The year ahead for Australian retail

Liz Webster 
Hello everyone, I'm Liz Webster – I’m a Partner in Management Consulting at Grant Thornton. At Grant Thornton, we work with some of Australia's largest retail businesses to help them be successful. We've all grown up in retail, and we worked in retail, and we consume it 24/7. 

We work with our clients to bring their strategies to life, and we do this because retail is in our DNA. So, let's get started on my second podcast – looking forward to talking to Craig Woolford from MST Marquee with respect to what's going on in retail, retail trends, what he's just seen coming out of reporting season, and where he thinks retail is going to go in the next 12 months. 

So, Craig, it's been a big month for you – you’ve come out of reporting season, talk to me. Talk to me firstly about MST Marquee very briefly and then talk to me about, you know, what you saw through the course of the last four, five weeks.

Craig Woolford
Thanks, Liz – it’s good to talk with you. Yeah – MST Marquee is a financial services firm. I've been an analyst on the retail sector for close to 20 years, and, now here at MST, we focus on analysing and understanding where retail is heading, what is going to drive and impact profitability, what are some of the sales drivers and leaders and we spend all our days analysing the major companies that are in the retail sector – those that are listed on the share market. 

It’s a dynamic world that we live in and something that we always find keeps us busy and interested in what's going on in retail. You know, in February and August each year, we get the results from lots and lots of different retailers and have conversations with the management teams, and the short of it is that retail profitability is good for the vast majority of companies that presented their results for the six months to December. Profitability is up – profit margins are up on pre COVID levels, and there's plenty of debate about when the sales downturn may hit retail. But generally, what we saw with retail talking about their current trading or their more recent performance was but if they're in housing related categories, there's an obvious slowdown that's already kicked in. If they're not in housing related categories, it's much more positive and optimistic, we're still seeing the very, very tail end of some of the COVID related issues that some of that might just reflect what they're lapping from a year ago.

But yeah, this downturn that everyone's figuring in retail is certainly playing out a lot more slowly and gradually – doesn’t mean it's not going to occur – but that taken a little bit longer to occur, and the good news is the retailers have profitability as a starting point in order to manage what will be a tougher 18 months for retail.

Liz Webster 
So, I mean, I saw some analysis you got at, which was super interesting, and there's clearly a lag in some categories, right? So, you know, the electrical categories are kind of going a bit faster in terms of their downturn, and you're saying it's kind of a three- or four-month lag with others? Do you think we're going see some lag in those other categories, especially discretionary categories?

Craig Woolford
Yeah, it feels like it's playing out that way. There’re two things I'd point out. One is there is a natural pecking order of how we as consumers, slow our spending – big ticket, highly discretionary spending slows first. So, furniture, white goods – we’re seeing those categories have slowed. They started slowing around November last year, and it's getting tougher in those categories. 

Smaller ticket, discretionary – depending on our financial circumstances, and yes, interest rates are starting to buy – but it's still lots of Australians with more income and savings built up. So, clothing or dining out, are holding up well, because they're smaller ticket discretionary, you know, satisfying things to do with our money. So based on past interest rate cycles, unfortunately, they do slow, it just takes a bit longer, and we're probably on the doorstep of that slowdown. I think we might get through Easter okay, but by the middle of the year, it will be noticeably softer in those other discretionary categories, like fashion or dining out, you know, matching what we're seeing in in the furniture and electronics type industries.

Liz Webster
I guess it's also been, you know, a little bit of a reprieve into Easter. I don't know whether that's the first of a couple of RAID halts, or whether we're back into it again in May, but do you think that's going to have an effect on retail spending? You know, one month reprieve?

Craig Woolford
Maybe I mean, the other thing I should say, just in response to you know how we see the slowdown occurring – it’s important to recognise that retail sales volume, the number of customers or the amount of product you're buying in a volume sense, is already quite weak across many retail categories.

