We start this week where we often don’t , namely with news of Ocado partnering with Coles to develop its online grocery business. Australia is a fascinating retail market, often neglected by major international retailers, with a relatively small population out of the way of traditional supply chain routes (not to mention its gargantuan size), even Amazon didn’t have an (official) offering until December 2017, leaving domestic retailers, such as Coles and Woolworths, to serve the market.
This glosses over key facts that are driving recent innovations and changes within the market – it’s an affluent and digitally savvy population that is clustered in just a few key spots within the country. Such urban populations are well suited to be served by dedicated fulfilment centres, an approach that Ocado (and Amazon) both use. It’s a win for Coles to be able to use an out-of-the-box solution that Ocado provides, a win for Ocado in their business model of licensing their technology to retailers around the world as it is paying off, and a challenge to any thought Amazon may have of being able to quickly enter the food market there with relatively low competition. The digitally savvytrend is still not adopted yet by the mass market in Australia, so we watch with interest to see how quickly this gets up and running, as well as what lessons can be taken from more mature markets, – especially in how growing online sales reconfigure physical stores.
On the topic of physical retail, the Chief of the British Retail Consortium, Helen Dickinson, was interviewed this week on the future of retail within the UK, and the merging of physical and digital retail. This is becoming a better understood theme within retailers, as they are getting to grips with the fundamentals of providing a coherent experience across digital and physical retail in aspects such as customer service, ranging and pricing. What was insightful in this article were the thoughts shared on how this will start to impact physical space in the future, as retailers will have to manage their physical space on the aspects digital channels cannot fulfil, for example, touch, taste, feel, fit – but can underpin. Taking this one step up from individual stores and retailers, it also highlights the importance of a wider conversation about the future look and shape of our high streets, as stores go through this transformation. Once individual retailers move beyond just products on shelves and alter what space is used for, it challenges the fundamentals of what space we have for retail, and where, and how that can be turned over to address other needs and challenges we have.
Finally, this week saw another twist in the long-running saga of whether a deal can be done in time to take back control and avoid uncertainty – yes, we’re talking about Mike Ashley’s latest bid to take over Debenhams. As a major shareholder who has seen the value of his stake collapse in the last six months, this looks to be a defensive move from Ashley who is keen to take full control of the business and to run it himself, and in turn providing Debenhams with a much needed injection of cash. Ashley clearly sees value and alignment between his Sports Direct business, and his holdings in Debenhams and House of Fraser enough to make such a big commitment. There is good sounding talk of reinvigorating high streets as part of this, but all is not perhaps as it seems. Taking on full control of Debenhams would double the debt Ashely would have across both Sports Direct and Debenhams to just north of £1 billion, and from what we’ve seen of his House of Fraser takeover, it has been more about a fire sale of stock he picked up cheaply, than anything approaching the ambitious rhetoric. Ashley has a tendency to not give up and to get his way eventually, so perhaps this is a question of when, rather than if, and then the hard work will really start.
Managing Consultant, Operations Transformation
Area of interest : Retail, with a focus on Store Transformation and Store Evolution, Proposition Development, and Landing Change in Retail