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Issue 2269
29 Jan 2020
RRP $14.95
insideretail.com.au
Blundstone charts
growth beyond
150 years
How the iconic Aussie boot brand plans to
evolve and triple its growth in the future.
In this issue
Analysis From the source Feature
The downfall of Kaufland Richard Facioni, Alceon The rise of bubble tea
Where did it all go wrong for the German The executive director on how retailers Taiwanese brand Milksha unveils its
supermarket giant? p5 can attract investors. p10 first Australian flagship store. p14
NEWS
Christmas miscalculation
blamed for driving store closures
Jeanswest is just the latest retailer to announce store closures
and staff cuts in 2020, and at least one retail insolvency expert
believes it’s due to a poor Christmas. By Heather McIlvaine and Dean Blake
T
he first few weeks of 2020 have already seen several “There’s always something going on. For example, the Sydney
Australian retailers announce store closures and staff cuts in light rail...that’s been frustrating for retailers,” he said. “There [are]
a sign that Christmas 2019 did not go as smoothly as some always factors that have got to be managed in order to remain
had expected, according to one insolvency expert. successful.”
Jeanswest is just the most recent example, with the struggling Indeed, retail strategist and founder of 12High Nathan Bush
clothing chain revealing plans last week to close 37 stores and make believes the retailers that have gone into administration in recent
263 staff redundant, after it fell into administration on January 15. months all have one thing in common.
KPMG’s James Stewart, one of the administrators, described the “There’s a similar pattern around settling for the status quo and
restructure as a difficult but necessary decision to attract a buyer. functional retail, rather than pushing the limits to stay relevant,”
“We are very mindful of the serious impact store closures and Bush told IRW.
staff redundancies have on people’s lives,” he said. “There’s a lesson here, and it’s not only for Jeanswest. It’s the
“However, we must also work to [maximise] the opportunity for importance of keeping up with the customer and staying relevant
this business to be sold or restructured - to give it the best chance [which] sometimes means you have to be uncomfortable.” IRW
to continue.”
Jeanswest is hardly the only national retailer facing the prospect
of closing some or potentially all of its stores. Harris Scarfe,
Bardot, EB Games, Curious Planet (formerly known as Australian
Geographic) and McWilliams Wine are all in the same boat.
At least one insolvency expert believes the recent rash of retail
failures is due to the challenge of managing supply and demand
across seasonal peaks.
“The summer holiday/Christmas period creates a really difficult
strategic time for retailers in that they have to buy or plan for an
influx of sales, but then also manage the impact of people taking
holidays [and] therefore demand [dropping] very shortly thereafter,”
Andrew Spring, retail insolvency specialist at Jirsch Sutherland, told
Inside Retail Weekly.
According to Spring, it’s clear that some retailers had been
counting on strong Christmas sales to “save” their business, though
they were likely dealing with other issues as well.
“It’s not a failed Christmas season in isolation that’s creating a
spike in retail insolvencies, but it’s these additional effects from prior
periods that are weighing them down,” he said.
While the official retail sales figures for December 2019 have not
yet been released, NAB is predicting a 0.1 per cent decline month
on month, largely due to the growth of Black Friday, which brought
Christmas shopping forward to November.
“Always something going on”
Summer sales were also impacted by the bushfires. Super Retail
Group (owner of Supercheap Auto, Rebel, Boating Camping Fishing
and Macpac) and Mosaic Brands (owner of Noni B, Rockmans and
Katies) both reported a dip in comparable sales.
Spring conceded that the bushfires have had “a big impact” on
The festive season was not as fruitful
retailers, but said there will always be unexpected events that make as many retailers had hoped.
it challenging to succeed.
2 insideretail.com.au
NEWS
Blundstone hits 150 years
The iconic Aussie bootmaker has survived and thrived for more
than a century, but has no plans to slow down. In fact, by its own
estimates, it will have tripled in size in the next decade. By Dean Blake
F
amily-owned Tasmanian boot brand Blundstone is turning “Sustainability is massive globally. Not just in footwear, but in any
150 this year, and will be celebrating the brand’s heritage product. You have to be very focused, and very transparent,” Wilkes
throughout 2020. said.
Founded in 1870 by John Blundstone, the business started “It’s one of our key initiatives for the future, and it’s being driven
making fit-for-purpose footwear, and never looked back. Surviving right from product development. We don’t develop anything without
the Great Depression, and fitting out Australian soldiers in two world asking questions about product sustainability.
wars, the business has seen more than many others combined. “We don’t want to introduce anything into our ranges that doesn’t
“I suppose being 150 years old is a pretty big achievement, meet our criteria, even to the extent that we’re looking down the
especially when the economy changes all the time,” Blundstone track at reengineering anything that doesn’t.”
global head of operations Darryl Wilkes told Inside Retail Weekly. To Wilkes, it’s important to understand the business’ supply
“It’s unusual for brands to be around for that long, so with chain, and get ownership from its suppliers that they are doing the
all challenges and growth aspects going on, we see it as a real right thing and sourcing ethically.
achievement.” “For those suppliers that won’t do this, we find alternatives.
Part of the brand’s success comes from having a unified vision “It’s about brand reputation. We won’t compromise in this area.
from the family owners, who set corporate values and keep the Every brand wants to do the right thing, and that’s certainly one of
brand focused. our values.” IRW
“There is no desire to do any other path. You have to be pretty
focused on doing things right, building the brand. The family’s
vision to support that activity ensures there’s no mixed messages,”
Wilkes said.
However, the brand is not content to simply continue on the same
growth trajectory it’s been on in the past 150 years. Blundstone
is four times the size it was ten years ago, and in another ten, the
business is planning to grow another three times more.
According to Wilkes, the retail environment is ever changing and
for a business to succeed, it needs to evolve.
“Our business has remained mostly consistent, but the market is
changing so you have to be adaptive. When you look at bricks-and-
mortar versus online, consumers want to shop in different ways so
you have to change your strategies,” Wilkes said.
