Retail Outlet

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GUEST OBSERVATION
Dick Smith has laid the blame for closing his Australian-made processed food lines squarely at the feet of Aldi Australia.
He accused the German retailer of “extreme capitalism” and warned the CEOs of Woolworths and Coles that “unless your companies move towards [Aldi’s limited range and high proportion of private brands], you will very likely become uncompetitive”.
But this betrays a fundamental misunderstanding of Aldi’s strategy and the limits of its appeal in the Australian market.
An important element of Aldi’s strategy is a severely limited range of “preselected” products, overwhelmingly private brands. The company’s smaller range (some 1,500 store-keeping units as opposed to 20,000 to 30,000 in a large Coles or Woolworths outlet) has several advantages – in terms of store footprints, warehousing infrastructure and supplier discounts, to name a few.
A proportion of these savings are passed on to consumers to ensure their appeal with households wanting to stretch their shopping dollars further.
This strategy and disciplined execution propelled the company’s growth.
From its first two stores in the Sydney suburbs of Marrickville and Bankstown, Aldi gradually expanded across the eastern seaboard. It was not until 2016 that Aldi started opening stores in South Australia and Western Australia.
These new territories promised significant growth opportunities while store openings in the established territories were largely restricted to gap-filling.
By 2018, Aldi was operating more than 500 outlets around Australia and claiming roughly 13% of the Australian supermarket industry. Aldi’s gain in market share has overwhelmingly come at the expense of the smaller, independent supermarkets (IGA-affiliated as well as others).
Coles and Woolworths have chiefly responded to Aldi through price cuts and by boosting their share of private brands. While competition in the Australian supermarket sector has increased, it remains a lucrative oasis in comparison to international markets.
Low-hanging fruit is gone
As its stores now span the entire nation, Aldi’s growth can be expected to slow down. The company is unlikely to “turn on” and overwhelm Coles and Woolworths, as Smith predicts, because of the inherent limitations of the Aldi formula.
Aldi has successfully appealed to a particular segment of the market. It is a segment of shoppers prepared to trade low prices (coupled with sound product quality) for a variety of conveniences offered by traditional supermarkets. These shoppers readily accept Aldi’s highly restrictive range of product, the lack of manufacturers’ brands, and austere stores with minimal service at the cash register or in store.
The company has also been successful in expanding this segment, by convincing a growing number of people to do at least part of their shopping with Aldi and accept the trade-off at the heart of its offering.
But the majority of Australian shoppers prefer to do (the bulk of) their shopping with the two incumbents (Coles and Woolworths who still account for more than two-thirds of the market) as well as a shrinking number of independent supermarkets and a growing set of alternative sources such as farmers’ markets or subscription-based retailers (Costco).
Strategy has limits
Aldi exemplifies strategy scholar Michael Porter’s dictum that the essence of strategy is choosing what not to do. In embracing the “Aldi way”, the company has made hard strategic choices. Its strategy appeals to a sizeable segment of the Australian public.
But it’s turning away shoppers who value things other than what’s on offer at Aldi – larger choice, established brands, more service, plusher stores, in-store bakeries and delis or expanded fresh food sections. As a result, Aldi’s growth in Australia is going to reach its limits.
As far back as 2016, CEO Tom Daunt acknowledged that growth opportunities were slowing in existing territories. He also acknowledged the onset of cannibalisation between existing Aldi stores, a sure-fire indicator that their segment was becoming saturated:
"Increasingly those stores on the eastern seaboard are less often in virgin catchments and more often than not for the majority of those stores there is some impact on other existing Aldi stores."
A recent UBS report also picked up the increase in cannibalisation among Aldi stores. UBS analysts suggested Aldi store cannibalisation in South Australia and Western Australia was reaching levels not far behind the more established territories.
This indicates that saturation might be achieved sooner in new markets, and puts growth objectives in these states in doubt.
Since its arrival in 2001, the company has benefited the Australian public by injecting much-needed competition into the local grocery retail scene, thereby boosting Australian consumers’ spending power. While its success is testimony to the appeal of the Aldi formula, growth will inevitably peter out and the company will not overrun Australia’s existing retail giants.
<img src="https://counter.theconversation.com/content/100671/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">Aldi’s experience in Australia exemplifies the benefits as well as the limitations of clear and focussed strategy.
Tom Osegowitsch, Senior Lecturer, International Business and Strategic Management, University of Melbourne
Angela McCabe, Lecturer, Management, La Trobe University
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/the-secret-to-aldis-success-is-choosing-what-not-to-do-100671" target="_blank">original article</a>.
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j.ballantyne1990-6AQqhLzZaK

