###### AustralianRetail

®

###### Outlook2023

Powered by KPMG


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## Are you future-fit?

When it comes to retail, change is the only constant.

In-store or online, expectations are high and the
opportunities boundless.

Customers want a personalised, integrated and
socially conscious retail experience.

And your strongest competition is not waiting for
you to catch up.

At KPMG, we partner with Australian retailers to
help with fresh strategies and agile processes to
optimise a data and technology enabled business.

Customer first. Future fit. Grow with confidence.

**Ask us how**

**KPMG.com/au/retail**


-----

C O N T E N T S

Foreword **4**
Industry in focus **5**
Australian Retail Outlook Survey **7**

Ready for tomorrow
by KPMG

2023 economy: less is more as growth **15**
rate slows
It’s not e-commerce anymore – it’s just **18**
commerce
Defining a winning ‘integrated experience’ **22**
Protecting your brand must be on **25**
everyone’s radar
De-risking your supply chain **28**
Ride the wave as the tide turns **32**
Reflections on the future of Australian retail **35**

18

Selling your business? Focus on what **39**
matters to buyers
Kiwi corner: what to expect in 2023 **42**

Retail profiles

Rebecca Vallance: fun with colour and **45**
growth
Making the bed better: Sheet Society **47**
Why July is full of optimism about the **49**
journey ahead
Dan Murphy’s sees plenty to toast in 2023 **52**
For TerryWhite Chemmart, pharmacy means **55**
more in 2023
Salvos Stores: more than just charity **57**
Ebay’s success: a matter of trust **59**
General Pants: bigger britches to fill **61**
Baresop: single-minded about single-use **64**
plastics

57


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Australian Retail

®

**Graphic Design** Outlook 2023
Sofia Costales
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**The Australian Retail Outlook**
**is printed by Octomedia**

**Head Office**
Suite 1502, Level 15,
31 Market Street
Sydney, NSW 2000
Tel: +61 2 9901 1800
Fax: +61 2 9251 5957

**Editor**
Heather McIlvaine
heather.m@octomedia.com.au

**Subeditor**
Haki Crisden


-----

F O R E W O R D

Each year, we ask our readers to

share their experiences from the
previous 12 months and predictions for
the year ahead. From revenue growth
and leasing terms, to social media
and the value of the Australian dollar,
our survey provides a snapshot of
the industry, highlighting retailers’ key
concerns at a specific moment in time.

It’s probably not a surprise to anyone

reading this that staffing and cyber
security are some of the top priorities
for businesses in 2023, but how should
you act on these insights? The experts
at KPMG have provided smart strategies
and practical advice to help you make
sure your business is future-fit and
ready for tomorrow.

Want to know if you’re doing

everything you can to keep your
customers’ data safe? Check out
“Protecting your brand must be
on everyone’s radar” on page 25.
Concerned about your inventory levels?
Take a look at “De-risking your supply
chain” on page 28.

There are also tips to be gleaned

adapting to shifting market conditions.

This will mean best-practice

retailers will be hyper-focused
on understanding their customer,
rebalancing range architectures,
redefining what an integrated
customer experience across channels
looks like, investing in protection of
their data, and recalibrating supply
chains to be resilient and adaptable.

Another issue that shows no

sign of receding is cyber risk, with
several high-profile data breaches
affecting Australian businesses
last year. Retailers are taking note,
given the permanent step-change
to digital channels that has led to
more customer data being collected.
Being ready to prevent and respond to
any breach can be less daunting for
retailers preparing for it in the right
way, right now.

Despite the potential for severe

economic headwinds, we also expect
M&A activity to come back to prepandemic activity and pricing levels
after an unprecedented boom in
recent times. Indeed, we believe there
remains a strong market appetite to
buy good retailers that adapted to the
‘new normal’ and are future-fit, with
strong digital DNA and clearly defined
brand identity.

This year could prove to be

the retail trading environment we
thought we would get in 2020 but


**From the editor**

THE START OF A NEW YEAR OFTEN
brings with it a feeling of fresh
optimism and energy to take advantage
of the opportunities – and tackle the
challenges – in the months ahead, and
2023 is no different.

Despite the fact that most retailers

are expecting consumers to rein in
discretionary spending as the cost of
living continues to rise, the prevailing
attitude is that “we can do this.” After
surviving forced store closures and
broken supply chains during the Covid19 pandemic, navigating a potential
recession suddenly seems like small
potatoes.

Nevertheless, forewarned is

forearmed, and business leaders still
need to understand how consumer
expectations are changing around online
shopping, physical retail, sustainability
and data privacy to not only survive but
thrive in 2023. This is where our annual
_Australian Retail Outlook comes in._

**Are you future-fit?**

AUSTRALIAN RETAIL CONTINUED TO
power ahead last year, still riding
the highs of economic stimulus
combined with a global shift to
digital platforms. This year may tell
a different story, with economic
headwinds likely to reset the bar for
successful retail performance in 2023
(and potentially 2024).

Higher interest rates and rising

energy costs are placing pressure on
household budgets and as a higherthan-usual number of households
with fixed mortgages refinance
towards the middle of the year, we
may find consumers starting to feel
the pinch.

It wasn’t all doom and gloom,

though. Since 2020, best-practice
retailers have capitalised on the
strongest trading conditions in
generations. We’ve seen retailers
accelerate their digital transformation
journeys, redesign their business
models, create seamless integrated
experiences, and shore up their supply
chains, which will provide resilience
moving forward.

Meanwhile, this year shapes up as a

lower-growth year, when the challenge
for retailers will be to design and
implement business models that are
genuinely future-fit and capable of


from our retail profiles on pages 45-65.
We spoke with senior leaders at Dan
Murphy’s, TerryWhite Chemmart, Ebay,
Salvos Stores, Sheet Society, Rebecca
Vallance and more about their growth
plans in 2023 and beyond.

If there is one thing I have learned

from these interviews, it’s that
successful retailers embrace change
and see it as an opportunity to
streamline and improve their business.
Wishing you all a positive 2023!

Heather McIlvaine
Editor,
_Australian Retail Outlook_

didn’t. Australian retail has shown
its resilience time and time again.
Retailers should be asking, ‘How can
I ensure I am future-fit for years to
come?’ We believe those leaning into
this question will come out on top.

Lisa Bora
National Firmwide Lead Partner –
Retail & Leisure, KPMG Australia

James Stewart
Partner, Global Retail Restructuring
Leader, KPMG Australia


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I N D U S T R Y I N F O C U S

Paradigm shifts and

fresh perspectives

Last year brought so many ups and downs that trends often changed

before retailers could adjust to them. Here is a look back at the major

shifts and how they will impact retail in 2023 and beyond.

By Mark Fletcher


HOW MANY TIMES CAN PARADIGMS
shift in one year? in 2022, it seemed
like too many.

Let’s start with shoppers finally

emerging from a Covid-19 cocoon of
contemplation and online shopping.

The early signs were that consumers

were going to splurge on everything they
missed. In a short period, their mindset
shifted from lockdown doldrums to
finally getting ‘back to normal’ with a bit
of catchup spending and a lot of treating
themselves after the hardships of the
last two years.

What’s more, consumers had spent

much of lockdown thinking about what
really matters – and the environment
came out trumps. This manifested as a
preference for retailers and brands with
strong ESG credentials, that’s where the
dollars were headed.

And contrary to the expectations of

many online retailers, consumers took
their socially minded splurging straight
back out to their beloved shopping
centres. For some, like Kogan, which had
beefed up their inventories in the face
of global supply-chain issues, the surge
back to physical stores left them trading
in the red in the first four months of this
financial year.

Sadly, however, many consumers

simply couldn’t find the products they
wanted to buy. The combination of the
war in Ukraine, Covid-induced factory


shutdowns in China, and massive
natural disasters both overseas and
in Australia resulted in widespread
product shortages, some of which have
continued to varying degrees.

Still, all in all, the first shopper

paradigm shift of 2022, from a lockdown
mindset back to ‘normal’, meant good
times for retailers and brands – as long
as they could get stock. Unfortunately,
this shift was short-lived.

The cost-of-living crunch
Seemingly out of the blue, around mid2022 many shoppers realised they could
no longer afford their lifestyle. In the
face of drastic increases in the cost of
essentials, most consumers made rapid
and wide-ranging spending cuts.

Some went without products in many

non-essential categories altogether,
others deferred large purchases. Many
traded down to cheaper brands, and
most did a lot more price checking
before pulling out their digital wallets.
There was some reassuring data on
improvements in overall retail spending,
but the ABS and others attribute most
of these increases to rising prices
of essential items, rather than more
discretionary spending.