“Footwear is one of those products where consumers love to look,
feel and touch, [online] helps to push the brand to those consumers.
Younger people tend to buy online, so it’s about making sure you
cover both sides of consumers.”
Though the business has manufactured its own product for a
century-and-a-half, it hasn’t opened its own standalone physical
store – and, currently, there are no plans on the horizon. Instead,
Blundstone products are sold in 10,000 stores worldwide, including
about 2,500 in Australia.
“We are currently represented in seven different countries, and
we have plans to grow. Some bigger countries – Canada, Israel, the
United States, Europe – there’s opportunities in all of them for the
type of product that we make,” Wilkes said.
The times they are a-changin’
Like many businesses, Blundstone has observed the growing
consumer demand for businesses to be transparent and
Bundstone has survived two world
sustainable in the ways they manufacture and sell goods - and
wars and the Great Depression.
they’re taking notice.
3
NEWS
Amazon launches ‘Uber for e-commerce’ This week’s top 10
Our most read stories from the
Last week, online giant Amazon launched its gig- past week at insideretail.com.au.
economy powered delivery system, Amazon Flex,
in Australia.
Initially rolling out in Sydney and Melbourne,
delivery estimates will be presented in four-hour
blocks, when delivery partners will be able to
collect packages from specified pick-up points to
deliver to customers.
“With visibility of how much they will be paid for a
block before they accept it, delivery partners ensure
their time on the road is well spent,” said Amazon
Australia director of operations Craig Fuller.
“We are always looking for new ways to deliver
convenience to customers. As customer demand 1 Online competition didn’t kill
Jeanswest. Boring retail
and delivery needs continue to grow in Australia,
killed Jeanswest
Amazon Flex gives us the agility to supplement the
work we do with our existing carrier partners so we
can speed up delivery times and respond to peaks 2 Myer trims another 35
executive roles
in demand.”
Flex initially launched in the US in 2015, and has
been linked to the deaths of 10 people according 3 All over before it began: Kaufland
cans plans for Australia
to an investigation by The New York Times and
ProPublica.
However, because Flex drivers are hired as
contractors, the online business has no legal
4 Jeanswest enters voluntary
administration due to online pressure
responsibility.
5 Moir to lead David Jones as parent
company names new CEO
The Iconic gives old clothes a second chance 6 “Retail is not dead. That’s my firm
Further growing its sustainable credentials, The view”: PAS Group’s Eric Morris
Iconic has partnered with Australia Post and the
Salvation Army to allow customers to donate pre-
worn clothes, helping Australians lower their waste
7 Harris Scarfe closing 21 stores
footprint.
The initiative, called Giving Made Easy, lets
8 Bose shutting stores across Australia,
North America, Europe, Japan
customers use the same return solution The Iconic
employs to donate old clothes, which will be sent to
one of 330 Salvos locations - lowering the barrier of
9 Amazon expands delivery capability
with gig workers
entry in order to make the process more simple for
10
customers. Bushfire and drought impact Super
The clothing will then be sold to raise money
Retail’s start to the year
to help people dealing with issues ranging from
homelessness, addiction, emergency situations and
domestic violence, as well as those impacted by the
catastrophic bushfires.
“Australians discard 23kg of clothing per person
Comment of the week
every year - that’s a whopping six tonnes of textiles
and clothing to landfill Australia every 10 minutes,”
said The Iconic chief sustainability officer Jaana
Quaintance-James. “Like Starbucks, Kaufland may have
“As a leading player in the Australian fashion thought globally, but weren’t prepared to
industry, we have an important responsibility to act locally.”
reduce our impact on textile waste and to influence
customers’ attitudes and behaviours when it comes Matthew - Where did it all go wrong
to clothing disposal.” for Kaufland?
Last year, the Salvos raised $37 million and
provided over 1.2 million sessions of care across
the country. IRW
4 insideretail.com.au
ANALYSIS
Chasing too much, too
soon sinks Kaufland plan
The German retail giant saw a few more bumps on the
road than expected, and was willing to cut its losses rather
than press on. By Jared Dickson
N
o doubt there was some fist-pumping and backslapping at The strategy was a key factor in the failure of the Masters Home
the headquarters of Woolworths, Coles, Metcash, Aldi and Improvement chain, with the cost of each of its stores significantly
Costco last week. There was probably also a sense of relief higher than Bunnings and flaws in store formats entrenched.
among the discount store brands that a new market entrant had The strategy simply translated to a long tail for a return on
decided to exit Australia before opening a single store. investment, particularly with the tight margins for the grocery
Kaufland’s sudden and unexpected announcement is likely to sector and the oversupply of floorspace in the discount general
leave the privately owned German retailer with a loss exceeding merchandise category.
$500 million on its aborted plan to open at least 20 stores in Ironically, the failure of the Woolworths hardware venture
Australia. could have benefited Kaufland if the German retailer had opted
The first two stores were to open in the Adelaide suburb of to establish an initial batch of stores in the former Masters Home
Prospect and the Melbourne suburb of Dandenong, with planning Improvement sites.
approvals secured for further locations. Negotiations may not have succeeded, with a Woolworths
Kaufland had said last year it expected to open between eight management wary of a new competitor for their grocery and general
and 12 stores in 2020 although the more realistic timeframe, merchandise chains, but they could have been more fruitful with the
allowing for planning and development approvals, was likely to companies that bought the properties from Woolworths.
delay most of those openings until next year. The Masters Home Improvement locations were not necessarily
The final cost of the exit will depend on the sale of some of the prime sites but would be likely to have been more successful for
properties Kaufland had acquired, compensation to developers and a destination food and general merchandise hypermart than a
related parties and severance packages for staff. hardware store.
Kaufland had opened and staffed a head office in Melbourne and Kaufland wanted to open stores of more than 20,000sqm with
had acquired a number of warehouse and retail sites as well as around 400 car parks, offering a merchandise range of up to 40,000
offices in Adelaide, Brisbane and Sydney. products.