The secret to Aldi's success is choosing what not to do

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Oroton stores will operate as usual after the 79-year-old luxury handbag retailer fell into voluntary administration.
"The board is disappointed that it has had to take this step after running such a comprehensive process," interim chief executive Ross Lane, the grandson of Oroton founder Boyd Lane, said in a statement to the ASX on Thursday.
"However, having carefully considered the options available to the company at the conclusion of its strategic review, it is apparent that voluntary administration is necessary to protect the Oroton business and the future of this iconic Australian brand."
The group's 62 Oroton stores across Australia, New Zealand and Malaysia, which employ about 550 staff, will continue to operate as administrators from Deloitte Restructuring Services look at recapitalising or selling the brand.
The Lane family have a 22% stake, with fund manager Will Vicars having an 18% stake.
Entities controlled by Vicars entered a put and call arrangement with Westpac to secure critical credit support for Oroton in August.
Oroton sank to a $14.3 million loss in the year to July, compared to a $3.4 million profit the previous year.
Contributing to the loss were costs linked to its wind-down of its Gap franchise after it terminated an agreement with the US apparel group.
The group's shares, which have been suspended, last traded at 43.5 cents.
The company's December 1 annual general meeting has been postponed.
The first creditors meeting is set for December 11.
"However, having carefully considered the options available to the company at the conclusion of its strategic review, it is apparent that voluntary administration is necessary to protect the Oroton business and the future of this iconic Australian brand," the board advised the ASX.
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Oroton's 62 stores to continue trading as administrators move into luxury handbag chain