With interest rates still high, even the

normalisation of costs for many food
items has not reassured consumers,
and many intend to continue a cautious


spending approach in 2023.

So what have been the paradigm

shifts for retailers? There are too many
to explore them all in depth, so here's a
quick review of the ones whose impact
is likely to be felt this year and beyond.

People problems
Throughout 2022, retailers struggled with
the Covid-induced sick and carer leave,
combined with significant decreases in
the number of international students
and people with temporary visas. The
impact hit small businesses and those in
regional areas particularly hard.

It’s difficult to anticipate the extent

to which this will continue through 2023
and beyond, though our industry survey
found that 44 per cent of retailers
believe staffing will be one of their
biggest challenges in 2023 and 39 per
cent name retaining staff as one of their
top priorities for the year.

Just out of time
Over the last few years, most retailers
have focused on fine-tuning their supply
chains to reduce inventory and shipping
costs. As previously noted, in 2022
multiple factors disrupted these finely
tuned machines.

Jana Bowden, professor of marketing

at Macquarie Business School, aptly
summarised these developments,
noting that the cost of shipping goods


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I N D U S T R Y I N F O C U S

priorities for 2023.

Perhaps the most telling sign that

digital still has a long way to go, however,
is that 39 per cent of retailers who
operate physical stores plan to increase
their footprint in 2023.

Many retailers

“
benefited from
the surge back to
physical stores."

Doing the right thing
Last year also delivered a case study in
the business impact of ESG behaviour.

Within weeks of the Russian invasion

of Ukraine, numerous global brands,
including H&M, Inditex – the parent of
Zara and a collection of other brands –
and Estée Lauder shut up shop in Russia.
Most luxury brands ceased trading,
leaving empty stores, while ASOS, Apple,
Ikea and Nike have all suspended or
closed various consumer-facing services.

Uniqlo chose a different response

and announced that it was not closing
its Russian stores, so as to not “deprive
people in Russia of clothing, as it is a
basic human need”. It stated: “Clothing is
a necessity of life. The people of Russia
have the same right to live as we do.” It
was a bold response that lasted less
than a week in the face of a global socialmedia backlash.

On balance, it appears that most

retailers are comfortable with their own
approach to ESG, with just one in seven


to Australia had increased by up to
700 percent, ordering times had
tripled and most retailers have had to
pay earlier for their orders.

More importantly, however, “The whole

concept of just-in-time sourcing that
Australia has relied so heavily upon has
crumbled,” Bowden remarked.

Many retailers are already gearing up

for these issues, with 24 per cent citing
supply chain, and 20 per cent citing
shipping and delivery as major challenges
for 2023.

E-commerce matures
Despite such staffing challenges,
many retailers benefited from the
surge back to physical stores. Longer
term, however, 2022 clarified the shortto medium-term future of online
retailing as a significant channel but
one that is still substantially smaller
than physical stores.

While Covid lockdowns shifted

many shoppers online, the last six
months have brought a leveling out of
shopper participation in e-commerce,
and of online as a proportion of retail
sales. Survey data fails to suggest any
significant change in the near future,
with almost three in four shoppers
preferring to shop in-store, and nearly
two in five saying they have a newfound
appreciation for being able to touch and
try on fashion items.

Reflecting this consumer behaviour,

only 12 per cent of retailers reported
a significant rise in their e-commerce
revenue in 2022, though 49 per cent did
experience some increase. Another
sign of the leveling off of e-commerce
is that only 30 per cent of retailers
list growing online as one of their top


(15 per cent) nominating it as a top
priority for 2023.

Under the spotlight
The Australian Competition and
Consumer Commission’s Digital
Platform Services Inquiry report found
that online marketplaces have a “high
level of control and involvement” in
transactions between consumers and
sellers on their platforms.

The consumer watchdog’s report

highlighted a range of operational and
privacy concerns regarding the use of
consumer data, lack of dispute resolution
mechanisms and the way products are
preferentially ranked on some websites.

“Hybrid marketplaces, like other

vertically integrated digital platforms,
face conflicts of interest and may act
in ways that advantage their own
products with potentially adverse effects
for third-party sellers and consumers,”
the report stated.

Buy now, pay later (BNPL) has been

the darling of the retail industry, with
widespread consumer acceptance;
however, it has been under intense
scrutiny, with consumer groups pushing
hard for tighter regulations.

In November, The Treasury released

an options paper on BNPL. A number
of options were outlined and further
consultations promised. It looks likely
there will be regulatory changes in
the future.

All in all, what a year of change.

More than ever, it is a time for new
perspectives and fresh approaches.
There is no doubt that 2023 will reward
those retailers that are prepared to get
uncomfortable and embrace the new
reality – what fun.


-----

A U S T R A L I A N R E T A I L O U T L O O K 2 0 2 3


Industry insights:

executive voices

Retail leaders gave us their opinions on consumer confidence,

staffing costs, e-commerce and more in our annual survey.

By Mark Fletcher

How would you describe trading
conditions in 2022?

Q.1

A lot of retailers really didn’t like 2021. The majority found 2022 an
improvement, thankfully, though most simply shifted from poor or terrible
trading conditions back to ordinary ones (17 per cent described 2021 as
ordinary, 32 per cent described 2022 that way). It was telling that the
proportion of retailers who experienced good or outstanding trading conditions
didn’t significantly increase in 2022.

retail executives, including many senior ones, and came up with Best I have experienced 8.45%


47.89%


Good

Ordinary

Poor

Worst I have
experienced


32.39%

How did
the last 12

Q.2

months compare to
the previous year?


MANY RETAILERS WILL BE
HAPPY TO PUT 2022 IN THE
past and move on. So what
are they planning for 2023? We
conducted a broad survey of
retail executives, including many
senior ones, and came up with
some surprising findings.

See how your thoughts

compare with those of the
industry as a whole.


8.45%

2.82%

29.58%

5.63%

Slightly


Significantly

worse


Retailers had a similarly subdued
perspective when reflecting back
on 2021 compared with 2022, with
42 per cent saying 2022 was an
improvement, but 36 per cent
saying it was worse.


improvement


35.21%

7.04%

Slight


22.54%


Significant

improvement


Remained

about the

same


worse


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A U S T R A L I A N R E T A I L O U T L O O K 2 0 2 3


Remain about

the same

How do you expect trading

22.54%

conditions to change in 2023? Significant changes

Q.3

32.39%

What retailers are in general agreement about, however,
is that 2023 is going to be a zinger with 77 per cent
expecting some change in trading conditions from 2022,
and almost one in three expecting trading conditions to Slight
be significantly different. changes

45.07%

How will What are the biggest challenges
the value of facing retailers in 2023?

Q.4 Q.5

the Australian dollar
impact your business 5.63% Climate change
in 2023?

56.34% Consumer confidence

5.63% Covid-19 variants

5.63% Cyber attacks

12.68% 14.08% Discounting

26.76% 15.49% Energy costs

30.99% Global economic factors

5.63% Government regulations

26.76% Labour costs

60.56% 12.68% 0.00% Overseas competitionRental costs

19.72% Shipping and delivery

43.66% Staffing

23.94% Supply chain

2.82% Taxes

Positive impact

14.08% Value of Australian dollar

Negative impact

1.41% Workplace health and safety

No impact

15.49% Other

A key concern for retailers, and a
major contributor to their belief that As discussed in our review of 2022, consumers spent the year on a
2023 will deliver changed trading roller-coaster, going from spending to saving to skimping. Most retailers
conditions, is the potential negative are not convinced that shopper sentiment has stabilised; more than
impact of the Australian dollar. half (56 per cent) see consumer confidence as the biggest challenge
Reflecting our broad engagement for the industry in 2023.
with international supply chains and Most retailers experienced staffing issues in 2022, and 44 per cent
financing, only one in four retailers (27 see this as a problem that will extend into 2023. With anticipated staff
per cent) nominated themselves as shortages come increased wages, and 27 per cent also note labour
immune to its effects. costs as a major industry issue for 2023. ►


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A U S T R A L I A N R E T A I L O U T L O O K 2 0 2 3

What will be the

Q.6


45.07%

Increasing margin

39.44%

Retaining staff


38.03%

Increasing turnover

29.58%
Growing online
25.35%
Rolling out new technology
18.31%

Omnichannel initiatives


15.49%

ESG (environmental, social, and
corpoerate governance) initiatives

15.49%

Hiring and training staff


15.49%

Growing on social media

It would be an unusual retailer who
didn’t list increasing margin and turnover
as their leading business objectives, and
they were both among the top priorities
for the retailers surveyed.

Staffing has already been identified as

a challenge for retailers in 2023, though
they are focused more on retaining staff
(39 per cent) than on hiring and training
staff (15 per cent). To some extent,
this strategy reflects their concerns
around rising labour costs and is likely
to continue as long as employment
remains high.