The decision has left around 200 staff, developers and suppliers The German retailer’s timing for entry to the Australian market
in the lurch, none of them receiving any forewarning that Kaufland was poor, not just in respect of missing out on the Masters sites,
had decided to exit Australia to focus on the “great growth but also because it gave the US hypermart chain Costco a flying
potential” of European markets. start and encountered a period of industry consolidation amid
Kaufland is owned by the Schwarz Group that also owns the Lidl subdued retail sales growth.
supermarket chain and is the fourth-largest retailer in the world. Costco is generating sales of around $2 billion from 12 stores and
There are 1300 Kaufland stores across Europe. is profitable.
Subdued consumer spending and the outlook with low wages Costco, Coles, Woolworths and even Aldi would be delighted with
growth and other menacing Australian economics were no doubt a Kaufland’s withdrawal from the Australian market without opening a
factor, along with the competitiveness of the grocery and discount single store. Not only does the exit eliminate a new competitor but
general merchandise categories. it also sends a warning signal to other international retailers about
However, the key issues were likely to have been the high costs the difficulty of breaking into the mature and highly competitive
of establishing a distribution and retail store network, an equation Australian market.
not helped by a flawed rollout strategy for its hypermarts, and the However, for Metcash the news was no doubt greeted with
intense competition of entrenched retail brands. sheer relief as the grocery and liquor wholesaler battles to secure
Unlike Costco and Aldi, which both implemented a measured sales, margins and earnings, buffeted by fierce competition in
store rollout program that allowed them to consolidate before the categories and the loss of key chain contracts with Drake
venturing into new markets, Kaufland was following the same supermarkets and 7-Eleven.
aggressive expansion in multiple markets playbook as the failed Metcash half-year results to December 31 for the grocery and
Woolworths Masters Home Improvement chain. liquor channels stabilised, albeit recording a fall in profitability,
While Kaufland was obviously attempting to achieve scale quickly low revenue growth and the contract losses have prompted Credit
in their Australian operation, the strategy adds to the cost of store Suisse to suggest the wholesaler should spin off its food
development, distribution, staff recruitment and marketing. distribution arm. IRW
5
AROUND THE GLOBE NEWS
Around the globe
Bezos phone hacking stokes fears It said it would, however, retain Dickies and Timberland Pro brands
from the workwear segment. VF spun off its jeanswear business as
News of the apparent hacking of the mobile phone of Amazon
Kontoor Brands last year.
billionaire Jeff Bezos in 2018 is sending shockwaves around the
world, alarming Wall Street and Silicon Valley and giving Western
investors pause about the kingdom.
Hugo Boss revamp lures shoppers
German fashion house Hugo Boss has reported better-than-
The Guardian has reported that Bezos had his mobile phone
expected fourth-quarter sales growth, helped by strong demand at
hacked after receiving a WhatsApp message that had apparently
its renovated stores and growth in online retail.
been sent from the personal account of the crown prince of
Fourth-quarter sales rose 4 per cent to €825 million ($1.33 billion),
Saudi Arabia.
beating average analysts’ forecast of €805 million, Reuters reports.
The encrypted message from the number used by Mohammed bin
In its announcement, Hugo Boss said the environment in Hong
Salman is believed to have included a malicious file that infiltrated
Kong remained difficult in the fourth quarter, although mainland
the phone of the world’s richest man, according to the results of a
China saw double-digit growth.
digital forensic analysis.
Major renovations, including at its Champs-Élysées flagship,
This analysis found it “highly probable” that the intrusion into
contributed strongly to the sales rise, although outstripped by online
the phone was triggered by an infected video file sent from the
sales which rose 52 per cent.
account of the Saudi heir to Bezos, who is also the owner of the
Washington Post.
Large amounts of data were exfiltrated from Bezos’s phone within
Best Buy investigates CEO
US consumer electronics retailer Best Buy says that its board is
hours, the newspaper reports, though what was taken or how it was
conducting an independent review on allegations of misconduct
used remains unknown.
against CEO Corie Barry after receiving an anonymous letter alleging
However, the hack raises questions about how the National
that she once had a romantic relationship with Karl Sanft, who was
Enquirer was able to publish intimate details of Bezos’s life,
at the time her boss.
including text messages, a few months later.
Both Barry and Sanft joined the firm more than two decades ago.
Ted Baker doubles trouble While Barry became the finance head in 2016 and CEO in June
last year, Sanft, according to his LinkedIn profile, was senior vice
An accounting error at British fashion retailer Ted Baker is more than
president of US retail operations until March last year.
twice as big as initially estimated, adding to a stream of bad news
Barry is one of only a handful of women who lead Fortune 500
over the past year and sending the company’s shares down as much
companies. She is married and has two children. At just 44 years
as 10 per cent.
old, she is one of the youngest CEOs of an S&P 500 company.
Ted Baker appointed accountants from Deloitte last month to
Sanft left Best Buy in early 2019 and is now the chief operating
investigate after the company found that it had overestimated the
officer of 24 Hour Fitness Worldwide. IRW
value of its stock.
The company, known for suits, shirts and dresses with quirky
Jeff Bezos: Intimate details of
details, said the value of stock on its balance sheet was overstated his life were released following
by £58 million ($111 million) as at January 26, 2019, more than the hacking of his phone.
double its preliminary estimate of up to £25 million.
The results of the accounting investigation come after Ted Baker’s
banks appointed advisers to carry out a business review amid
concerns that its weak financial position could force it to look for a
cash injection, the Guardian reports.
A £58 million overstatement would be larger than the London
Stock Exchange-listed company’s annual profits before tax for the
year to January 31, 2019 of £50.9 million.
VF eyes future of nine brands
VF Corp is assessing the possibility of further brand divestments,
including Red Kap and Bulwark, as the US apparel maker looks to
focus on its more retail-oriented workwear brands such as Vans
rather than those that target businesses.