All the growth in retail, we'd say at the moment is price – very little is volume. If that's the starting point, then the debate about the timeframe of a slowdown is more about the timeframe with which price inflation fades away than it is about the demand environment from a volume of products sold, and that's a distinction that's fairly simple and obvious once you break it out, but it is creating these dispersion of growth rates that we're seeing across the retail categories. 

And then bringing it back to your question here around interest rates on hold from the RBA, as at the April meeting, look, they definitely called it a pause to reassess things. If inflation continues to remain quite high and sticky, then they're likely to raise rates again and hard to be a crystal ball gazer on the RBA, at the best of times, we think there are a number of areas where inflation is remaining quite sticky and high in food related categories, we expect to see more price rises coming through in calendar 23. Obviously, energy costs and a few other things outside of retail, it's starting to tick higher as well. So we would say it's more likely a pause in interest rates to then go higher again, you know, might be one or two months’ time that they put another rate hike through, but maybe we're getting too caught up in the finer details here – we are close to a peak in interest rates, which is the good news. 

The bad news is that that we're up from a very low level, and we're only now coming into a period where a lot of those people that had fixed their mortgages, are rolling off to variable. So, without trying to sound too bearish or negative on this, the actual financial impact on retail spending on consumers from the interest rate hikes is only now starting to go through and will be more evident over the next 12 months than what we've seen today.

Liz Webster
Yeah, I noted in something I read that Westpac has already repossessed some kind of circa 200 homes. I can't recall whether that was nationally or in a particular state, but that's kind of probably something that's going to hit a few people as they're coming off fixed term interest rate rises, because it's everything. It's just not what you're spending at the supermarket, what you're spending at the bowser or what you're spending in your energy costs – something’s is going to give somewhere along the way, I guess. 

But I just want to pick up on one of the points you made around sort of volumes. So that's great that the pricing is all coming out of, you know, their profitability is coming all out of, you know, inflationary pricing, what does that mean to volume? What does that look like for inventory? Where are the risks and kind of in what categories do you think there's some inventory risks?

Craig Woolford  
Good question. Yeah, and we've done some research on this quite recently, because the biggest pain for a retailer is when they get their inventory wrong. And some retailers overseas have got it horribly wrong and crushed their profitability here in Australia, there's not many that have tripped themselves up on excess inventory. There's a couple but there aren't as many retailers that have gone as hard. Having said that, if I peel back the onion and look at individual categories, there's definitely a higher level of inventory in fashion categories – and it's ‘bit-sy’ – like some retailers are definitely over stocked others are still pretty lean on inventory. It's not one that I can make a broad-brush statement of excess, but you know, those with the highest inventory levels are definitely facing a risk as we come into this lower spending environment. 

And then the other one is the miss-estimate and the misunderstanding of underlying demand for those COVID category winners – think of bikes, outdoor furniture, gym equipment, some of the baby care categories have seen it as well, like it's categories where it was understandably quite hard to really unpick what is true ongoing demand versus what was just pulled forward or created because of COVID. We are seeing some significant excesses inside those categories at the moment that will lead to growth margin pressure and financial pain for those retailers.

Liz Webster
So, when you're talking about some retailers overseas have got it really wrong – who are they? Which ones? And in terms of categories that they're in, is there a risk that some Australian retailers are heading in the same direction because we tend to lag a little bit to what kind of happens overseas?

Craig Woolford
Yeah, well, the poster child of this excess inventory and the pressure that it creates is Target in the US and Walmart got caught up in the same thing. So, these are very large retailers with long histories that as we might recall, there was significant pressure on supply chains in getting product out of China. And so, while we're still in the thick of COVID, retailers in Australia and the US were scrambling to get inventory and ordering practices may have become less disciplined buying up on some of these COVID winning categories in excessive quantities is another problem that was really evident in the US retailers results. 

So, Target’s inventory – we look at inventory per square metre – the US likes to use square foot – but the inventory position that those retailers have had – or Target had – was up substantially ahead of their sales growth, and it's an obvious red flag and, you know, in response to that their profit margins are down four or five percentage points – 500 basis points. They've had to discount aggressively declare that inventory. 

