Steve Jobs once famously said, “The only problem with Microsoft is that they just have no taste. They have absolutely no taste, and I don’t mean that in a small way, I mean that in a big way. They don’t think of original ideas and they don’t bring much culture into their product.”
Australia has long been thought of as “the lucky country”. A country not just blessed by natural opportunity but one afforded historical wealth gain arguably based more on the relatively easy option of commodities and geographically protected replication. In an economic climate of infinite growth it was hard to argue the logic of the higher risk and return of value adding versus the low risk certainty of smaller but steadier returns delivered by commoditisation and price.
Retail growth is outperforming the economy. Year on year growth as measured by the Australian Bureau of statistics is consistently above four per cent in an economy that is growing at two per cent. In other words – double the rate of GDP growth. Far from celebrating, the industry mood is one of survival. As margins decline and costs escalate the profit crunch is hitting hard in the majority of retail businesses.
When Myer floated on the ASX back in 2009, the shares were valued at $4.10. It was judged at the time to be a very successful float. For TPG and Blum Capital (the private equity owners prior to the float) that is. Its current share price is around 90 cents and market capitalisation around $835 million. About a third of what it was floated for.
A client of mine recently completed a long, painful and expensive technology implementation program only to emerge without profit or business productivity gain of any kind. Many issues, bugs and disconnects are still being worked on to this day with no sign of when they will be resolved. “Liars, cheats and thieves” was how he described the I.T. vendor and the claims he was sold versus the outcome delivered. And he is not alone.
It is both fascinating and sad to watch so many Australian retailers floundering as they face the onslaught of global retail brands entering their previously under-contested local markets. While competitive performance has always been (and always will be) subject to the context of the competition at any point in time, many retailers in this country have historically been allowed to get away with being little more than logistics operators.