Do you plan to change your
number of stores in 2023?

Q.7

Shoppers’ enthusiastic return to physical

25.35% stores has emboldened many retailers, with 39 per cent of those with physical stores

planning to increase their footprint in 2023.
This is three times the proportion that are
planning to decrease their number of stores

8.45% (13 per cent). While this is good news, it will

also continue to put pressure on staffing
and keep the job market red hot.

30.99% Yes - increase the number of stores

Yes - decrease the number
of stores

No - stay about the same

We do not operate any

35.21% physical stores

Did you receive more flexibility
and help from landlords in 2022

Q.8

compared to the previous year?

Significantly more 0.00%

Slightly more 4.23%

Remained about the same 47.89%

Slightly less 11.27%

Significantly less 7.04%

We don’t have stores 29.58%

Most physical/omnichannel retailers (68 per cent) reported ‘business
as usual’ in terms of the support they received from their landlords.
With so many retailers planning to open more stores in 2023, it will be
interesting to see if they still feel the same way about their landlords
when we look back on 2023.


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A U S T R A L I A N R E T A I L O U T L O O K 2 0 2 3


How do you expect leasing
terms to change in 2023?

Q.9


What percentage
of your total

Q.10

revenue comes from your
e-commerce channel?


Significant changes


Consistent with
their view that not
much changed in
their relationships
with landlords
in 2022, only a
minority (12 per
cent of those with
leases) anticipate
significant
changes in leasing
terms in 2023.


14.08%

12.68%

22.54%

For 60 per cent of
retailers who have an
e-commerce facility, it
makes up less than 25
per cent of their revenue.


Less than 5%

Less than 10%

Less than 25%


8.45%


Slight changes

23.94%


Remain about the same

38.03%

Not applicable

29.58%


Less than

50%


7.04%


Less
than

75%


2.82%


Between 75%

and 99%

100% of the

revenue


9.86%

12.63%


We don’t have e-commerce


18.31%


How did your revenue from e-commerce in
2022 compare to the previous year?

Q.11

While 49 per cent of online retailers with an e-commerce facility saw an improvement
in their online revenue in 2022, it was a significant increase for only 12 per cent. Despite
that, 30 per cent are still focused on growing their online revenue in 2023. ►


9.86%

Increased significantly


30.99%

Increased slightly


19.72%

Stayed about the same


22.54%

Decreased


16.90%

We don’t have e-commerce


-----

A U S T R A L I A N R E T A I L O U T L O O K 2 0 2 3

What are the most

Q.12


effective social media

channels for your retail business?

Consistent with their broad consumer use, Facebook
and Instagram remain retailers’ preferred social
media channels; however, LinkedIn, which is
oriented towards business interactions, makes a
surprise appearance as an effective social media
channel for 34 per cent of retailers, marginally ahead
of both TikTok and blogs.

33.80% 25.35%

LinkedIn Blog/native

content

on website

12.68%

Twitter

1.41%

WeChat

4.23%

Pinterest

1.41%

73.24%

Snapchat

Instagram

76.06%

Facebook Other

19.72%

14.08%

TikTok

We don’t use

14.08% social media

YouTube 19.72%


Price

Customer service

Online delivery speed

Cyber security/privacy


Where will consumer
expectations

Q.13

increase the most in 2023?

Consumer expectations do rise each year, and more
than half (58 per cent) of retailers believe price will
be a key consumer focus for the next 12 months.
Given the continuing uncertainty around economic
conditions, shoppers will probably continue to place
price ahead of all other considerations.

As already identified in this survey, staffing is a

key 2023 concern and priority for many retailers.
And helping push this along is the broad expectation
(44 per cent) that shoppers will expect even better
customer service in 2023.


58%


44%

38%


Finally, retailers have

been among the many
Australian businesses
experiencing hacking and
data privacy issues and
nearly one in three (31 per
cent) of retailers expect
consumer expectations
around these issues to
increase in 2023 as well.


31%


Online delivery options

23%

Omnichannel

21%


-----

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Ready for

Tomorrow


-----

R E A D Y F O R T O M O R R O W

2023 economy: less is more

as growth rate slows

Just as retailers begin to recover from the pandemic, rising

interest rates create new headwinds. Overall, however,

Australia looks well placed for the year ahead.

Sarah Hunter, Partner and Senior Economist, KPMG Australia


DESPITE THE MOUNTING HEADWINDS, AUSTRALIA’S ECONOMY
was a strong outperformer in 2022. The removal of restrictions
on movement in the early months of the year, coupled with
pent-up demand in households, formed the catalyst for a boom
in household spending; monthly retail turnover rose 12.5 per
cent between December 2021 and November 2022.

And while other sectors in the economy, such as construction,

have continued to battle with supply-chain disruptions and
adverse weather, activity has been buoyant across the board in
general; we estimate that GDP expanded by around 3.8 per cent
last year, with the economy growing by an estimated 6.5 per
cent since the start of the pandemic; however, the last couple
of years have also brought some permanent changes.

For consumers, there is a very strong desire to get out

and enjoy life. Domestic travel has fully rebounded, with 27.7
million passengers flying domestically in the three months to
September 2022. Hospitality has had a resurgence as well. This
has been good news for retail spending that is linked to social
settings, such as clothing and shoes and department stores.

Spending on international travel remains a long way below

pre-pandemic levels, and while labour and aircraft capacity
remain a constraint driving high airline ticket prices, this is


expected to improve over the course of the year as more of the
global airline fleet comes back online.

Domestically, the household savings rate was 6.9 per cent in

September 2022 only slightly above 2019 levels and well down
from the 2020 high of about 24 per cent, suggesting that the
amount of dry powder in consumers wallets is declining. The
shift in spending towards online channels is another permanent
outcome of the pandemic, with annual events such as the Black
Friday and Click Frenzy sales helping to propel end-of-season
retail sales well into November, permanently changing the flow
of consumers’ retail spending patterns.

Policymakers navigate a narrow path
Notwithstanding the strength of the economy in 2022, the
headwinds to momentum in 2023 are clear.

The strength of the national economy and a need to bring

inflation back down to the 2-3 per cent target band has
prompted the Reserve Bank to raise the cash rate precipitously,
to over 3 per cent from near-zero 12 months ago. The RBA is set
to tighten further before pausing to allow the impact of what’s
been done to flow through. The impact of higher interest rates
on the housing market is apparent. Sydney has led the country’s


-----

R E A D Y F O R T O M O R R O W


decline, with a 13 per cent correction
in prices seen in 2022. Interest rates
are also putting pressure on household
budgets for those with a mortgage
(around a third of households), and this
squeeze is set to increase as those with
fixed mortgages refinance through 2023.

Consumers are also feeling the heat

from the strongest inflation rates seen in
over 20 years.

The RBA is set

“

to tighten further
before pausing to
allow the impact of
what’s been done
to flow through.”

While price rises in early 2022

were relatively concentrated in a few
categories, particularly food, fuel and
the cost of residential construction,
pressures have broadened to most parts
of the economy and there are anecdotal
reports of some consumers trading down
to manage their household budgets.


Notwithstanding these drags, the return
of migration – 117,000 student and
temporary worker visas were processed
in the first quarter of the financial year,
a record high – and continued wage
growth of about 3.5 per cent this year,
albeit slower than headline inflation,
will provide some support. Taking all
this and the end of the reopening boom
into account, consumer spending is set
to grow by less than 2 per cent in 2023,
down from over 6.5 per cent in 2022.

The picture for other parts of the

economy is also a mixed bag. The war
in Ukraine has had a significant impact
on global commodity prices, with the
manufacturing sector in Europe now
contracting as a result of the increase in
fuel costs. More broadly, high inflation
and rising interest rates are challenging
many economies, and in some cases
domestic conditions have held back
activity. China’s economy underperformed
in 2022, but the relaxation of Covid
restrictions, interest rate cuts and other
stimulus to the property sector should
lift momentum moving through 2023.
Australia’s exporters have generally
been able to adapt over the last two
years and take revenues to near-record
highs. Helped by the disruption in global
markets, commodity producers have
found new markets in India, South
Korea and Japan, while high-value


manufacturers such as wine producers
have pivoted into Europe.

Elsewhere, the challenge of elevated

input costs and labour shortages in the
construction sector should start to
ease this year as conditions normalise
locally and globally. It will take time,
but the demand outlook for the sector
remains positive. There is a solid pipeline
of major infrastructure projects to
complete, including the work needed
for the 2032 Olympics, and demand
for residential housing remains robust.
The government has made providing
affordable housing a key policy
commitment, with the establishment of
the National Housing Accord.