I mentioned these COVID winning categories being the worst offenders. We hear that factory capacity in China – there’s plenty of it because a lot of retailers are cancelled orders. Branded products in and electronics that are transportable across countries are starting to see some excess. And some of that is floating back here in Australia as the brand owners tried to exit stock. 

So yeah, there's potentially some collateral damage as excess inventory globally, makes its way to Australia, but we are seeing it normalised reasonably quickly. So, the best, and I would advise any retailer this way, the best antidote to dealing with excess inventory is to get rid of it quickly and move on, and that's what we're seeing from Target in the US.

Liz Webster
Yeah, in talking to some of the retailers, you know, you touched on supply chain, is everyone kind of over this supply chain challenges with China or do you think it's still there? 

I've got a few mates out of my old retail world who are heading off into China for the first time in the best part of three or four years, and some of them are a bit hesitant about what they're going to find and what they're going to see, and are the factories the kind of factories they still want to do business with? Because you know, when you're a retailer in those factories three or four times a year, they haven't been there. Did anyone talk about any kind of issues around supply chain? Is it still something that's hanging over their heads?

Craig Woolford
There are two different issues in the supply chains as it relates directly to China. One is the near term, which is that factory prices in China are coming down, because the factories in China have excess capacity and things are getting back to normal in China. There are actually some pretty good deals being done and freight rates in shipping products from China to Australia have come right back to pre-COVID levels as well. So, in the near term the opportunities to deal with some of the gross margin risks and the cost pressures that retailers have onshore here by both in favour in China.

The bigger board level fundamental question, which is a question for the next 10 years, is should I as a retailer, or a supplier be diversifying away from China? And that's a tricky one, because I think the obvious answer is to ensure you’ve got diversity of supply chains sourcing, however, China still provides, in the vast majority of cases, the best all in cost on product. And that's the identity crisis, and the board tension that's going to exist is I'm going to have to sacrifice some margin if I want to diversify towards the subcontinent, or to other Southeast Asian countries or even further afield into European markets. But, you know, maybe you want to do that, because a lot of companies will be 60 to 80 per cent of their product is sourced from China, or if it's not sourced from China, and they are in the subcontinent, still Chinese componentry parts or Chinese-owned companies run those factories in the other countries. So it’s a tricky question to solve.

Liz Webster
You know, I lived in Vietnam for a while in 2019, and they tried their best to try and you know, pick up some of that volume. But I think there's some innovation, there's some process, there's some systems, there's pricing around China, I mean, they've been doing it for a really long time, and they're pretty good at it, right? 

And so, they're able to deliver good costs, but talking about China and even other countries, do you think that that ESG kind of space will affect Boards and Exec teams around where they will be manufacturing? Do you think that's going to start to play out, and play out in countries like China, where maybe the way they run their business or businesses is not kind of acceptable to Australian companies?

Craig Woolford
Yes, it's certainly building as a as an issue that retailers and consumers are more aware of. I think the issue with China is just a more fundamental one around the trade tensions, the political tensions and what risks might unfold, you know, shock, or some way that's very difficult for companies to manoeuvre quickly on. So that's more about how retailers manage the situation over the medium term in dealing with that.

Are we seeing any problems emerge with retailers that have, you know, sourcing from China. The answer is kind of, but you know, low cost, retailers that, you know, frankly, seem to get products, cheaper than I could ever imagine – whether it be Primark in the UK, or Shein online these days, built upon quantities, and there's a tension there between consumers that love value, and consumers that want to see things sourced ethically and appropriately and in an environmentally suitable way.

Liz Webster
I think it's a bit like the, you know, ‘Buy Australia’ campaign, I think if it's more expensive than a Chinese based product that you're going to buy, you see what the consumer does, they kind of do shop, I think with their hip pocket, do you think that's going to be something that might be high on the agenda of Boards in terms of their ESG policies and ethical sourcing and slavery and all that kind of stuff, and absolutely should be part of Board's thinking, but do think the customer really cares about that kind of stuff? And do you think in this current market that we're in, that they're caring less or they’re caring more?

