The truth behind Australia’s profitable growth

Stephen Bartholomeusz (Business Spectator) wrote a couple of weeks ago about the business performance of David Jones and Myer in a refreshingly non-adversarial way. He also did this in a way that highlights opportunities for retailers in our still growing economy.

He wrote on the results of the two department stores and said that the “similarity between their (profit) numbers would suggest that their competition isn’t a zero sum game; (not a win lose game) that both can be simultaneously successful and, indeed, that the near-simultaneous upgrades of their key stores in Melbourne could be very good for both their businesses.”

Whenever the majority of us think about Woolworths doing well, we think it’s to the detriment of Coles. So too with the three discount department stores – Target, Big W and Kmart – and all across the differing retail sectors.

However, the truth behind the numbers is that we still have sufficient growth to allow well run retailers, and their staff, shareholders and suppliers to do well – if they are well run retailers!

In the grocery sector in Australia, Woolworths, Coles, IGA and ALDI have all grown sales volume, store numbers and profitability over the past four years.

Same with the two luxury department stores and the three discount department stores. However, this wasn’t always the case; Coles, IGA (in its previous guise under the Davids Holdings banner), Kmart and Myer all lost their way for several years, Davids Holdings to the point of falling off a cliff in the dark!

Only an injection of new leaders with the energy and drive to make tough calls, change culture at the top and at store level in order to deliver a truly better shopping experience was able to turn these significant players around.

And it’s a very personal process of change too as you can name them quite quickly; Rietzer at IGA, McLeod at Coles, Brookes at Myer and Russo at Kmart have all re-engineered poor performing retailers into strong players in the sectors, while other players in their sectors also performed well.

So how does this happen? How do all the players in a sector perform better?

How do they all grow profitably? Aren’t there supposed to be winners and losers in each space?

Well yes, if the sector is closed to new shoppers and no growth is possible.

I once ran a business in the Middle East in a country where population growth was strictly controlled and where the government controlled import of product. We had no growth, no productivity improvements and could only grow by “taking share” from each other. It was, as Stephen Bartholomeusz termed, “a zero sum game.” Growth in one came only at the expense of another.

But we don’t live in a static, closed market in Australia. We do have population growth, supporting a strong economy with lots of jobs. We still have continuing productivity improvements across our retailers and their suppliers. And these two conditions combined allow all parties, retailers and manufacturers, to lower or hold prices and improve profitability.

As long as these conditions prevail, we will continue to enjoy “profitable growth” across all retail sectors in Australia.

In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.