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<img src="https://counter.theconversation.edu.au/content/78593/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Self-checkouts aren’t necessarily faster than other checkouts, don’t result in lower staff numbers, and there are indirect costs such as theft, reduced customer satisfaction and loyalty.
Worldwide, self-checkout terminals are projected to rise from 191,000 in 2013 to 325,000 by 2019. A survey of multiple countries found 90% of respondents had used self-checkouts, with Australia and Italy leading the way.
Employment in the Australian supermarket and grocery industry went down for the first time in 2015-16 and is projected to remain flat for a few years. But staff numbers are projected to rebound again, in part due to the need to curtail growing theft in self-checkouts.
Social trends pushing self-checkout
There are a couple of intertwining trends that explain the rise of self checkouts.
We now visit our supermarkets more frequently than ever before, two to three times per week in fact. This means our basket contains fewer items and being able to wander up to a self-checkout, with little to no wait time, has been an expedient way to shop. Most shoppers consider self-checkouts both fast and easy to use. Although this varies with age - 90% of shoppers aged 18-39 found self-service checkouts easy to use, only 50% of those over 60 years said the same.
Shoppers also gain value from taking control of the transaction – being able to ring up their own goods and pack them the way they want. This is because a sense of control over their own shopping can lead to greater customer satisfaction and intent to use and reuse self-serve technology.
The numbers behind self-checkouts
Wages represent around 9.5% of supermarket revenue in Australia, and reducing wages is one of the reasons proposed for the uptake of self-checkout.
But from a business perspective, moving from “staffed” checkouts to self-serve machines isn’t cheap. A typical setup costs around US$125,000. On top of that there are the costs of integrating the machines into the technology already in place - the software and other systems used to track inventory and sales, and the ongoing costs - to cover breakdowns and maintenance.
But the biggest direct cost to retailers of adopting self-service checkouts is theft. Retail crime in Australia costs the industry over A$4.5 billion each year.
There is reason to believe that rates of theft are higher on self-service machines than regular checkouts. A study of 1 million transactions in the United Kingdom found losses incurred through self-service technology payment systems totalled 3.97% of stock, compared to just 1.47% otherwise. Research shows that one of the drivers of this discrepancy is that everyday customers - those who would not normally steal by any other means - disproportionately steal at self checkouts.
Studies also show that having a human presence around - in this case employees in the self-checkout area, increases the perceived risk of being caught, which reduces “consumer deviance”. This is why retailers have been adding staff to monitor customers, absorbing the additional losses, or passing them on to customers in an “honesty tax”.
<a href="https://www.propertyobserver.com.au/images/2017/06/14/Screen%20Shot%202017-06-14%20at%2010.15.06%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/14/Screen%20Shot%202017-06-14%20at%2010.15.06%20AM.png" alt=""> 
As you can see in this graph, preliminary work by researchers Kate Letheren and Paula Dootson suggests people are less likely to steal from a human employee than an inanimate object. Not only because they will get caught, but because they feel bad about it.
On the other hand, consumers have plenty of justifications to excuse self-checkout theft, which is leading to its normalisation.
To combat this, researcher Paula Dootson is trying to use design to combat deviance. One of the ways is through extreme-personalisation of service to reduce customer anonymity. Anonymity is an undesirable outcome of removing employees and replacing them with technology.
Other ideas are to include moral reminders prior to the opportunity to lie or steal (such as simply reminding people to be honest), and to humanise the machines by encoding human characteristics to trigger empathy.
While self-service technologies will continue to be adopted by businesses broadly, and particularly within the retail sector, it will be important for retailers to take a holistic approach to implementation and loss prevention.
Self-service technology reduces front line staffing costs and increases efficiency by re-distributing displaced staff into other service dominant areas of the business, but it creates unintended costs. These business costs can be direct, in the form of theft, but also indirect costs, like reduce customer satisfaction and loyalty. Something that some supermarkets are focusing on today.
<a href="https://theconversation.com/profiles/gary-mortimer-1322" target="_blank"></a>
<a href="https://theconversation.com/profiles/gary-mortimer-1322" target="_blank">Gary Mortimer</a> is associate professor, Queensland University of Technology 
<a href="https://theconversation.com/profiles/gary-mortimer-1322" target="_blank"></a>
<a href="https://theconversation.com/profiles/paula-dootson-129022" target="_blank">Paula Dootson </a>is research Fellow; PwC Chair in Digital Economy, Queensland University of Technology.
<a href="https://theconversation.com/profiles/gary-mortimer-1322" target="_blank"></a>
Both are authors for The Conversation.
<a href="https://theconversation.com/profiles/gary-mortimer-1322" target="_blank"> </a>
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jchancellor-FAypfDUnLy

The economics of self-service checkouts

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Furniture retailer Nick Scali Limited has acquired a site in Sydney’s Manly Vale for $6.2 million.
The 1 Kenneth Road property is a mixed-use site with potential for further development.  
Nick Scali said in its half-yearly report that the company had committed to acquire a property at Manly Vale (NSW) for a purchase price of $6.2 million, excluding statutory costs. It had paid a deposit of $620,000 and the property would settle after December 31. 
The total land area of 1 Kenneth Road &amp; 265 Condamine St is 1,553 sqm. It has dual street access. 
It is a rapidly growing residential area with neighbouring properties approved for shop top development, says the description. The area has numerous housing developments, providing for an ideal setting for a furniture retailer, such as Nick Scali.
The deal was brokered by Raine &amp; Horne Commercial’s Vincent West. 
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jrobinson-rf4aSBido9