Craig Woolford
I’ve seen in some environmental and ethical solutions that retailers and brand owners have provided where it's a win win win, in my opinion and the consumers better off for brand owners better off, or retailer, and also the environment, like the way packaging is done is probably the best example of that. Let’s de-weight the packaging – less packs inside packs inside packs for things, there's less cost for the retailer, there's less waste, and some of that gets passed on to the consumer, and they want those sorts of products. So, there's some examples on that side. 

If you're trying to bring things back on shore, in certain categories, they are just, unfortunately, way more expensive, and the consumer still buys on value. So, I think that's the real tension in some categories. It's very hard, like, you know, some of our things, we know this, and some of the things that we extract out of the ground or grow, get converted into something more elaborate overseas and then brought back as the finished good, and can we do that onshore? Well, the machinery and the cost of doing that on shore is just not as available here on the ground. So, it's a significant investment that businesses would have to make, to change that backdrop and probably needs government intervention as much as anything.

Liz Webster
My personal opinion is I think that ships possibly sailed in that space. You know, I mean, technology, innovation has moved way ahead of probably where we can start, and for a country, a small country, right, 25 odd million people, it's pretty hard to sort of sustain that significant sort of manufacturing base.

But just touching on what you've just said around, you know, what the customer can afford. Inflation is having a crack at everything in our lives just about, but our wages aren't going up. So, talk to me about the wage growth risk, both from a consumer point, but also, you know, for retailers keeping people. How is wage growth affecting the way the consumer is spending at the moment? And what's the risks with that?

Craig Woolford
There are two different issues I want to raise on wages. The first is that even though wage rate growth is quite anaemic, average wages for households are going up because the change in the jobs that people have, as well as more people in a job. 

So, wages growth, like there's some data we can get from standard statistics, wages growth, is running at circa 9 per cent. So that's a combination of more hours worked, more people in a job and the wage rate that they're earning. So that's a pretty good outcome, if we're getting 9 per cent more wages and inflation is running at six, you know, we're doing okay, that's the first point to make. 

And the second one is a very retail specific issue that's going to unfold over the next two months and that’s around the minimum wage decision that the Fair Work Commission will make, which they do every year around the end of May, early June, and that affects the wages that most retailers are going to pay in the following 12 months. I think there's risk that that wage rate growth is somewhere between 5 and 7 per cent for fiscal 24, and that's going to create the challenge for retailers in that 12 month period. 

It's always a double-edged sword here – I’m telling you that people on a minimum wage in many industries are going to get a 5 to 7 per cent increase. And that's kind of good news a bit in terms of their ability to spend and deal with living cost pressures – that’s the positive and the negative is that that means 5 to 7 per cent more cost for businesses that have workers in retail – it tends to be the largest operating costs for a retailer, obviously outside the cost of the products that they purchase. So, I think it's going be tough in FY 24, where wage rate growth will be elevated as the retail sales trends are slowing, and that's going to bring back to the front of everyone's attention – how retailers manage wages in a structured way. Can I automate processes? Can I bring in self-checkout? Can I adapt? Can I change my rostering processes?

Liz Webster
Yeah, that's interesting. I mean, there's a lot of kind of automation and semi automation going on in DCs because that labour cost is significant if you can find it right and trying to get if you can't get your goods out, there's no point in them sitting in a DC. 

So, changing the topic a little bit – I saw Scentre’s results yesterday and talking at their AGM and they're saying you know, customers are back in shops, baby, you know, they're kind of they're back walking, their back talking, their back eating and drinking, and clearly spending money. Are you surprised by that? Are you surprised by what's happening in bricks and mortar? And you know, this kind of category that, a few years ago, was almost kind of starting to die a slow and gradual death? And then what's the impact on the other side of that - the pure play E-comm guys?