Australia is still set to outperform
Overall, the economy is expected to just
about escape a recession, but grow by
less than 2 per cent. This is below trend
but given the strong performance over
the last two years, in many ways it’s a
welcome moderation in momentum.
Firms and the labour market need time
to expand capacity and catch up with
demand, and during this process the
RBA should be able to bring domestic
inflationary pressures under control
and return to the 2-3 per cent band in
the medium term. This outcome will
ultimately be best for the government,
households and retail businesses.


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R E A D Y F O R T O M O R R O W


It’s not e-commerce anymore –

it’s just commerce

As online retail has expanded, the lines between channels

have become blurred. A unified organisational focus on the

customer experience is more important than ever.

Linda Chai, Partner, Retail Technology, KPMG Australia

Lisa Bora, National Firmwide Lead Partner - Retail & Leisure, KPMG Australia

Phil Welch, Retail Operations, KPMG Australia

Rebecca Alexander-Head, Client Director – Retail, KPMG Australia


FROM 2020-22, RETAILERS TOOK THE
opportunity to accelerate their digital
transformations. For many, this meant
bringing forward investments in
e-commerce to sustain a level of sales
activity. As economies across the world


reopen and store foot traffic enjoys
a healthy rebound, many retailers are
turning their attention to what they
should do next with the investments that
were made during the pandemic.

While the percentage year-on-year


growth in sales made through online
channels has fallen since the heights
achieved during the pandemic, we
continue to see a ‘locked-in’ step change
in the volume of sales being made online:
that means the investments made to ►


-----

R E A D Y F O R T O M O R R O W


expand the utility and reach of this
channel continue to be a valuable base
for retailers.

Australia Post’s 2022 e-commerce

industry report told us that online retail
sales represent around 20 per cent of
total retail sales, with shopping habits
being reformed during the pandemic.
Shopify declared Australian online
shoppers’ 2022 Black Friday sales fourth
globally and November 2022 was the
biggest month in Australia’s online
shopping history. However, over the
12-month period from November 2021 to
November 2022, online purchases were
down 3.8 per cent due to lockdowndriven spending in 2021.1

All this shows e-commerce has

become critical to any retailer’s sales
strategy and there are significant
benefits for brands. Firstly, e-commerce
has enabled many brands to attract
customer segments to their store that
may have never previously considered
that retailer.

Retailers who have invested in their


online visibility, search functions and
excellent digital user experiences have
seen their share of wallet amongst
other dormant segments expand, in
some cases with impressive results.
Brands have started to scale their size
and appeal impressively by leveraging
e-commerce to reach beyond their niche
appeal to broader and more diverse
customer groups.

Secondly, having a strong e-commerce

channel enables customers to find
products online that they may have
struggled to locate in-store. This is
particularly true with department stores
and discount department shops, where
the efficiency is created by seeking
out niche brands or specific products
that might be underrepresented in
mainstream retailers. Benefits to the
retailer are not just the revenue this
brings in, but the positive association
forged through this type of strong brand
experience.

Thirdly, e-commerce should be seen

as a channel that can drive shoppers


in-store for intentional purchases.
One example is at Michael Hill, which
leverages its online platform to simplify
the shopping experience for jewellery,
allowing customers to reserve the
products they are most interested
in and create a time for a personal,
in-store shopping consultation. This is
a strategy of ensuring the online and
offline sales experiences are integrated,
particularly in premium product
categories like jewellery, where there is a
mental spending limit online. Customers
are more likely to trade up when they
transition to the in-store environment.

It’s all just commerce now
With retailers using the online channel
to promote engagement across the
entire buying journey, the distinction
between the online store and physical
stores has become increasingly blurred.
We are seeing the role of e-commerce in
a number of distinct parts of the journey
and motivations to shop online have
moved far beyond convenience alone:


Awareness: Online
channels should be

1

leveraged to promote
broader awareness
of their products and
services to potential
customers across
multiple platforms.
The retailer’s website
is merely the start of
a customer’s shopping
journey today. Social
media marketing in
particular has grown
in terms of its reach
and impact, with an
estimated 75 per cent of
internet users reporting
that they use social
media to research
products prior to
purchase, either online
or in-store.[2]


Education: As
the majority of

2

consumers turn to the
internet to compare
products prior to making
purchases, retailers
are also using this
channel to educate
their target customers
on the benefits of
their products over the
competition. Online
channels are proving to
be an excellent platform
through which retailers
can provide customers
with information-rich
materials, such as
sustainability alignment
in response to the
trend towards more
conscious and mindful
consumption.


Sales: Mobile
commerce has

3

become the norm and
social commerce has
grown, especially as Gen
Z become young adults
with their own spending
power. Further, with the
increasing awareness of
cybersecurity concerns
worldwide, establishing
trust with customers to
give them the confidence
to transact online has
become more important
than ever, leading to
greater online penetration
by trusted and known
brands than unknown or
generic ones.


Customer service:
This is often a

4

buyer’s primary point of
contact with a brand.
Customers expect to be
able to ask questions
before, during and
after a purchase and
that help is provided
quickly. The experience
that they have during
these interactions is
often a key determinant
of whether a sale is
completed, or a repeat
purchase is made.


-----

R E A D Y F O R T O M O R R O W


While these trends are broadly

applicable, they are not universal. There
are differences between categories,
retailers and customer segments.
For example, in household goods, we
have seen good penetration of online
sales and the rise of pureplay retailers
with a loyal following, due to strong
user experience and detailed product
information. In contrast, the grocery
category has experienced a far more
blended approach to online and in-store
purchases, with customers regularly
buying everyday items online while less
common purchases and fresh food
continue to be the domain of in-store
visits. Sophisticated retailers understand
where the differences are for their
target customers within the brand’s
specific categories and will optimise
each channel accordingly for a seamless
commerce experience.

Success requires organisation-wide
agility and focus
Delivering great customer experiences


across the entire buying journey is
challenging. Engaging experiences that
attract customers to the website or the
store will only go so far.

75 per cent

“of internet users
use social media to
research products
prior to purchase.”

The ability to execute on the basic

sales and fulfilment transaction itself
is also important. A lack of payment
options, a lack of focus on what’s
driving cart abandonment, limited stock
visibility and poor returns experiences
are just a small sample of the reasons
that customers spend less than they
otherwise might online.


Addressing these issues to capture

the full potential of a given sales
interaction will typically require deep
change that has implications for store
operations, the entire supply chain,
human resources and finance. We
believe the retailers that will genuinely
thrive tomorrow will understand that
success requires agility across the
entire organisation, not just in a specific
channel. Some success will come from
optimising each channel to meet the
distinct needs of specific customer
segments in that channel. Lasting and
sustainable success, however, will also
require the business to be agile so
that the entire organisation can work
harmoniously to deliver on an end-toend customer experience across all
integrated channels.

1 Australia Post, Inside Australian Online Shopping
eCommerce update, November 2022

2 Datareportal, 2022


-----

-----

R E A D Y F O R T O M O R R O W

Defining a winning

‘integrated experience’


Take a closer look at the elements that will make up a

successfully personalised and convenient journey online and

in-store for shoppers in the new normal.

Richard Large, Director, Customer Experience, KPMG Australia

Lisa Bora, National Firmwide Lead Partner - Retail & Leisure, KPMG Australia

Shae McDougall, Director, Retail Operations, KPMG Australia


NOW THAT THE BALANCE OF IN-STORE AND ONLINE SHOPPING
has started to settle into a new norm, retailers need to focus
on delivering seamless integrated retail experiences more than
ever. But what does this much overused and rather generic term
‘integrated experience’ mean in practical terms?

We see two clear areas where physical and digital channels

will increasingly converge in 2023 and beyond: the first is in the
use of predictive analytics and real-time triggers to drive foot
traffic and stimulate purchases; the second is in e-commerce
raising its game to emulate the familiarity and immediacy of
in-store interactions, particularly post-purchase.

Predictive and proactive engagement
Current campaign personalisation tends to engage similar
shoppers prescriptively, based on their profiles, using
predetermined trigger points along the customer journey to
dictate what information to send to a customer based on past
behaviour. This does not recognise contextual data relating to
the individual, such as the behaviour they are exhibiting at a
specific point in time, which is far more relevant in determining
the type of information they should be sent.

The evolution of this capability, towards reacting to contextual

data will increasingly cause a shift, from outbound push
campaigns to inbound personalised experiences based on
identifying and acting on signals as they happen. Delivering a
message to a customer that directly relates to the precise stage
they are at in the purchase journey – while they are in that
moment – amplifies the impact exponentially.


of churn can be reduced by using inbound personalised experiences.
They can also drive conversion rates 3-6 times higher.1

Examples of this effect include the Starbucks app in the

US, which uses geo-location to identify when a customer is
approaching a Starbucks outlet and prompts them to order their
favourite coffee so that it is ready to pick up as they walk past on
the way to their office. As a competitive response, Dunkin’ Donuts
employs geo-conquesting to offer coffee lovers hot offers and
discounts from Dunkin’ Donuts as they approach Starbucks.