Nick Scali buys property in Sydney's Manly Vale for $6.2 million 

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Generation Z, considered the future shoppers of Australia, prefer to head in-store to make a purchase rather than buy online.
A recent report by AMP Capital, From A to Gen Z: Shopping with the Future Generation, found that 87 percent either like or love shopping in-store compared to 79 per cent who prefer to shop online.
Mark Kirkland, managing director of AMP Capital Shopping Centres, said the research highlights the importance of developing fun, social experiences in-store and the opportunities that emerge once brands and retailers align their online and offline offerings.
"The continued popularity of shopping in-store provides a positive outlook for retailers," he said.
"It’s important that, as an industry, we constantly evolve to adapt to the current trends that engage our future shoppers in order to stay relevant. It’s vital that retailers and shopping centres engage with the digital world to deliver a seamless online and offline experience that will create new and exciting avenues to connect with their customers. 
“Trailblazing Australian retailers such as Mecca Maxima and Culture Kings have captured the attention of Future Shoppers by creating a personalised customer experience that’s exclusive to in-store.
"These are just a few representations of the future of retail although we look forward to seeing more bold ideas from retailers within this innovative space.
 The RRP report identified four key themes:
1. Don’t panic! Traditional shopping is not dead
<ul>
<li> 53 percent of future shoppers feel more confident when shopping with others compared to just 27 percent of current shoppers.</li>
</ul>
2. Online and bricks-and-mortar work together
<ul>
<li>  61 percent of future shoppers research while in-store compared to 36 percent of current shoppers.</li>
<li>  63 percent of future shoppers use retailers’ wish list functions, compared to 43 percent of current shoppers.</li>
</ul>
3. Don’t just sell me something, mean something to me
<ul>
<li>  Just below 70 percent of both future and current shoppers prefer brands that give back to society.</li>
<li>  59 percent of future shoppers agreed they would pay more for sustainable products compared to 48 percent of current shoppers.</li>
</ul>
4. Male Future Shoppers are a whole new ballgame
<ul>
<li> 46 percent of male future shoppers have said they are more interested in staying ahead of popular trends than 36 percent of their female counterparts.</li>
</ul>
The term future shoppers is used to refer to adult Gen Zs between the ages of 18 – 22 years. Current Shoppers are used to reference the rest of the Australian population aged 23 and over.
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jonathanchancellor-7SQnKwU6yx

Future of shopping is bricks and mortar

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A retail freehold in the key Centre Road, Bentleigh shopping strip has sold for $2.025 million under the hammer.
Fitzroys agents Chris Kombi and Mark Talbot sold the property on behalf of vendor Ninetieth Ecstasy Pty Ltd, with six bidders on auction day pushing the price $350,000 above the reserve.
The 280sqm site has a triple frontage to Centre Road, Burgess Street and a rear public carpark, and comprises a 250sqm retail building.
Leased to St Vincent de Paul Society under the Vinnies retail banner for 3 x 3 x 3 years, the property currently returns $65,000 per annum plus outgoings and GST.
 
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Triple-fronted Bentleigh retail investment leased to Vinnies sold

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The loss-making Australian Geographic retail chain of 67 stores could disappear by March 2017.
The Myer Family Investments vehicle, owned by one of Australia's richest families, has owned the chain since 2007.
The Australian Financial Review said commercial property sources said individual store leases at some of the outlets were being offered to rival retailers as the Myer family tries to salvage some value from a retail business that had been generating annual sales of close to $50 million.
It is understood the retail chain has been quietly offered to potential buyers but that avenue has been largely unsuccessful, leading to plans for a wind-down of the business.
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<div>It follows the Australian Broadcasting Commission deciding 12 months ago that the national broadcaster would shut its 50 ABC Retail store network.</div>
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<div>Records lodged with the Australian Securities and Investments Commission show that financial accounts lodged by Australian Geographic Retail for the 2014-15 financial year indicate the business reported a loss of $3.34 million, a worse result than the previous year when it reported a loss of $2.54 million. </div>
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Australian Geographic's total revenue was $49.1 million in 2014-15, up from $44 million in the previous year.
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Australian Geographic retail stores tipped to close