Craig Woolford
We are in an environment where this year – this calendar year – is the year where things are really getting back to normal. Now of course, you know the cliched phrase, it's a ‘new’ normal, but if we try to benchmark what consumers are doing with their time and money, some of the behaviours of say going to shops rather than shopping online, but also going on holidays or spending time at concerts or sporting events – you know, all those things are getting back to normal. 

So yeah, the shopping centres are seeing an improvement in traffic. Generally, traffic is still lower than 2019 levels, but that's more about the structural change towards some customers that are just more planned in their shopping, and so, the browsers or the just the wandering traffic in the shopping centres has reduced a bit. Online penetration has come right off its peak levels during COVID, and those views that online had been luckily accelerated, only a small amount of real accelerate stuck and online, you know, online, our forecasts are that online will be back in growth this calendar year and growth faster than bricks and mortar. But there's two things to point out – one is that a lot of retailers are now seeing up to 40 per cent of their online sales as click and collect, and store still matters, and two – retailers are still struggling with online profitability, and so how they differ from what was boom times in terms of demand during COVID, to a tougher environment now, to now actually making money out of each dollar they sell online. There's still some work to be done around the technology that they use, in the fulfilment solutions that they provide to customers.

Liz Webster
And so, are we seeing sort of more challenging times for some of the pure play E-comm guys? Are we going to see them coming into bricks and mortar, are we going to see them, you know, try and have eggs or both baskets do you think? 

Craig Woolford
Potentially – I think the online pure play industry has to ensure that it's got an offering that remains relevant, and the biggest, sticky cost that's hurting online retailers is that cost of acquisition, the cost of retaining the customer in an online channel. There's a lot of marketing dollars getting spent on these customers, and it's taken away a lot of the profitability that whether that can be shifted towards a stickier customer, it's not playing out that way so far. 

And yeah, we are seeing some of the groups the likes of Catch, which is owned by Wesfarmers incorporating its business within the retail network and leveraging the physical points of presence that the Wesfarmers retail businesses have, in addition to that online, offer and Catch has some automated distribution centres that provides an efficiency around fulfilment, and they can leverage that back into their retail businesses as well. 

So yeah, it's not an easy path to good profitability for online businesses. I think there is a path towards low single digit profit margins, the path beyond that, like big companies around the world are still struggling to make meaningful profits online, which suggests that scale is a bit elusive in the online world.

Liz Webster
Did anything surprise you in any of the results announcement this time around? Like was anything kind of like, you went, Oh God, that really kind of shocked me or pleasantly or unpleasantly surprised you?

Craig Woolford
Two things that come to mind. I mean, the Catch group lost a lot of money, and yeah, that's just about a reset of that business. The online pure players – the losses there were very large, and as I hinted at, these kinds of businesses are trying to scale back some of their marketing investment and certainly scaling back their inventory risk taking, that will have an impact on sales. So, they'll probably be smaller businesses than they were at their peaks. 

The other issue was just how quickly things have slowed in electronics, furniture, the housing related categories. It was such a dichotomy – everyone in Nicscali, Harvey Norman and JB Hi Fi, The Good Guys are all showing sliding trends, and then Rebel or Super Retail Group, across their portfolio of brands, universal stores, really are all seeing accelerations or continued good sales growth. So, a clear dichotomy between categories of retail that usually we talk about and theorise about how these things might play out, but for it to be so clearly evident in numbers was quite a surprise to me.

Liz Webster
And so, when you talk about some of those, you know, the Nicscali’s, the Harvey Norman's of the world, where do you see that kind of going in the next, kind of, 12 to 18 months?

Craig Woolford
The homewares categories feel like they've got too much inventory in certain sub segments, these inventory issues that on balance across the Australian retail sector inventories don't look too elevated in a totality sense. But when you break it down into individual categories, there's definitely some pockets and some of these home related categories are definitely vulnerable. And it's probably going to take good 9 to 12 months for them to work through those challenges. 