The company said the brands under review represented about
US$865 million ($1.3 billion) of its total fiscal 2019 revenue of
US$13.85 billion and about half of the workwear segment’s sales.
Divesting the brands, including VF Solutions which sells uniform to
businesses and governmental organisations, would give it financial
flexibility to plan future divestments, the company told Reuters.
6 insideretail.com.au
AROUND THE GLOBE
How to sell the sizzle,
not the steak
It’s no secret that retail has evolved beyond simply selling
products on a shelf. Here’s how retailers are building relationships
with customers and tapping into their emotions. By Norrelle Goldring
T
he so-called “retail apocalypse”, of which Jeanswest is the A raft of other academic reports backs this up.
most recent example at time of writing, is regarded by many There are a number of factors driving this shift, including
industry pundits not as a disaster, but as a time of revolution millennials and others increasingly placing more importance on
and renaissance – the death of bad retail. experiences than acquisition of things and the increasing use of
What is boring retail? Transactional. Product- and price-oriented e-commerce, resulting in more emphasis on human connection,
selling, which may be sufficient if you’re a big-box discounter or even contact and emotion in physical environments.
an e-commerce pure-play, but it no longer cuts it in physical stores, Communications channel fragmentation, and the decline of TV
where customers increasingly expect an immersive experience. advertising has made it simultaneously easier and more difficult
Emotion equals excitement. In the words of American retail to establish an emotional customer connection. And according to
consultant Bob Phibbs, “People buy feelings, not things, which is German retail design consultancy Wolfgang Gruschwitz, because
why you sell the sizzle not the steak.” the consumer is becoming an information-loaded “prosumer”, the
There’s a reason experiential retail works, when it’s done well: it retailer’s journey is now from retailing to “emotailing”, and becoming
taps into the emotions. the entertainer of people in a store.
In spite of all this research, a 2018 report by New York media
You gotta love the product company PSFK on the future of retail found that only 55 per cent
First, some rational statistics to back the case for emotion. A recent of US C-suite retail leaders planned to invest marketing dollars into
Forrester and FocusVision study indicated that the way customers increasing experiential elements in retail stores.
feel about a brand experience has an influence factor of 1.5 times on
their brand-oriented actions, and that 93 per cent of retailers believe
customers are more likely to buy brands that they feel connected to.
According to Chief Executive magazine, if a customer feels an
Lululemon Athletica’s yoga
emotional connection with a product or brand, this can drive gains
of between 30 per cent and 100 per cent in customer value. A 2012
sportswear and gear brand
article in fibretofashion.com indicated that emotional ideas stimulate
a customer’s mind 3000 times faster than rational thoughts. This
is positioned as a way
links to what the renowned psychologist and Nobel laureate Daniel
Kahneman has called “system 1” thinking, which is fast, instinctive
and emotional and in which he says 95 per cent of decisions are
made. of life, connecting
Research conducted by “predictive emotional intelligence”
consultancy Motista published in the Harvard Business Review as yoga, spiritual living
far back as 2015 indicated that customers who are fully emotionally
connected to a brand are 52 per cent more valuable than those who
and products.
are highly satisfied but not fully connected. Further, fully connected
consumers spend twice as much with preferred retailers, have a
greater than 300 per cent higher lifetime value, stay with a brand up Beyond the one-off
to 50 per cent longer, and recommend brands at an average of 30 Part of the disconnect may be not knowing where to start, or
per cent, which is quadruple that of other cohorts. expecting a one-off experiential event to build brand loyalty. In
According to Motista, within a year of launching products and a piece for AdAge, retail analyst Ana Andjelic suggested that
messaging to maximise emotional connection, a well-known experiential events may be becoming undifferentiated, and that
household cleaning brand turned market share losses into retailers may be better to become a destination for recurring
double-digit growth, and after an apparel retailer reoriented its customer and community activities than a “one and done’” social
merchandising and customer experience to its most emotionally media opportunity. Patagonia, with its activist cafes, is an example
connected customer segments, same-store sales growth increased of this. “Worn wear” by Patagonia also features in Nordstrom’s
by a factor of three times. NewConcepts@Nordstrom ongoing pop-up store events series, ►
7
AROUND THE GLOBE designed to give shoppers hands-on opportunities to connect with the website for recipes and promotions. Patagonia’s eco-friendly efforts in reuse, recycling and fair trade. By identifying emotionally connected consumers and the precise US fashion retailer Planet Blue hosts a series of in-store events emotions that motivate profitable behaviours, brands can apply this leveraging partnerships with the clothing brands it sells and local insight to every aspect of their customer journey in a targeted way influencers. A tie-dye event held at its Santa Monica store with that optimises marketing investment across touchpoints – talking to denim brand Agolde drew 150 attendees and sold three times more the most valuable customers at touchpoints and in ways that matter jeans than on a regular day. to them, rather than to the masses. Beyond recurring events, there are a number of ways to tap into One prolific author on the subject of sales, Tom Hopkins, says, customer emotions. “Logic in sales is a gun without a trigger. You can twirl it all you care Emotional connections with customers can be driven by to, but you can’t fire it. Emotion has a trigger.” permanent activations in-store, temporary activations in and out The shift from the transactional to the experiential means that of store, and across digital and other communications touchpoints understanding the emotions behind and during shopping are where customers can also create and share content themselves. becoming increasingly imperative to survival. Emotive retailing is An example of both temporary and recurring in-store activation is holistic, not just what you do in-store or at a single experiential education, which is now often combined with entertainment to form event. The most sophisticated brands and retailers make emotional “edutainment” and something that a customer can’t necessarily get connection part of a broader strategy involving every function and online before they get to the store. Williams-Sonoma does this well touchpoint in the customer journey pre-, during and post-purchase. with their cooking classes held at the back of the store, adding a Ultimately we may see a shift from sales per square metre to service and experience to the customer’s purchase. experience and emotions per square metre. IRW Lululemon Athletica’s yoga sportswear and gear brand is positioned as a way of life, connecting yoga, spiritual living and Norrelle Goldring has 20 years’ experience in retail, category, products. Its New York store features Zen pods, self-guided channel and customer strategy, marketing and research, working meditation and yoga classes. with global retailers, manufacturers and consulting houses. Another way to connect to emotion