3.6%


of people who received Dunkin’
Donuts offers came to redeem
them in-store.[2]


In longer-sales-cycle retail, Harley Davidson uses AI to detect
when potential target customers are most likely to be ready to
buy, and advises a sales representative to contact them and
walk them through the sales process.

Three components underpin this capability:
1. The continual collection and aggregation of transactional,

contextual, behavioural and motivational data at an ►


-----

R E A D Y F O R T O M O R R O W


individual customer level.

2. The ability to detect and understand the significance of

behaviours in real time, to determine the best response.

3. The means to deliver the right message to the individual via

a medium that suits their circumstances.

Transactional, behavioural and motivational data points

are already on many retailers’ radars, but to enable inbound
personalisation, these measures need to be extended to
real-time contextual data from apps, mobile devices and
geo-location. Investment in deep analytical capabilities is also
required, to support the coordination and curation of data in a
decisioning engine.

Raising e-commerce’s game
In the last two years, lockdowns and store closures have
accelerated the growth of e-commerce to unprecedented
levels, as customers have embraced the shopping ease and
freedom forced upon them. Restrictions have now eased,
however, and shoppers are returning to physical stores. Greater
alignment of certain elements is necessary for the integrated
experience between online and in-store to be optimised.

When you shop in-store, you take your purchase home with

you. Similarly, when you return a product in person, it costs
nothing to do so, and you’re refunded immediately. E-commerce
does not replicate this ease and immediacy of experience postpurchase, in spite of being convenient in other respects.

of shoppers state that return
options are an important factor
when making a purchase.

of shoppers have returned
an item they bought in-store,
while...

returned an item they
bought online.[3]

There are retailers already making a move to bridge this gap

and a great example is Dissh. The Australian fashion brand offers
instant refunds on full-priced items via Refundid. Shoppers
are reimbursed before they’ve even returned their goods. This


potentially changes the game from free deliveries and returns
and suggests that channel and geographic separation will no
longer be sufficient.

Whilst recognising the balance to be struck between

commercial benefit from repeat purchases and the cost of
implementing changes for shopper convenience, the question
“Where to from here?” needs to be asked. Could the gig economy
of couriers enable 30-minute returns, or would increased
transparency and communication of inbound processing suffice
when time is less of an issue? Enabling cash returns earlier than
stock receipt, as well as maximising customer personalisation,
creates the opportunity to convert a return into another sale and
becomes a much more profitable way to think about returns.

of consumers would shop online
more frequently if there were faster
delivery options available.[4]

A change in retailer mindset from ‘Is this necessary?’ to ‘What

benefits are there when I meet my customers’ needs?’ must
prevail more commonly. Whilst same-day delivery is currently
the conventional norm, delivery within 30 minutes is set to
supersede this across the board. Consumers of products such
as Lego are now adopting the demand for immediacy that was
previously the domain of consumables, with JB Hi-Fi announcing
90-minute delivery via Uber. Other categories are sure to follow.
Retailers will start to be reimagined as supply-chain businesses,
focused on the efficiency of staying ahead of consumer
expectations. Transparency of data will be critical to maintain
and maximise profitability and remove the reliance on third-party
service providers, which erode margins.

Every year, the landscape of customer experience in retail will

evolve. There will be new technology, supply-chain advancements,
new market entrants and disruptors – the list goes on. It is
our responsibility as retail leaders to be bold, advance with the
changes, pre-empt the next wave and continuously innovate to
respond to the needs of our current and future customers. An
integrated experience that enables interactions with your retail
brand any time and anywhere is key.

1 Australia Post, Inside Australian Online Shopping eCommerce update,
November 2022

2 Mindk.com, “How Location-Based Apps Benefit Businesses”

3 Inside Retail, “Where are Aussie consumers now?” November 2022.

4 powerretail.com.au


-----

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R E A D Y F O R T O M O R R O W


Protecting your

brand must be on

everyone’s radar

It’s more important than ever for retail companies – from the

board on down – to be ready for attacks on digital systems.

Help is available.

Matthew Quick, Director, Technology Risk & Cyber, KPMG Australia

Luke Eason, Partner, Technology Risk & Cyber, KPMG Australia


RETAILERS HAVE ALWAYS BEEN UNIQUE
in the world of business. With slim
margins, complex supply chains and
rapid changes in customer interest driven


by changes in seasons or a viral hit on
social media, retailers are constantly
adapting to different market conditions.
Retail boards and executives need to be


financial analysts, property speculators,
geopolitical gurus, social-media experts,
brand builders and, above all else,
relentlessly customer-focused.


-----

R E A D Y F O R T O M O R R O W


It is little surprise then, that the need

for retail boards to be highly literate in
technology and cyber-risk has been seen
as just another challenge. The rapid pivot
of retailers to digital channels has led
to more customer data being collected,
and in light of some of the high-profile
data breaches in Australia in the last 12
months, boards are concerned about
whether their cyber-risks are now being
properly managed.

Unlike challenges in the past, however,

cyber-risk and security have a habit of
making those who haven’t been deeply
involved in them as a profession feel
a sense of unease or even fear. Retail
boards and executives are required to
oversee a complex organisation with
multiple points of presence in both the
real and online worlds, which rely on
systems remaining secure and available
to trade to protect brand, reputation and
even a business’s ongoing existence.

There is good news though. Awareness

of the need for a greater level of
engagement in cyber-risk is becoming
[better understood each year. KPMG’s](https://home.kpmg/au/en/home/insights/2022/10/ceo-outlook-2022-australia.html)
[2022 CEO Outlook Report shows that](https://home.kpmg/au/en/home/insights/2022/10/ceo-outlook-2022-australia.html)
more CEOs are recognising that they’re
underprepared for a cyber-attack – with
24 per cent saying so in 2022, compared
with 13 per cent in 2021 – and no
noticeable change in the number who say
they are prepared (56 per cent). There
were, however, nearly three-quarters
(72 per cent) who said their organisation
at least has a plan in place to deal with a
ransomware attack, compared with 65 per
cent in 2021.1

of CEOs say they are

underprepared for a cyber-attack

of CEOs say they are prepared

for a cyber-attack

of CEOs say their organisation at least

has a plan in place to deal with a

ransomware attack.


However, what is often forgotten in

discussions with cyber-risk is the upside.

Done well, cyber-risk management can

be a significant advantage for retailers.
Not just through the avoidance of the
costs and brand damage that come with
an attack but also from the increased
levels of trust and engagement that
comes from an honest, open and clear
discussion with your customers.

Take loyalty or membership programs

as an example. Whilst it may be easy to
sign customers up at the point of sale
and keep them engaged from there, the
ROI from setting up and running these
programs can be turned on its head as
soon as that trust is broken.

[In KPMG’s Cyber Trust Insights](https://assets.kpmg/content/dam/kpmg/xx/pdf/2022/10/kpmg-cyber-trust-insights-2022.pdf)

[2022 global report, over one-third of](https://assets.kpmg/content/dam/kpmg/xx/pdf/2022/10/kpmg-cyber-trust-insights-2022.pdf)
organisations we surveyed already
recognised that increased trust leads to
better profitability, but nearly two-thirds
said that cyber-security requirements are
still shaped by compliance rather than
long-term strategic ambitions.

In 2023, Australian retailers that truly

understand the business advantage gained
by ensuring their systems, suppliers and
people are able to demonstrate how they
manage cyber-risks is not only doing the
right thing by their customers, but also for
their bottom line.

Verizon’s 2022 Data Breach

_Investigations Report analysed more than_
23,000 incidents and 5,200 confirmed
breaches from all around the world. This
report notes that of the 629 incidents
and 241 breaches for retailers, social
engineering attacks – such as phishing
and pretexting – have been increasing
consistently, year-on-year, from 7 per
cent in 2016, to 13 per cent in 2018 and
now to 29 per cent in 2021.

So what can retailers do? How should

they respond to both the risks and the
opportunities that exist?

Harness your greatest asset:
your people.
1

Retailers’ reliance on technology at
almost every single point across a long
and time-critical supply chain can’t be
ignored. The retail technology landscape
is one of complexity in terms of systems,
suppliers, locations and, critically, people.
It can’t be monitored 100 per cent of the
time for 100 per cent of the cyber-risks.

