Longer boats are arriving and who manned the light house?
Yusuf Islam, also known as Cat Stevens
Australian retail was previously, as a representation of Australian commerce, an island economy – somewhat protected, certainly isolated geographically and culturally.
One expression of this for many retailers and for many years was unparalleled profitability – by way of example our historic supermarket duopoly held one of the world’s best EBIT returns. Indeed, many of our national chains also could boast similar, if not quite as exemplary results and returns.
The balance sheet was not anything other than a statement of net worth, hardly required, save for working capital (stock). Capital planning for shop fitouts was about it. Market share was determined largely by the number of physical sites and the profit land loss statement was the monthly bible – we responded to softer sales by pump priming the sales line and while brand was important, product was king.
And the island economy lived happily ever after, the occasional accession and market rumbles, however the long boats of online and global retail invaders where nowhere to be seen.
And the lighthouse was largely unmanned. Were boards and executives seeing the growing trends, understanding the climate change as it moved towards the island? Was it the board’s responsibility to assess risk both current and future, agree to research, planning, investment in concept innovation, incubation and actually read the weather vane for climate changes brewing in the distance?
Was it reasonable to expect foresight and future investment even if it impacted upon theirs and shareholders dividends within that current financial year? How could the future really be considered and prepared for when the response of the profit and loss was so elastic to pump priming in the day to day operations?
Was it the CEO’s and executive teams responsibility when they where also rewarded and recognised for short term incentives, driving the reactionary accounting statement, referred to as the P&L? Where was their incentive to seriously look from the lighthouse and view the construction of the longboats being assembled 20 to 30 years ago? Could they and their boards argue that these longboats are only recently assembled and upon us before we had a chance?
On May 15 in 1997, by way of example, Amazon raised its IPO on the US stock market – literally 20 years ago today. We have had nine Australian Prime ministers (some in two terms) since that long boat was built.
It was 1990, when computer scientist Tim Berners-Lee invented the world wide web and that has been with us for 27 years.
Fast forward to today and we see the imminent arrival of a full scale Amazon. Online sales growing at circa 10-12 per cent per year on average and we now have 39 of the world’s top 250 retailers (Deloitte) on our shores and the longboats continue to open up the economy to the world.
And some of the natives are increasingly nervous, yet for many the seeds were sown at board and senior level one generation ago.
Better retailers invest into research, real customer insights, business information systems, customer experience architecture, retail ecosystems, leadership, retail consistency and application of great service, product differentiation models, coverage and database growth. Certainly moving between investment capital, operating returns and manning the light house.
The island prepares the bunkers while the longboats arrive.
Brian Walker is founder and CEO of Retail Doctor Group and can be contacted on (02) 9460 2882 or [email protected].