is in creating a space Contact: 0411 735 190 or norrellegoldring@hotmail.com that speaks to the five senses. Lush does this well, with visually attractive stores and products and plants that exemplify the product ingredients. The unwrapped products smell lovely; there is music and the voices of salespeople; customers can feel the products’ Williams-Sonoma cooking textures and packaging. Drawing a longer bow, it could be argued classes appeal to all the senses. that Lush also involves taste, as it uses colours and product names related to food. A company can select a specific customer emotion or emotions to focus on. Uniqlo has employed “mood stylists” who use neuroscience to assist customers in selecting T-shirts based on their mood. Point-of-sale materials, merchandising, and communications both in and out of store (including social media) can be employed to demonstrate the emotions a customer may feel in purchasing – needs of status and prosperity, intelligence, pleasure, acceptance, power and dominance, or individuality and uniqueness. In the 2015 HBR article, Motista is more specific, listing 10 consumer emotional motivators with significant impact against which retailers and brands can activate. These include “stand out from the crowd”, “have confidence in the future”, “enjoy a sense of well-being”, “feel a sense of freedom”, “feel a sense of thrill”, “feel a sense of belonging”, “protect the environment”, “be the person I want to be”, “feel secure”, and “succeed in life”. This would indicate that experiential events that only speak to one of these – such as “thrill” or “community” – may be missing a trick. Brands and retailers may need to select several of these motivators and execute against them in different ways over time, in the same way retailers and brands activate various consumption occasions over time. Further, it shows that there are opportunities to build emotional connections in ways that are more permanent than one- off events. This ties in with Motista’s findings about emotional connections and sales. Motista’s article related that a condiments brand found that 60 per cent of its social media-affiliated customers were emotionally connected, versus 21 per cent of all customers. The brand therefore has increased its focus on its social media network, developed its online customer community, and points customers to 8 insideretail.com.au
PROPERTY
Scentre lauded on gender equality
Scentre Group has announced that this year for the first time it has an active D&I Council driven by employee-led working groups.”
been included in the Bloomberg Gender-Equality Index (GEI), as Allen said Scentre Group has a Gender Equity Working Group as
one of 325 companies globally and one of nine in Australia. part its D&I Council to remain focused on targets and address any
The GEI showcases leadership on gender equality across perceived barriers for women to achieve more senior
multiple dimensions and tracks the financial performance of public executive roles.
companies committed to supporting gender equality through “We provide equitable pay for like roles by gender and have
policy development, representation, and transparency. The index continued to increase the proportion of women at all levels of
measures gender equality across five pillars: female leadership and management, with women currently representing 44 per cent of all
talent pipeline, equal pay and gender pay parity, inclusive culture, people managers and 28 per cent at senior executive level,”
sexual harassment policies and pro-women brand. Allen said.
Scentre Group CEO Peter Allen said: “We are addressing gender “We recently updated our parental leave policy to provide more
equality on a number of fronts to ensure we drive strong employee options for our employees to ‘share the care’ including doubling the
engagement and retention and improve our productivity and amount of paid leave for secondary carers from two to four weeks
business performance. This includes a board-endorsed diversity and reducing the qualifying service requirement for paid parental
and Inclusion policy, an executive team endorsed D&I strategy and leave from 12 to six months.”
Vicinity makes CDP’s A list
Vicinity Centres has announced it has earned a place on CDP’s “This is testament to our proactive, long-term approach to
prestigious Climate Change “A list”, which recognises leading action sustainability which places climate change at the centre of our
on climate change. focus. As part of our net zero carbon emissions target by 2030,
CDP was formerly known as the Carbon Disclosure Project; it is and by further integrating climate resilience into our business
a not-for-profit running the carbon disclosure system and its annual practices, we will continue to enhance our approach,” Kelley said.
environmental disclosure is widely recognised by the investment The net zero target will be achieved through Vicinity’s solar
community. In 2019, more than 525 investors with more than US$96 program and implementing innovative technologies that improve
trillion in assets participated. energy efficiency across its portfolio.
Grant Kelley, Vicinity CEO and managing director, said Vicinity’s Vicinity has also developed a Climate Resilience Program which
significant efforts to mitigate climate risk across its portfolio and focuses on increasing the resilience of its centres to extreme
prepare for the transition to a low-carbon economy were key factors weather events and was recognised with an Australian
in its inclusion in this year’s A list, making Vicinity one of a small Business Award for Sustainability in 2019. IRW
number of companies globally to achieve the top ranking.
Vicinity’s Chadstone
Shopping Centre
9
Q&A
From the source:
Richard Facioni, Alceon Group
Richard Facioni is the
executive director at Alceon
Group, which is an investor in
a range of businesses including
Lego, Ginger & Smart, Noni
B and EziBuy. Here, Facioni
discusses the current challenges
in the market and what he
looks for when investing
in businesses. Interview by Dean Blake
Inside Retail Weekly: How would you describe the past year for mature female shopper, similar to EziBuy. Ginger & Smart is very
Alceon Group? smart, statement-making female shopper; you start to see where
Richard Facioni: It’s been exciting in the sense that we’ve done each brand talks to.
a few more things. We bought the Ginger & Smart business, we What you don’t want is a brand that is everything to everyone –
actually sold half of EziBuy to Mosaic Brands, and we’ve also been that’s not our game.
working on our existing brands and looking at a bunch of other Once we’ve got that, the next piece for us is to figure out what
potential acquisitions – which we’re still looking at. we at Alceon bring to that equation. How do we make this business
And of course we launched Lego, which has gone from nothing to better? If we can’t make it better, then we shouldn’t be investing in
six stores in that period, and has been hugely successful. it. If we can help improve their cost structures, or their sourcing, or
No question, it’s been a rocky market for retail, and so we’ve sales by cross-promoting with some of our other brands, if there’s
been seeing that across the various brands. Some of them have a way that we can help that is material and measurable, then that’s
been doing better than others, some have been impacted more than when we get excited.
others, and they all behave a bit differently in the market. There’s If we’ve got no value to add then we really don’t have any right
been a lot of focus on what is going on in the market, and what do owning that brand. So in each case there is something that we need
we need to change to respond to the changing market. to bring to the table.
