Smaller retailers get bigger

The retail sector in Australia is about to change and it can only be good for shoppers, small retailers and suppliers, said retail expert Phil Bonanno, from insights consultancy The Leading Edge.

It must be said that up till now the trend in retail shopping has been one stop shopping. The decision being taken as to which shop to visit by the biggest amount of goods needed.

The decision by the Federal Government to make it easier for foreign retail giants such as Costco and Wal-Mart to operate in Australia is just "the tip of the iceberg", he said.

He said major supermarkets should be especially concerned about the future noted a trend where customers are abandoning them and heading for specialist shops or discount outlets such as Aldi.

"I've seen this in numerous occasions in the retail world. For example, with the Home Depot shops in the US, I've seen smaller operators open down the road to provide a quicker shop for people who don't have the time or interest in going through a huge outlet. In other words it could cost a premium for the convenience of being able just to walk straight in and straight out again.
"The shopper may just need nails and doesn't want to go into a warehouse for them. Or they want someone to talk to them."

Mr Bonanno said that lately there had been a growth in specialist retail outlets and this will grow bigger.

"This is noticeable in fruit and vegetables, and meat.

"People will go to the supermarket for staples but then go to specialty shops for the other things.

"The big operators are aware of this and reacting to it, such as the recent refurbishments in Woolworths as it tries to win customers back.

"It's the same thing in health and beauty care.

"Chemists are doing a good job in creating destinations. If you want to buy beauty products, you want to buy them in a beautiful place."

He said there was also now a trend for people to shop at different places for different occasions, and this was presenting greater opportunities for small businesses.

"Those who will benefit have a flexible supply chain and realise the importance of the quality of packaging.

"They will recognise the need to differentiate not only their competitors but also their customers."

Mr Bonanno believes that in the next five years sales growth will fragment because of the introduction of new retailers and as existing players such as Coles and Woolworths respond to the challenge.

"Over the next three to five years, the Australian landscape will become broader.

"Woolworths and Coles and the other big players are hardly asleep at the wheel. The whole sector will become more competitive."

He said the test to Australia now was if there was an economic slowdown.

"Consumers will most probably demand greater value and the retailers that are sharpest here will be best placed to reap the rewards.

"We will probably also see a greater divide between the haves and have-nots, largely along credit/debit and income lines.

"Australian retailers should start investing seriously in their core assets and be working tirelessly to know their core shoppers better.

"They need to be engaging customers at their desired positioning and be very strategic as to when they do it.

"I would also recommend against being a generalist, instead focusing on being the best and clearest in very specific areas.

"They also need to differentiate beyond price.

"Innovation that actually changes a customer's purchasing behaviour should also be implemented on a few key opportunities.

"Extreme clarity of offer, at the shelf, wins the day."

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Published on June 6-th, 2008 in Insurance
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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