So, we're seeing it in some sub segments, outdoor furniture, some great bargains out there, white goods that the bargains are starting to come back, and electronics prices are starting to fall again as we're used to seeing. So yeah, it's a very different market for these kinds of businesses than what we would have seen to of months or even two years ago.

Liz Webster
We haven't talked to at all about, you know, real estate, rental prices. What's the feeling out there amongst the retailers you're talking to about where they're landing? I mean, you know, along high streets, I'm still seeing a lot of vacancies – not so much in centres, but certainly, you know, there's some pockets of high streets that have got vacancies. What are you hearing around rental at the moment?

Craig Woolford
I would say it's quite balanced, and by that, I mean, you know, landlord has some bargaining power, which, you know, they’ve typically had, but if we think about pre-COVID foot traffic was starting to slow, online was growing. And so, a number of retailers are finding it easier to do deals with landlords.

Over the last three years have been not much additional floor space added to shopping centre land, and so, if a retailer wants a genuinely good shopping centre locate and they're having to pay up for that space, you know, the C grade, the high street that may have lost traffic in relevance a shop may be struggling. CBD certainly has had a tough time and it's starting to come back. The rents are on the way up, and the pressure from lower rents may emerge if profitability falls away. But that's not the situation at the moment. Retailers are making good money and their business case for opening a store in the right location stacks up.

Liz Webster
So right place, right time is, you know, and right product, I guess it will always kind of win through right?

Craig Woolford
Absolutely, and you know, one of these other issues I’ve highlighted is the importance of ‘Click & Collect’. So, I am hearing a lot more about what would be described as ‘network optimisation’. So if I'm having a store footprint, if I've got a big store footprint, have I got the rights store advisors in the right locations, incorporating thinking around my online fulfillment outcomes, and generally, that means you want a bigger store, because you need to make sure you've got all the range in that store, and it can act as a bit of a hub for online deliveries.

Liz Webster
Yeah, I do like the ‘Click & Collect’. Like I mean, you know, we saw that years ago, you know, in the sort of more advanced, you know, retailers overseas, where they were creating all sorts of shopping experience, by the time you get to the back of the store to pick up you ‘Click & Collect’ and I can see now you know, Starbucks coffees, and all that kind of thing – I can see Australian retailers starting to do that. 

So, it's a clever way, and customers don't really want to pay extra for the shipping, right? But the problem is, someone's got to pay for it. And so, you know, if you can pick it up, as you're going through the centre, I think it makes sense. It's a win win. I think it's a win win for both customer and retailer. 

The results of you know, DJs and Myer were pretty strong. And tell me, you know, certainly that's not the demise of department store in this country. Is that what you're thinking?

Craig Woolford
Probably, I’d probably soften the commentary on the debate.

Look – they’re trading a lot better than they were. Every retailer that's in discretionary retail, in the six months to December or technically six months to the end of January, in the case of Myer, had a good period Sale were strong – rebounding, and so the department stores had a nice rebound or recovery after all the pressure that CBDs had during the worst of lock downs, and that's reflected in results. 

And yes, Myer is a lot more profitable than it has been for many years and David Jones made some of the best margins that's made in the last couple of years. I think the question is, can it be sustained? What's proven is that these department stores have good brand recall with consumers – a long heritage they've got in this market, and they've been able to spend a number of those dollars to online from bricks and mortar, and so the path over the next decade is probably still a reduction in footprint. The debate of how many more of these customers they can move to the online channel and a different looking department store landscape than what we would have had 20 years ago. So, it's improvement and suggests they're not you know, financially broken, but there's probably going to be fewer square metres in the department store sector in a decade's time than what we have today.

Liz Webster
I was really shocked to read about my moving out of Queen Street Plaza – that’s the third biggest city in the country and coming out of a CBD location. What does that mean for both CBD retailing, but for someone like Myer?