It’s been an interesting and exciting year, no question – it certainly
had its moments. IRW: Are there any categories that you aren’t in that you’re
looking at already?
IRW: What do you look for when you look at brands to invest in? RF: We just got into homewares as well through our investment in
Is there a common through-line in your brands? Marlin Brands [which] bought Zanui.
RF: If you look at our brands, if you take EziBuy and Noni B, Mosaic I think apparel and fashion is certainly the segment that we know
Brands, they kind of play in what I call mass market. Ginger & Smart and understand and have got strong capabilities in. So that’s the
and Lego play in the premium end of the market, while Cheap As segment that we’ll keep looking at. I think what Lego did is that
Chips is very much at the discount end of the market, and Surfstitch it opened up the ability to identify premium, international brands
sits between mass market and premium, depending on what they’re that are looking for an entry into the APAC markets. So we are
selling. now in conversation with other international brands that are not in
When we look at a business, we always look at whether it has a fashion – they’re not in toys necessarily – that are talking to us about
clear customer that it is talking to – that there’s a market segment partnering with them to bring those brands to Australia.
that it is focused upon. In the case of Mosaic Brands it is the more So that’s an interesting opportunity for us.
10 insideretail.com.auQ&A
international brand, know what their key sensitivities are.’ That’s
what we’ve been able to do with Lego, and that’s what we’d like to
do with others.
I think going forward retail IRW: You mentioned a bit earlier how tough retail has been
will be okay, but there’s a already this year. What is your opinion of the brands going
under at the moment? Where do you think they’ve failed, and
lot of shifting within retail; are there any you would consider picking up?
RF: I can’t talk to specifics, but of the ones that have recently failed
and that’s where people are I think there’s maybe one or two that we’ll have a sniff around and
see if there’s an opportunity for us. It really comes down to why they
getting into trouble. failed in the first place.
Is it something that we can fix? It’s very easy to go in and say the
sales went backwards and all we need to do is improve sales. That’s
the hardest thing to do. It’s so hard to do. That’s not our investment
piece. We’ll look that and say, ‘Let’s assume that we can’t change
But other than that, we tend to be focused on apparel, that, but what can we do below that? What can we do with gross
homewares, accessories, and then, through Lego, the more lifestyle margin, what can we do with cost of doing business? And what can
products. we do to restructure this business to make it profitable In our hands.’
If that can mean improved sales, then all the better.
IRW: I don’t suppose you’re willing to name those international It’s really understanding why those businesses failed in the first
brands? place. There are really material, seismic shifts in the market in retail
RF: I’m not in a position to say – I’d love to say, but they’re of a at the moment – the ongoing shift from bricks-and-mortar to online,
similar ilk to Lego. So if we’re able to land one or two of those, the business shift from traditional retailers to new retail formats.
and the fact that we’ve done it successfully with Lego, people are There’s a shift from those that are executing poorly to those that are
looking at it and going, ‘Okay, these guys know what they’re doing’. executing well.
You know, I just came back from New York, and I saw two Lego I think overall, retail is okay. I think retail is not over. We’ve had
stores there. They’re great, but what we’re doing is just as good an impact due to the tragedy of the bushfires, and that’s put a real
if not better, so I’m pretty proud of what we’re doing, and I think dampener on consumer sentiment; it’s actually affected a lot of
other brands are now looking at that and saying, ‘These guys know consumers directly.
what they’re doing in terms of respecting and working with an I think going forward retail will be okay, but there’s a lot of ►
Ginger & Smart plays to a premium
market and to the very smart,
statement-making female shopper.
11Q&A
shifting within retail; and that’s where people are getting into trouble, jewellery retail business you should run’. That’s great, but I don’t
if they’re not ahead of those shifts. The consumer is changing, know the first thing about jewellery and it doesn’t fit into our
trading patterns are changing. The whole Christmas trading period portfolio. It might be a great opportunity, but it’s just too hard for me
has changed forever. There’s no point in saying it used to be great, to get my head around.
it is what it is now, it’s not going to be different going forward, it’s
moved. So how do you realign your business to work within what is IRW: How are your brands progressing this year in 2020?
a new paradigm around the December trading period? RF: They’ve all got quite a bit of growth planned for the year ahead.
Those that get that right will succeed and take market share away Cheap as Chips is ready to get into growth mode; we’re looking at
from those that get it wrong. That’s my view, and that’s what I’m new sites for that brand. We’re looking at new sites [for Ginger &
seeing across the market as well. Smart] and we’re negotiating them for that brand. Lego has a very
strong growth profile so we’ll be continuing a store rollout this year.
