_Australia_Adjusting_Innovation.pdf)
I think this is evident in our retail sector. I believe that our two major retailers Coles and Woolworths are process and systems driven. They spend their days studying consumer purchasing data and engaging each other in price wars. They produce dull, boring and uninspiring shopping experiences.
Rows of shelves with a few “kitch market spaces” which are supposed to tap into our liking of the market stalls in the country.
"There has been a lack of imagination, a decided lack or absence of new product. That is one of the reasons why this Christmas is going to be a very flat, uninteresting situation. It is relatively dull, boring, repetitive — and that is not the sort of thing that will capture the imagination or stimulate the emotion."(Australian retailers urged to lift their game after nightmare year, December 17, 2016, News.com.au)
In my local shopping centre Woolworths has renovated adding a small café with a sushi bar and a large long deli with big signs and a small limited butchery. One can ask for a bigger cut of the same meat product wrapped in plastic packaging in the rows of fridges. Woolworths like Coles has bought up the meat pipeline from paddock to plate effectively creating a duopoly that can set the price through the supply line rather than through collusion or monopoly..
The senior managers of Woolworths come from state head office and gather together looking at the small butcher’s precinct (and I mean small with no capability to actually cut up beats) or they gaze at the long glass, quite ordinary, deli counter congratulating themselves on the new supermarket.
I have a view that they are people in pursuit of new heights in mediocrity.
Back in head office people remote from the coal face make decisions on mass for the stores, adding and deleting products based on their “technical assessments” and study of big data. I wonder how much decision making authority a local store manager ahs to stock other products or create a new service?
For people sitting in the hive without real context all that big data is just data in the hands of detached analysts.
Next to the supermarket is a liquor store owned by Wollworths. But you cannot combine the buying of groceries and liquor because they are separate business entities with separate systems.
Across the aisle is a shabby older Coles, with minimal floor space and less stock but still rows of goods presented as they were decades back. There is a fruit and vegetable section which is similar to Woolworth’s attempt at a market presentation.
Coles has a liquor store inside the supermarket but one cannot pay for liquor and groceries together. Like Woolworths they are separate businesses with separate systems.
Both companies make the customer fit their systems and their processes. Not the other way around.
Coles and Woolworths are focused, not on offering variety and imagination with a single shopping experience for everything one might want but on using old methods of psychology and manipulation which are failing.
The two companies see saw in the gladiatorial contest of sales but for me they demonstrate no vision as to what is possible.
This occurs because together they control 80% of the grocery market. There is no real competition. They have been in this duopoly since they were created. There has been no major entry of a competitor on scale to take this share off them. Second tier competitors nibble at the turnover. They have built end to end pipelines of products and they dominate liquor and wine sales.
Aspects of their store presentations are similar to the more imaginative European hypermarts, with stacks of discounted items, probably closer how Aldi is setting up its stores in Australia. Aldi unashamedly promotes itself totally on price. It has taken maybe 13% of the market predominantly from other smaller chains. It too is bound in a technocratic model of operation, not surprisingly since it is a German company. Aldi carries a small range of goods and is not a shopping experience offering choice and atmosphere. A no frills service.
The focus on price begs the question as to why people go shopping and do they prefer the social experience of malls? Shopping centres rely on anchor tenants and they are forced to provide the consumer experience, not Woolworths or Coles.
In my case I have the choice of all three within the same precinct. Price is often a determinant. At Aldi one can buy liquor and groceries at the same time. The choice of liquor and wine is very limited.
Coles and Woolworths are working to match Aldi on price.
Australian retailers tend to all congregate with smaller stores than the European models which tend to be destinations along a highway. Here we have Cosco and DFO who have large stores but they are in metropolitan areas.
In late 2017 Amazon will purportedly open in Australia.
“MIKE SEGAR / REUTERS
Only a small minority of Aussie retailers have a plan to challenge Amazon down under.
It's official -- Amazon delivery services are coming to Australia in 2017 and the majority of local retailers don't have a plan to be able to compete with them in the consumer market.
In fact, almost half of the 505 Australian retailers surveyed in new research from Commonwealth Bank were unfazed about the giant online goods distributor's arrival down under, which is tipped for late 2017. Almost a third were unaware they were coming at all and, of those who did know, only 14 percent currently have a business plan in place to be able to compete with Amazon.
He told HuffPost Australia the innovativeness of retailers surveyed was measured on a scale between minus 100 and 100, where a score of minus 100 suggests no innovation at all and 100 suggests multi-focused innovation that results in business strategies and products consumers have not seen before.
"What we found with retail on average, if you took all of the retailers in our survey, is [the score] comes down to 26.2 percent on our innovative scale, so only just innovating," he said.
· "What we did find is that, if you're in retail, you're more likely to be innovating, but you're innovating in small ways rather than in a strategic multi-dimensional method. (Luke Cooper, Associate Editor, HuffPost, Australia 24 March2017)
· "We have this very high performance in discovery, research, inventiveness, universities and medical research institutes. For the size of this country we rank very high on that test."