Whilst the incident and breach

numbers for retailers supports the
common view that employees are
the weakest link in any organisational
security program, the reality is that they
can also be its greatest asset. Workforces
– both yours as a retailer and those of
your suppliers and third parties – can act
as the first line of defence in blunting
social engineering attacks, if they are well
educated in cyber-security risks.

Activities ranging from training

campaigns to phishing and crisis
simulations are examples of reliable,
well-established ways to help build


The share of incidents and data

breaches attributed to social

engineering attacks, such as

phishing and pretexting, has been

increasing year-on-year. From...

7%

in 2016

to


13%

in 2018

to

29%

in 2021.

awareness of cyber-risk. Emerging
options such as user behaviour analysis
through integrated API analytics and
dedicated cyber escape rooms are
particularly worthy of consideration
for retailers whose employees are
often highly geographically dispersed in
clustered groups with a high percentage
of casual workers.

Learn from the (recent) past.
Recent history has highlighted for
2

all Australians just how real the threat
is of a successful cyber-attack. Then,
once the investigations are done and
the causes identified, the importance of
getting your core cyber-controls in place
and making sure they’re working is yet
again reinforced.

These core controls are things like:

making sure vulnerabilities in your
systems are identified and then
quickly patched; implementing
multi-factor authentication;
decommissioning old systems and
rationalising duplicated functionality;
making sure APIs are hardened and
secure; taking backups of critical data
and systems then testing them as ►


-----

R E A D Y F O R T O M O R R O W


part of regular resilience recovery
exercises; and having the right tools
in place to detect and alert you to any
unusual or suspicious activity.

Critically, for retailers, this includes

also asking questions and seeking
assurance from your suppliers and
supply-chain partners that they must
do the same. In the high-volume and
multi-vendor world of retail, it may seem
that high levels of supply redundancy
are available but dig a bit deeper and
you’ll often find that what seemed like a
wide field of suppliers are all relying on
the same fourth- or fifth-party supplier
somewhere down the line.

Finally, testing that the controls

you and your suppliers are relying on
are designed and operating effectively
is essential. The hard lessons about
missing or incomplete controls learned
by organisations that have been
compromised cannot be ignored.

When something does go wrong,
know whom to call.
3

Knowing whom to contact is crucial
when responding to a cyber-incident.
Swift, clear actions and communication


enable you to protect what you can and
not allow further harm. Not only that
but, crucially, in retail, where stickiness
of customers is so important, holding on
to as much goodwill as you can in the
very worst of times is vital.

Holding

on to as much “
goodwill as you
can in the very
worst of times
is vital.”

Preparing your own teams, from the

board down, to know how to respond
and communicate with your customers,
your regulators and governments, thirdparty suppliers and the media in a crisis
is make-or-break leadership. Getting
ahead of the game allows you to be
more proactive and methodical in your


response, leading to clearer thinking
and decision-making. It also gives you
an opportunity to show your customers
how, even in the worst of times, you
respect them and that you will work to
repay their trust in you right from the
very beginning.

Along with the mock exercises

that can help prepare you for these
situations, there are also a growing
number of helplines to call for support
and guidance in a crisis; for example,
KPMG’s own Cyber Incident Hotline
(1800 316 767) received a significant
increase in requests over the last 12
months, as have others, such as IDCARE
in Australia. Help is at hand, and more
so now than ever before.

The bottom line for Australian

retailers in 2023 is that while the
threats posed by a cyber-attack are
showing no signs of slowing down,
preventing and being ready to respond
to one need not be as much of a
daunting prospect in the future as it has
been in the past, if you prepare for it in
the right way, right now.

1 KPMG Cyber Trust Insights 2022 report


-----

R E A D Y F O R T O M O R R O W

De-risking your

supply chain

The world’s logistics crisis isn’t over yet, but there

are some strategies retailers can adopt to help

them worry a little less about inventory.


Peter Liddell, Partner, Global Operations Centre of Excellence Leader, KPMG Australia

Brendan Cottam, Associate Director, Supply Chain, KPMG Australia


AUSTRALIAN RETAILERS ARE RECOVERING FROM PERIODS OF
widespread shortages rolling into high inventory levels on the
back of supply-chain disruptions in recent years. While in 2023
the worst of the disruptions may be over, we expect local supply
chains to be impacted beyond this year as global imbalances in
transport and logistics take time to settle and the geopolitical
environment remains uncertain. Best-practice retailers are
already acting to build resiliency and responsiveness into their
supply chains as a competitive advantage.

Geopolitical disruption
Rolling lockdowns in Asia have wreaked havoc on retailers,
especially those with heavy reliance on manufacturing and
distribution from China. While this is expected to ease over
the coming year, the demand backlogs will take time to clear
and continue to place pressure on replenishment lead times.
With additional delays arising from the ongoing global trade
and logistics imbalances, it all points to one key trend for 2023
– supply-chain disruption will be a factor for some time yet.
Unfortunately, transport and logistics costs are not expected to
return to pre-pandemic levels until demand patterns stabilise
and global supply chains have a chance to reposition containers
and process backlogged capacity.

Given the continuous disruptions, it is not surprising

that 83 per cent of organisations surveyed stated that their
commitment to managing supply-chain risk is now “medium”
or “high”. 1 This observation aligns with the fact that investment

applied toward building enhanced supply chain resilience
through the digitisation of operations is at its highest levels.


Nearly 75 per cent of global organisations experienced

significant supply-chain disruption in the past few years, yet
nearly half of these organisations have yet to establish stability
for the future.[2]

Logistics costs (domestic and inbound ocean freight) are

not expected to return to pre-pandemic levels until demand
patterns have stabilised and pressure from rises in fuel costs
begin to ease.

Ongoing geopolitical tensions, specifically in Europe, are

impacting key supply routes and the costs of inputs. The recent
US export controls on computing technology going to China will
delay many consumer electronics, and also raise the likelihood
of escalating trade and geopolitical tension that could spill over
into other product categories, creating shortages of critical
equipment and spare parts, tools and machinery, and more.

Planning remains challenging
Lead times will continue to be stretched and Australian retailers
will need to maintain extended planning horizons, especially
for items coming from Asia or Europe. This places increasing
importance on the accuracy of forecasts and the quality of the
data that underpins them. Leading global retailers are leveraging
external data sources in real time and applying predictive
analytics on daily transactional data from stores to maintain
more accurate inventory holdings, helping to increase sales
with greater on-shelf availability and reduce waste within their
supply chains. The improved data management and real-time
analytics enables a mature and capable supply-chain planning
team with the right skills and technologies to analyse the data


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R E A D Y F O R T O M O R R O W


and make critical decisions in response
to disruptions, supply inconsistencies
and variations in demand.

Excess inventory remains a challenge

for all retailers – the reactions to
shortages include stock ups and ‘justin-case’ supply strategies. Now we are
seeing inventories well above historical
levels, particularly for those based in the
northern hemisphere. Economists are
forecasting that consumer confidence
will take a hit in 2023 on the back
of inflationary pressures, with the
immediate impact on spending. With
a drop in consumer spending, many
retailers will be exposed to margin
pressures off the back of likely
markdowns, especially in those product
categories where shelf life is less than
6-12 months.

Excess inventory

remains a challenge “
for all retailers.”

It’s not just about your Goods-for
Resale. The industry is also facing
cost and lead time challenges across
Goods-not-for-Resale, with inputs into
construction and technology products of
particular concern. For companies whose


strategy is underpinned by network
expansion, store refits or new supplychain facilities, this represents a material
risk to their 2023 growth objectives.
Rigour in supply-chain risk management
also needs to be applied to these GNFR
categories.

The time is now
It is critical that retailers act now to
build in resilience through greater agility
and responsiveness within their supply
chains. Reverting to an efficiency-focused
supply chain or attempting to ride out the
current conditions will cause them to fall
behind market leaders.

Three actions retailers can take to

build resilience into their supply chains:

Digitisation: True digitisation of
the supply chain goes beyond just
1

implementing a new point solution
or planning capability within your
warehouse. While these are the building
blocks, it involves the use of digital
technologies to change part or all of
the retail business model to support
new revenue and value-producing
opportunities, just as many Australian
retailers supported sales growth
during the pandemic by creating online
platforms and enabling flexible delivery
with new digital technologies.

We’ve seen this done well. A European

retailer developed a new AI-based


forecasting and allocation tool for
promotional items that factored in
inventory levels at stores and sales
history to increase the accuracy of
promotional stock allocations across its
network of stores.

Supply-chain visibility: The key to
building resilience is understanding
2

in real time how your supply chain is
performing and where the potential
disruptions lie. Many have achieved this
through investment in digital tools, such
as control towers that collate data from
partners across the entire value chain,
enhanced with predictive AI capabilities
to help retailers identify and proactively
manage supply and delivery risks.