IRW: When it comes to partnering with retailers, what does Even a brand like Mosaic that has 1400 stores across the country
Alceon bring to the table? [has] gaps in their brand portfolio geographically, so they’re also
RF: Ideally, we want to integrate them into one of our existing looking to grow to fill those gaps.
portfolio investments, whether that’s Mosaic Brands or the holding So certainly growth is on the agenda for the year ahead. I think
company that owns Surfstitch or whether it’s Cheap as Chips’ we continually strive to achieve cost efficiencies across all our
platform. We want to bring them in, integrate them and through that, businesses, particularly in an environment where it’s hard to get
drive efficiencies and synergies. To look at a new retail investment, comp sales growth in the current market. What that means is you
on a completely standalone basis, makes it harder for us. [We want] need to be more disciplined about your cost structures to make
to drive significant efficiencies across the business and potentially sure you’re driving efficiencies in your business. That’s always the
gross margin, [and] drive revenue across those brands – that’s when focus; it’s more of a focus where you’ve got a relatively fragile retail
we start to add value to the group. That’s how we look at any new consumer. All our businesses are disciplined in that respect.
investment opportunities. Where does that fit in our existing portfolio We’re looking at more bolt-on acquisitions we can bring into
investment? If it doesn’t fit anywhere, then do we really have the each of those portfolios and give those companies a step change
appetite for a completely new standalone retail business on top of in revenue and growth as well. There are a number of potential
what we’ve got? acquisitions we’re looking at.
If you think about it, we’ve got the middle mass market with
Mosaic Brands, the discount [category] covered with Cheap as IRW: What’s an interesting insight you’ve picked up from
Chips, we’ve got the premium market covered with Lego and Ginger working across these brands?
& Smart. If it doesn’t fit into one of those three buckets, then we RF: They do all behave differently. One might be finding it tough at
shouldn’t be doing it. this point in time, one might be doing really well. Consumers are
I’ve had people approach me and say, ‘I’ve got a really interesting behaving differently, depending on where they sit on the spectrum.
But at the end of the day, the brands need to understand who
Each Lego store is tweaked their customer is and be focused on them. Then we assess each
to appeal to the local market. of the businesses and keep an eye on all of them. The metrics are
all the same, but we emphasise different metrics from business to
business.
In certain businesses, you might be more focused on traffic
growth, in another, it might be about improving conversion or
average basket size. All the key metrics are the same, but we
emphasise it differently business to business, depending on where
they’re at in the cycle and where they’re playing in the market. That’s
the one thing I’ve learned.
You can’t take a one-size-fits-all approach for these businesses.
IRW: How do you approach store design across all the different
brands? How does Noni B compare to Lego, for example?
RF: Again, you start with the customer – who we’re serving – and
make sure the store design is relevant to them. Then we try to focus
as much as we can on experience and engagement. Having good
product isn’t enough. Product is available anywhere, people have
got so much choice, but it’s about where they get it from, online
or in-store. What brings them into your store is the experience. It’s
everything from the offer, the range of product to the service and
the fitout. So it’s about understanding who the customer is and then
designing a store that works for that customer.
Everything we do though, has to have a commercial outcome.
Having a great in-store experience and lots of engagement for the
sake of it is not good enough, they have to actually drive traffic and
improve dwell times, which translates into conversion. We’ve got to
have measurable outcomes.
Then with a Noni B or Rockman store, we won’t come up with a
12 insideretail.com.auQ&A
completely new store design. We’ll trial different things, maybe we’ll pragmatic. We are focused on bringing things back to the numbers
see a trend overseas and maybe trial it in a couple of stores; we’ll because that’s ultimately how we make our money. We like to work
see if things improve there or not. If we do see an improvement, with people who think that way as well, but it’s about having a clear
then we’ll roll it across the portfolio. If not, we don’t follow. We test plan of what you want to do if you come on board with us.
and learn, that’s our approach, rather than just say that store’s not
working so let’s come up with a completely new store design. I know IRW: You’ve turned around some struggling businesses, but
that’s another approach, but it’s very high-risk and we prefer an what makes them seem attractive to you as an investor?
incremental approach. RF: It might be something as simple as a brand that is working-
Lego is a different model. The actual fitout modules are capital constrained and simply can’t grow because they’re on the
standardised so each store globally has a similar look and feel so treadmill of when money goes in, and then goes straight out to fund
you know when you walk in that it’s a Lego store. Our job is to make the new product and then comes back in, and then goes back out,
each store unique within those constraints. and they never have the capital to grow, or the in-house capabilities
There’s a process we go through to identify a site, work with the to help them grow either which is additional resources.
Lego design team in Germany to get the layout right, make sure we That’s the case with Ginger & Smart; what we were able to do was
get the full range in there, get the right flow in the store, make sure to free up working capital, helping with their sourcing, helping them
we have the right product mix and [let people] play, interact, engage with cost structure, and recapitalising them so that they can now
and make sure we have lots of that so we maximise dwell time. We look seriously at growing their stores. That was quite a good story
have a bunch of engagement models we can choose from from with there.
Lego that we can use, whether it’s a play table or a digital screen. In the case of something like Speciality Fashion Group, that
Then what we do is try to customise each store to make it unique Mosaic Brands bought last year or two years ago, that was
to that particular market through hero figures and mosaics. In Bondi, very much about improving the gross margin through sourcing,
we have a mosaic of Sydney Harbour and the beach and we’ve got and improving the cost of doing business through head office
a lifesize figure of a surfer. In Doncaster in Melbourne, it’s a mosaic efficiencies.
of a tram. We try to make each store speak to the local community. I It was very simple to see where their cost structure was, under our
think that’s where it gets fun and it’s a great process. ownership we move them to a different cost structure, we can see
their gross margin, and through outsourcing we can improve that
IRW: What tips would you give retailers who might be looking gross margin.
for an investment partner? So again, it’s not a one-size-fit- all approach – you have to be
RF: Don’t try to sell the dream, because we’re not going to invest looking at what we can do, but it’s always got to be tangible.
in dreams. Don’t say, ‘Sales are declining, but with your money, I’m We won’t invest in something where the outcome is dependent on
going to grow sales.’ Don’t do that. Come with a more considered something that we can’t control. Head office costs we can control,
and realistic plan. If we come on board as an investor, what can you pricing the cost of goods we can control. Average sell price and
do? We know what we can do to drive the business, but what do increasing that, you can’t control that. If you put your prices up,
you plan to do and where do you see opportunities? Is it through consumers just aren’t going to shop.
international growth, is it through more store rollout? Is it through So that’s harder. We all ways look at the things that we can
improving or increasing your inventory or stock? What are the things control, the things that we can improve. The profit and loss of this
that are holding you back from growing? It’s really just coming to us business, and the value creation of this business, and it’s got to be
with an understanding of where you want to take the business, what like three things at most. If it’s 10 things, you’re never going to get
can you do on the cost and revenue side, what can you do in terms them right, but if it’s just two or three, we can get them right. Again,
of rolling out stores and what can you do in terms of growth? It has we try to simplify it, don’t overcomplicate it and bring it back to
to be tangible growth, not ‘I’m going to do a better job with my range things we can control. IRW
next year.’