"Where we don't rank nearly as highly is in the transfer of that knowledge and its translation into actual marketplace outcomes in better products and services. Why is that? We have no chance of becoming a top tier innovation nation until we fix that challenge/problem, in my view," he says. (Bill Ferris on Innovation, in Australian Financial Review Weekend, December 16, 2016)
Amazon's next big idea: https://www.theguardian.com/technology/2017/apr/16/amazon-seattle-testing-ground-go-fresh-real-space-grocery-treasure-truck
BELOW ARE THE REASONS I PERSONALLY BELIEVE COLES AND WOOLWORTHS' BUSINESS MODELS ARE SUBSTANDARD
When I observe how these two employers treat their people, the lack of training beyond teaching them how to use the register, the casualisation and manipulation of employment awards. There is no public evidence of a company wide training and development programme. The Human Resources Division operates behind the walls of a robo application employment system using NO REPLY emails to send the bad news. Front line staff in stores are not given time to see how the competition is doing things, receives no briefings on consumer law or explanation for fines levied by the Australian Competition and Consumer Commission or in the case of Woolworths an explanation of the company's appeal to the High Court. No debriefing on the outcome, that the company won on technical grounds. No explanation as to why they appealed an unconscionable conduct charge whilst Coles apologised and paid $10,000,000.
The aloofness of Coles and Woolworths senior management from walking the aisles talking to customers regularly. The arrogance of Woolworths in the Masters exercise. The fines for misleading advertising, they manner in which they treat their suppliers. They use their market power like a sledge hammer because ingrained in their middle management DNA is thuggery to meet the monthly sales and profit margins. Woolworths to be the most aggressive in this regard.
"In his former years, the nursery man was a supplier to Woolworths and, as was the practice of both Woolworths and Coles at the time, Woolworths gave him and all nursery people a hard time by changing the orders, delaying the payments and making life miserable....(Robert Gottliebsen, Australian Business Review, January 6, 2016)
Both retailers are uninspiring. The colours of the store, and lighting set the mood. Neither Coles or Woolworths exhibit design sense. Research indicates that consumers prefer stores with a large square footage and minimal fixtures and fittings. People like space and room to browse. If you enter a store where there is hardly room to move without fear of knocking over displays or bumping into other shoppers most people will swiftly head for the exit.
Both retailers have adopted the private label strategy. These are not world class brand products. Consumers know that they are designed to maximise the retailer's profit and their control over suppliers. There is a minimal nod to local or regional suppliers in the stores. A small cabinet at Woolworths Chirnside Park Victoria is hidden in the back and has small range of the fine foods of Victoria's Yarra Valley. In Coles these products, if they stock them, are buried in the normal shelves.
Both companies have sub standard marketing talent using a scatter gun approach which they no doubt would describe as "targeting". They rely on the Loyalty Card data for much of their intel. There is no evidence of extensive study of competitors other than perhaps price matching.
If either store wants to claim that they are fresh food suppliers let them display when the product was delivered from the farm gate to the logistics centre or the store. But they will not because they use an elastic interpretation of fresh. No matter how they bend the truth to suit fundamentally without evidence to prove otherwise I view their claim as misleading and a lie.
Training of employees in this important factor is non existent as far as I can tell. Both retailers have suffered shocks when they have been publicly outed for poor customer service and ignorant management. Both seem to rely upon their loyalty schemes rather than their front line personnel.
Coles and Woolworths supermarkets are very in using products to attract. I think they are fundamentally staple suppliers, that is bread and butter items. They have no high quality capture products. There is a minimal stock of alternate non grocery items.
Unlike the hypermarkets of Europe and Aldi they segregate non grocery products into other retail shops they own under different brands, all of which are failing or have failed.
Both are insular price focused companies, and the prices are not cheap compared to international supermarkets. Australia should be able to produce high quality agricultural products for the stores and they do, except Coles and Woolworths uss etheir market power, screwing the supplier down, and taking the profit.
Solving problems is really at the heart of their retail mission. Taking problem solving to the next level is a challenge. It appears to me that these two retailers will use email or text rather than face to face. They are much like the telcos who put you through hoops. There is no centre of excellence in any of these retailers facilities where customers are engaged. Apple call have a genius bar in their stores to engage customers. This would require an intellectual leap by Coles and Woolworths' management to conceive what they might be able to do. A lea too far.
Coles and Woolworths management appear to rely upon loyalty programmes and targeted offers via email or on line rather than by human interface. It is a rare employee of these retailers who will walk up and ask what can I do today to make your shopping here a pleasure? That might require more staff, on better salaries in the stores, than these two retailers are willing to entertain.
Woolworths carries something in the order of 31,000 items, Aldi has about 1,700. Coles in the mid 20,000s.
The technology at the check out in both is outmoded. Unfortunately it appears that over 30% of Australians who use self check outs are thieves.
THE ART OF THE POSSIBLE
A specialty cheese and deli presentaation in a French hypermarket chain.
I wonder whether Australia’s major supermarket retailers conceive the art of the possible or even how to imagine it?
They have examples here in Australia such as the iconic Queen Victoria Market in Melbourne. A tourist draw card yet our visionary politicians in the Melbourne City Council want to tinker with it and take away its soul. They too are technocrats with little grasp of how the culture of a stall market is addictive..
They could travel to Europe and see how it's done.