Micro-supply chains: Supply chains
of the future are more adaptable
3

to meet customer demand. They have
created more flexibility in their domestic
and global contracts, production and
delivery approaches and they have
adopted strategies that drive supply
efficiency and customer excellence, while
balancing the cost of complexity with the
value gained from offering variety. They
have established mini operating models
based around their customers within
specific segments.

1 KPMG Supply Chain Survey, October 2022

2 KPMG Supply Chain Survey, October 2022


-----

A membership with the ARA


-----

**Why do Australian**
**Shoppers love**
**D2C Brands?**


-----

R E A D Y F O R T O M O R R O W

Ride the wave

as the tide turns


An unexpected slowdown in the year ahead doesn’t have

to limit growth in all areas of retail. With a focus on four key

aspects of business, some categories can still thrive.

James Stewart, Partner, Global Retail Restructuring Leader, KPMG Australia

Trent Duvall, Partner, National Leader – Consumer, Retail, Industrials & TMT, KPMG Australia


AUSTRALIA’S RETAIL SECTOR STORMED AHEAD DURING
the pandemic, off the back of economic stimulus not seen
since World War 2 and a global shift to digital platforms that
accelerated a transformation that had commenced before
Covid-19. As we look towards 2023, the economy is now largely
dry of stimulus and year-on-year retail spending is set to slow.
Growth rates for discretionary retail are most likely to be affected
as the effects of rising interest rates and inflation finally take
hold. Amid the turning tide, growing a customer base and
margins is expected to become more challenging; consumers will
potentially return to a conservative spending pattern – this time
without the aid of the government dollar.

In 2022, non-food retail sales continued to post year-on
year growth at record levels between January and September
2022. What’s important here is that this was against significant
headwinds: surging fuel prices and inflation, multiple interest rate
hikes, a federal election – events we would typically expect to
constrain economic growth.


So, what is going on? What has powered the retail sector’s

upward trajectory?

It is partly related to high household savings levels

accumulated over the last two years, fuelled by government
stimulus and a shift in consumer behaviour to a new domestic
lifestyle on the back of extended lockdowns and closed borders.
While savings remain elevated, they have now declined to near
pre-pandemic levels. The interest rate hikes throughout 2022
will continue to cycle through to households, placing more
pressure on customer wallets in the year ahead.

Household savings ratio
%, seasonally adjusted
Jun-17 to Jun-22

25

20

15

10

5

0

5.8% (5-year average

pre-Covid)

Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22

What does this mean for retailers in 2023?
Some clues as to how this will play out lie in the period
following the Global Financial Crisis (GFC) over a decade ago.
The non-food retail sector experienced a tumultuous period ►


50bp rate

hike


Australian sales growth by month (non-food)
Growth rate y-o-y %



50bp rate

Jan-22 to Aug-22 hike

Federal election
& 25bp rate hike

19%

50bp ratehike 17%

Petrol price

hits $2/L

Omicron 12%

spike

10% 10%

9% 9%

6%


Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22

Source: Australian Bureau of Statistics, MST Marquee


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R E A D Y F O R T O M O R R O W

Retail spend from May 2010 following last round of RBA rate increases
Indexed, rebased to 100 at Apr-10
Apr-10 to Apr-11

115


In a slower

retail growth “
market, consumers
tend to fly to
the retailers and
brands they trust.”


9.6%

3.2%

1.2%

4.8%
5.3%


110

105

100

95

90

85

80


Household goods

Food

Department stores

Clothing, footwear, and

Cafes, restaurants and takeaway food personal accessories


Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11


So, how can retailers protect margins and grow in an

environment of depressed spending? There are four key areas
where businesses can focus:

Range architecture: Product range architecture has always 1
been a critical success factor for retailers. Indeed, in buoyant
1

economic times, retailers often explore new territory in pursuit
of growth. But this can lead to complex brand portfolios or
product assortments that drain capital, shift management focus
and sometimes confuse the customer as to what the retailer
stands for.

During the pandemic, many retailers initially narrowed their

product range, to focus on core brands, products or categories.
This put those retailers in a good position to survive, and indeed
thrive, during the pandemic, and protected sales and margin.

In a slower retail growth market, consumers tend to fly to the

retailers and brands they trust. They want product reliability,
items in stock when they need them, value for money when they
buy, and a seamless customer experience, because money and
time are both tight.

Ultimately, great retailers know that getting their product

assortment right, to meet core customer needs and clearly
communicate their brand proposition, will keep their customers
coming back.

So what does this mean?
Basically, a hyper focus on range architecture and supply
chain agility is needed for a retailer to capture the elusive dollar
of a customer who is more conservative in what they spend
and more considered in what they buy. We encourage retailers
to try out different trading environments as part of their
budgeting process and closely examine range architecture and
merchandise planning regime to identify opportunities to pivot
quickly if trading conditions change.

Price architecture: While we expect the growth in consumer
spending to slow, not all retail categories are equal in a

2

low-growth environment; some will be more sheltered from any
economic downturn. For example, food retailers typically are
more resilient.

Indeed, those retailers who invested heavily in understanding

their core customer, their behaviours and price sensitivity over
the last few years will be at a real advantage as the market
slows. More than ever, the digital revolution has enabled many
retailers to develop bespoke personal profiles of their core
customer and adopt a level of personalisation that was largely
a pipe dream before the pandemic. Having a dynamic pricing
strategy that is backed by data and responds to the ebbs and
flows of customer demand is the new oil. Does your business
have the data and tech stack to support a dynamic pricing
strategy?

Customer engagement: The benefits of a highly engaged
and loyal customer base are well known, regardless of

3


economic conditions. This becomes even more pronounced in
times of economic uncertainty.

We believe retailers looking into the future are asking

themselves:

1. What does best-practice customer experience look like in

a low-growth environment? And how does this change by
channel?

2. How will our core customers be affected by prevailing

economic headwinds? How will this impact our range and
price architecture? What levers are available to help adapt
accordingly and over what time frame?

3. How should our team and technology stack be set up to

deliver the best customer experience in a physical and
digital environment?

Operating model: Last but not least is operating model
resilience. During the pandemic, many retailers took

4

the opportunity to restructure their operating models to be
more agile, with a lower cost of doing business driven largely
by a reduction in fixed costs such as rent and head-office
infrastructure and stronger adoption of digital technology. Many
of these changes were possible only because of a temporary
shift in the usual business environment, which enabled
structural changes to be made to business models with a
relatively low financial penalty compared with the potential
economic crisis that loomed.

In 2023, operating model agility will again remain under

pressure; however, with a few additional overlays:

-  The return to economic and commercial factory settings

after the pandemic means retailers will not be able to rely
on government intervention if times get tough.

-  Data security and cyber protection have rocketed to

prominence in the eyes of customers as the world’s
hackers have turned up the heat on some of our most
high-profile and vulnerable organisations. This will grab
the attention of retail boards and business owners across
the country, encouraging them to invest in better defence
systems that protect not only their customers but also
their brand.

-  Environmental, social and governance matters will

continue to grow in importance in consumers’ minds,
playing directly into their decision-making patterns,
with the recent KPMG survey showing that 57 per cent
of consumers pledged to shop at stores with a strong
fair-trade commitment (factors included no child labour,
tackling poverty and protecting against deforestation).1

The next two years may prove to be the retail trading

environment we thought we would get in 2020. The key
question for retail boards is, “Am I now future-fit to deal with
what is coming?”


-----

Real Impact

Real customers

Real results


-----

R E A D Y F O R T O M O R R O W

Reflections on the future

of Australian retail


As new trends continue to emerge and evolve from the upheaval of

the pandemic, five CEOs share their reflections on what lies ahead.

JOHN GUALTIERI
CEO

KPMG: What do you see as the greatest challenge to Australian
retail in the year ahead?
John Gualtieri: The Australian retail landscape, like all
industries, has undergone significant change over the past
few years. At Kmart, our focus has always been on being there
for our customers by
providing great products
at the lowest prices in

Technology

the market across a
wide range of everyday

“

items. We are conscious has enabled us
that in an inflationary
environment, value to connect to
becomes a stronger
consideration for our customers.”
customers. For Kmart,
this is why our relentless focus on keeping costs low becomes
more important than ever. And we can keep costs low because
we design our own products and get them made at low costs
through our scale and direct sourcing capabilities. We know


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R E A D Y F O R T O M O R R O W

that rising costs of living are being felt by everyday Australians
and New Zealanders and we work hard to provide the lowest
possible prices for Kmart customers on products that help
make their everyday living brighter.


We all have a

“

responsibility to make
genuine and lasting
change, and it takes
time, strategic thought
and dedication to shift
the needle.”