We’re pretty rational, we’re pretty pragmatic when we look at Richard Facioni is speaking at Inside Retail Live February 26-27.
businesses and we like to work with people who are rational and For more information, visit: insideretail.live.
All brands talk to a particular customer
demographic: Surfstitch sits between
mass market and premium.
13FEATURE
Bubble rapt
Milksha, one of the largest bubble tea chains in Taiwan, has
just unveiled its first Australian franchise and flagship store
in Melbourne. By Sarah Stowe
F
rom Chatime to Gong Cha, bubble tea is on the rise in generation farming family.
Australia and now, Taiwanese Milksha has recently entered the Fresh milk is a crucial, distinguishing ingredient for Milksha, and in
Australian market. Australia the company is partnering with local award-winning Saint
Milksha (known as Milkshop in Taiwan) has more than 240 outlets David Dairy for all its fresh milk.
in its domestic market and across Japan, Hong Kong, Singapore, “Our team tested over 30 different milk brands in Victoria, and
Macau and now Australia. the team at Saint David proved exceptional. The quality of their
“The bubble tea craze has been seized in top cities around the milk extended beyond the product, and through their sustainability
world. In our observation, this market keeps growing as more and practices by offering small-scale processing, localised supply chains
more people are getting familiar with the bubble tea drinks, including and transparency in their commitment to ethical and environmental
the Western markets,” explains Peter Huang, Milkshop International’s welfare,” Huang says.
general manager. In line with Milksha’s environmental focus, the franchise uses 100
Huang was business development manager at 7-Eleven in Taiwan per cent biodegradable bamboo straws. The bamboo is grown and
for 10 years. In 2009 he franchised the first Milksha store, where he the straws made in Taiwan, and they are completely free from plastic,
had so much success that founder and chairman Kevin Lin invited bioplastic and PLA.
him to join the company as general manager. He has built the brand “By using paper bags, paper cup holders and bamboo straws
image of Milksha, and systematically developed and expanded the instead of plastic, we hope to reduce our impact on the environment.
franchising stores all over Taiwan and in the overseas market. Milksha is a proactive brand and we will continue to seek other
“We chose Melbourne to launch our flagship store,” he says, sustainable alternatives to integrate within our business,” says Huang.
“because it is no doubt the foodie capital of Australia. The city is a
melting pot of different cultures open to trying new products, which Toppings and teas
can be seen in its established and growing market of bubble tea “We source high-quality loose-leaf teas from various regions around
lovers. Australians are seeking high-quality products and are more the world, including Taiwan and Sri Lanka. Our tea leaves are brewed
health-conscious about their lifestyles, which matches with Milksha and tested regularly for quality control. There is a lot which goes
brand pillars: natural, healthy and high-quality.” on behind the scenes, including using water that goes through a
According to Huang, Milksha has set the benchmark in the bubble multi-filtration process. But we believe in providing the best quality
tea market in Taiwain in terms of sourcing quality ingredients. The ingredients for our discerning customers,” Huang says.
business owns a dairy farm in Taiwan and Lin comes from a third- Milksha’s Australian menu features five bubble tea categories:
14 insideretail.com.auFEATURE
Fresh Milk (pure milk blends), Tea Latte (loose-leaf tea and milk),
Specialty (seasonal juices and teas), Tea (Jasmine Green, Earl Grey,
Light-roasted Oolong, Oolong and Barley teas) and Yoghurt Drink
We have learned how to
(Strawberry, Avocado and Mango).
Milksha makes its own signature honey pearls toppings, which are
quick frozen and shipped to Melbourne. Other toppings include milk
pudding, red bean and herbal fairy-grass jelly. keep the best conditions of
Specialty ingredients for this brand include Taiwanese taro milk,
premium cocoa from France and matcha from Japan. the ingredients from many
Bubbling all over Australia
failures in the past.
Milksha will initially focus its energies in Melbourne with Sydney
following, before extending the brand’s reach across the nation.
“We will steadily and firmly grow the business in Australia like we
have done in other countries instead of spreading out too fast and
overlooking our product quality,” says Huang. always part of the pre-expansion plan for the Milksha brand, giving
“Milksha is a well-established brand in Asia, and so we believe confidence that the fresh territory will prove viable.
the brand reputation helps the brand awareness among Asian Ingredients are key, so to sustain the authentic flavour of its
communities. To grow the brand well in Australia, we pay attention bubble tea, Milksha ships fresh ingredients from Taiwan to each
to consumers’ experiences in our store.” market.
That equates to creating what Huang describes as “a cosy and “We have learned how to keep the best conditions of the
stylish space for our customers”. ingredients from many failures in the past,” he admits.
Constant social and digital communications help maintain “We also provide strong support from our headquarters for each
customer support and ensure word-of-mouth messaging delivers market with an R&D team that specialises in product innovation and
new business. quality control,” says Huang.
It is crucial not just to rubber-stamp the menu without due regard
An overseas brand over here to local tastes and culture. The Melbourne franchisee, for example,
Huang points out that thorough research into a new market is is stocking exclusive yogurt drinks unavailable in other markets. IRW
Peter Huang and Kevin Lin: Milksha will
initially focus its energies in Melbourne
with Sydney following, before extending
the brand’s reach across the nation.
15You can also read