Craig Woolford
Look, I think Myer taking a very pragmatic, financially disciplined approach to every lease deal, and it is quite a radical decision to leave the Queen Street site in Brisbane. Probably both sides – both landlord and retailer probably had an important decision to make around the amount of capital needed to make that suitable CBD location and the numbers just didn't work for both sides. So, there's every chance that Myer is going to look for another location in Brisbane, whether they can get something that's anywhere near as lucrative as the Queen Street site would be questionable, but it's – that’s the reality of the future for departments – they need less space and sometimes that might be in important locations.

Liz Webster
Yeah, it's interesting isn't I think that the whole thing around the space is really important and the days of department stores having a lot of spaces is probably long gone, and for Brisbane shoppers, I hope they find a good location that sort of is close to the CBD.

Change of tact – just around November trading and all around sort of that whole Black Friday, it actually isn't a Black Friday, it's kind of feels like it's a black November month – like it sort of start super early and tends to go even into December. Is November the new Christmas? Because I kind of feel the last couple of years, it's kind of got to that.

Craig Woolford
November has become a big promotional month and another – frankly excuse – to stimulate demand. It's changed the shape of Christmas – see the whole Christmas run-in period – you’ve got more sales in November, a little less sales, early December, Boxing day is not quite as big as it used to be, but they tend to serve different purposes. The catch phrase I hear from those in industry is you know, the November, Black Friday and November type promotions are for Christmas spending and what you're buying for your family and friends and then the Boxing Day is what you're going to buy for yourself. I think what's happened for most retailers, though, rather than being seen as a negative, retailers are now just embracing that promotional event and ensuring they've got the right product and the right assortment for those events – and it can be a highly profitable situation if you've planned for it, rather than you're trying to clear or selling at a discounted margin.

Liz Webster
So, December is still bigger overall than November?

Craig Woolford
Yeah, December is still the biggest month of profitability for every retailer. You get Christmas wrong – for some retailers that can be the bulk of your yearly profit.

Liz Webster 
Final question – if you were CEO of a retailer, decent sized retailer in the country, probably discretionary, what would your top three priorities be?

Craig Woolford
Yeah, I haven't had the luxury of working in retail, but I'm a huge fan of strong merchant principles. Ultimately, a great retailer is a great merchant. They know what consumers want, and they buy the right product and merchandise and create the right environment for consumers in store for online. So, having a really strong foundation around the merchant side of the business – the right culture, the right metrics – would be a top priority for me, I think. Outside of that, there's now more wide-open debate than ever before about what is 10 year future look like? How much is done online? How much is done in stores? How much the stores help online or hinder online? There are some big questions there, which I think get to the heart of what's your retail format, and what's your fulfilment model online? And it's looking increasingly likely that you need the combination of the two – you need physical presence, particularly if we're just talking Australia here – the physical presence around Australia to ensure that you've got customer access and distribution points to get the products to consumers if you're billing online efficiently and cost effectively, but then those doors have to be big enough to be an exciting place for consumers to drop in and buy their products. So, I think getting format, the network, right is crucial. 

The other one that's popular conversation, and I have mixed views on, is customer data and insight and how you use that. Unfortunately, I would honestly say that loyalty is a bit of an overused word, and every retailer seems to have a loyalty program. Does it really mean that customer is loyal to that brand? Not really. Does it give you an ability to talk to that customer differently? Most likely, but it's hard to create an edge on that, and I'm increasingly thinking about what other forms of loyalty might work best for the shopper, but making more data driven decision because your loyalty card holder base, there's other forms of data that sit outside of your own customer data or loyalty data that making those decisions based on that data, I think is just a huge opportunity for a lot of retailers. Some have come a very long way along that journey and others have the data available but aren't really using it in an effective way at this stage.

Liz Webster 
Thanks, Craig – as always super insightful, lovely to talk to you and really appreciate your time, and let's hope that retail you know, keeps delivering some good results during the course of the remainder of this calendar year. 

Craig Woolford
Thanks, Liz, good to speak with you. 

Liz Webster
And for everyone else listening out there, I look forward to presenting my next podcast in the next few months. Thanks.