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Vicinity Centres (Vicinity) and Perth Airport Pty Ltd (PAPL) are to developer Western Australia's first Outlet Centre at Perth Airport in a joint venture.
The $145 million centre will be branded DFO, Vicinity's brand for its Outlet Centre portfolio, which will increase to five across the country.
The portfolio currently includes DFO Homebush in New South Wales and DFO South Wharf, DFO Essendon and DFO Moorabbin in Victoria.
The DFO's have generated an internal rate of return of 14.5 percent since acquisition in 2010.
The proposed Outlet Centre development will have over 110 stores across 24,000 sqm and provide parking for over 1,600 cars.
Construction is expected to commence in mid-2017, with completion forecast for 2018.
CEO and managing director of Vicinity Angus McNaughton said they identified Perth as a prime location due to its low representation of Outlet Centre space.
"This joint venture provides a unique and exciting opportunity for Vicinity to further solidify its market leading position in Outlet Centres," he said.
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Vicinity announce plans to develop Outlet Centre at Perth Airport

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The SPAR supermarket at Burpengary - the midway point 35 km between Brisbane and the Sunshine Coast - has been listed for April 6 Burgess Rawson auction.
<a href="https://www.burgessrawson.com.au/buying/QLD/RedcliffeorBribieorCaboolture/Burpengary/Retail/4P0203#.VtXsDIx97u0" target="_blank">Its net rent is $178,015 pa + GST</a> (allowing 2% CPI June 2016) in Brisbane's northern growth corridor, agent Glenn Conridge said.
It comes with 15 year lease plus options through to 2039 to SPAR, the global retailer with 12,000 stores in 40 countries.
It is a modern 867sqm store with corner retail exposure amid Liquorland, pharmacy, medical Centre, childcare, dentist, newsagent, bakery plus many eateries.
The 2.04 ha site comes with 260 on site car spaces.
A Tasmanian supermarket at 212-230 Mount Street, Burnie, is currently being marketed by Burgess Rawson via an Eexpressions of interest campaign closing on Thursday 3 March.
The agents expect a sale price in excess of $17.5 million, with a new 20-year lease plus options through to 2051.
The net income is currently at $1,236,483, boosted by depreciation benefits.
Woolworths is responsible for the usual outgoings, except for building insurance.
While the retail development goes back some 50 years, it has recently been extended and refurbished, Graeme Watson, Burgess Rawson director, said.
“Not only is the supermarket said to be the highest performing in the state, it is well up there on a national level in terms of performance also."
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Burgess Rawson list Burnie Woolworths and SPAR Burpengary 

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Melbourne’s commercial property market continues to its strong run, with a tranche of sales in the lead-up to the end of the year.
Highlighting the trend, a ground floor retail shop in the heart of Brighton’s restaurant and retail precinct recently sold for $1.9 million.
Located at 370 Bay Street, the 233 square metre ground floor retail shop (above) is securely leased to food retailer Burger Edge. 
It provides an annual income of about $50,000 per annum with short-term upside. 
The selling agent was CBRE’s Rorey James.
“This result is yet another example of the strong market confidence towards well located strip retail properties, which is being further enhanced by the low interest rate environment, improved consumer sentiment and upturn in business confidence,” James said.  
In further evidence of the uptick in sales activity, an owner-occupier recently secured a retail presence in North Balwyn for $700,000.  
Shop 3, 74 Doncaster Road is a 62 square metre retail property in the heart of Balwyn North Shopping Village.  
CBRE’s  Sandro Peluso brokered the deal.
“The building rate was equivalent to more than $11,000 per sqm, indicating the strength of demand shown by these owner occupiers looking to secure retail space in Melbourne’s eastern suburbs,” Peluso said.  
The two transactions follow a recent  sale of a Richmond development site for $16.7 million, on a tight yield of 1.5%.  
Situated at 79-89 Swan Street, the 1,540 square metre site comprises a 2,057 square metre two-storey building that has 10 shops and eight office suites with shared amenities.  
The property was sold through auction after an initial Expression of Interest sale process.
Seven bidders drove the price more than $4.2 million above reserve to the final bid of $16.7 million – a rate of just under $11,000 per square.  
“In a trend that is continuing to gain more traction in 2015, the property was sold to a local buyer, who managed to outbid several activity offshore and local groups,” CBRE director Mark Wizel said. 
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