With this in mind, retailers will need to make sure they are

nimble enough to ensure they are adjusting their offer to what
customers want, and also to adjust their cost base to take into
account a period of lower economic growth. Furthermore, we’ve
seen the fashion and lifestyle industry as a whole clearing stock
through Q4 of 2022, and for some, they may do that well into
the first half of 2023, as the industry adjusts for lower growth
and potentially a more value-/cost-conscious consumer. This
won’t be the environment to handle excess inventory. The
Iconic will be focused on understanding our customers and
their behaviour on an even deeper level than we already do
to ensure we remain top of mind as they become more
value-/cost-conscious in the face of a higher cost of living.
This means understanding their behaviour, understanding their
future needs, and maintaining the right balance of stock so we
can pivot our offer based on those needs and wants.

KPMG: What is a key investment opportunity or area for retail
to thrive in the next 2-5 years?
EB: We see sustainability, circularity and DIB (diversity,
inclusion and belonging) as big areas of opportunity and
investment over the next 2-5 years. The Iconic has a deep
commitment to its people and planet-positive strategy, and
has invested in these areas for many years now. However, we
know we still have work to do and have ambitious goals in
place to achieve by 2030. These areas cannot be for facevalue or to simply ‘tick a box’. We all have a responsibility to
make genuine and lasting change, and it takes time, strategic
thought and dedication to shift the needle. We encourage the
wider fashion and lifestyle ecosystem to focus on progress in
this space over the coming years, and welcome any discussion
to support our counterparts.

Secondly, we see delivery as a key opportunity for

development. We pioneered fast delivery when we first
launched in 2011. For us, topics such as last mile, time-frame
delivery and automation as a customer value proposition will
be focal points for our investment in enhancing customer
experience over the coming years. That said, we also need
to find ways to reduce our environmental impact when it
comes to delivery, while simultaneously servicing customer
demand. This is a challenge the entire industry needs to focus
on and something I truly believe can be revolutionised if our
ecosystem comes together to evolve what delivery looks like in
our country.

Lastly, and specifically looking behind the scenes at

The Iconic, we will also be focusing on evolving our systems
and processes to make sure they are stable and scalable
given the size of our business now. Like any business, we
continuously look to increase efficiencies. For us as an online
retailer, this is of the utmost importance, given the speed at
which we operate. ►


KPMG: What is a key investment opportunity or area for retail
to thrive in the next 2-5 years?
JG: I believe the biggest key investment area for retail is digital
technology. From online shopping and delivery to inventory
management and better design processes, technology has
enabled us to connect more closely to our customers,
better manage the volatility and challenges of supply-chain
disruptions or significant swings in demand, and help create a
better customer experience. The importance of bringing great
products to our customers in a fast and agile way has never
been greater, which is why we are constantly looking to use
technology to bring speed and flexibility to our supply chain
and customer experience. One example of the ways Kmart
is using technology is through our 3D digital product design,
which enables designers to create animated 360-degree views
of our product to see how the fabrics hang, move and look on
differently sized models. Best of all, it removes the need to
send physical samples across the world, reducing lead time
and wastage. As well as improving our product development
process, this technology can also have great benefits for
customers – like access to more detailed fit and sizing
information, a heap of analytics that allow us to improve our
designs, and one day even the ability to browse digital avatars
rather than 2D product photos.

ERICA BERCHTOLD
CEO

KPMG: What do you see as the greatest challenge to Australian
retail in the year ahead?
Erica Berchtold: Understanding changes in customer behaviour
will be one of the greatest challenges for retail in the months
ahead. With rising interest rates and cost-of-living expenses,
we know that some customers will slam on the brakes when it
comes to spending, some will become a little more considered
in their purchasing, and others may continue spending as usual.


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R E A D Y F O R T O M O R R O W

ANGUS McKAY
CEO

KPMG: What do you see as the greatest challenge to Australian
retail in the year ahead?
Angus McKay: Considering rising interest rates, cost-of-living
pressures and general economic volatility, it is no surprise that
Australians are managing their budgets carefully. Keeping costs
down and offering great value for money should be the priority.
Retailers should emphasise investments that drive value and
differentiate themselves for the customer. We understand
the importance of this at 7-Eleven, which is why delighting
customers is one of our four values. In doing so, we aim to stay
relevant through the next year of economic uncertainty and
weakened consumer sentiment.


Delighting customers

“
is one of our four values.”

KPMG: What is a key investment opportunity or area for retail
to thrive in the next 2-5 years?
AM: The last two years of lockdowns have limited some
retailers and consumers to an online shopping environment.
Throughout this period, the role of online stores has evolved.
Consumers now have greater choice as to where and how they
want to shop, and we’ve invested in digital platforms to create
a seamless way to transition across both our terrestrial and
digital properties. Although some customers might engage
with your brand through only one avenue, others may begin
their journey through your app or website and then purchase
in-store. Customers have choice and we need to respond with
avenues that facilitate that desired choice.

Customers neither need, nor want, to know all about your

business’s back-end operations, but an effective back-end
paves the way to high satisfaction. As a retailer, we must


therefore be centred on the customer to drive better value and
curate an exceptional shopping experience. Despite increasing
financial pressures, discretionary spending isn’t slowing
down and that emphasises that consumers have a yearning
for places with strong customer service and great value for
money. Combining this understanding with comprehensive
investments in digital has enabled us to push the boundaries
of a traditional convenience store. We have extended our
product range to meet the wants and needs of consumers,
increasing offerings across food to provide greater balance in
both indulgent and healthy eating.

I think the retail industry has already seen significant

improvements in the variety of digital offerings but there is
still considerable untapped potential, and we’re excited to be
exploring this at 7-Eleven.


-----

R E A D Y F O R T O M O R R O W


ERIC MORRIS
CEO

KPMG: What do you see

In-store

as the greatest challenge
to Australian retail in the “experience is
year ahead?Eric Morris: There are a now our greatest
couple of challenges. The

investment area.”

macroeconomic issues are
the biggest; we predict they
will hit us over the coming months. Further to this, in the retail
world, the critical challenge is the shortage of staff, not only
in-store but in the support office; roles in e-commerce and IT
are really challenging to fill as well. I think that will get worse.
We are pleased to see that the government has made initial
moves on opening some visa categories, which should assist in
lessening the pain.

For apparel retailers, the other big challenge is getting people

back into the office. I feel strongly that working in a tactile
industry and creating the products we do is hard when working
from home.

Finally, how do we all regain the progress we made during

Covid-19 in the online space? Brand Collective were fairly
advanced, and then the pandemic gave an uplift, now we
are considering how we continue to make improvements in
this space.

KPMG: What is a key investment area or opportunity for retail
to thrive in the next 2-5 years?
EM: As people are wanting to get back into stores, in-store
experience is now our greatest investment area. Ensuring our
stores have great fitouts, and that our staff are well trained and
knowledgeable, is so important.

We will also have a continued investment in online tech. It

will play an advanced role in driving traffic in stores. Once the
customer is in-store, the focus needs to be on completing the
sale. There are many components to getting this right: loyalty
programs, segmentation, targeted communications. It’s the
ambience of the store, it’s the training of the staff, service,
customer data segmentation and targeted communications.


DANIEL BRACKEN
CEO

KPMG: What do you see as the greatest challenge to Australian
retail in the year ahead?
Daniel Bracken: People were starved of in-store experiences
during the pandemic, and we are now witnessing a resurgence
of physical retail. Customers want real-life experiences, they
want to interact with staff in stores. The challenge here is
that there has been such a focus by many retailers on online
initiatives, which now need to be converted into an offline
experience.

Most retailers think of multichannel simply as order

fulfilment; however, at Michael Hill we have remained true
to the meaning of omnichannel, thinking strategically about
our various sales channels. We saw a price barrier online
that people would convert at – approximately $1,000 – but
most engagement rings are $4,000 and upwards. Instead of
attempting to push the sale online, we created an option for
customers to make an appointment to view the items in their
cart in person. We did this before Covid-19 and we’re now seeing
other retailers adopt a similar approach. It goes to show brands
need to consider the reversal to in-person experiences and
clearly define what role their online store plays.

We are witnessing a

“
resurgence of physical retail.”

KPMG: What is a key investment area or opportunity for retail
to thrive in the next 2-5 years?
DB: Truly understanding the customer through data is
undoubtedly the big investment area for retail. We have been
working hard over the past 18 months to streamline our data
and build a robust, fully integrated CDP at Michael Hill. Data
has traditionally been maintained within marketing teams but
we are shaking this up, bringing customer data to the forefront
of our digital communications and interactions in stores. By
arming our store teams with information such as customer
purchase history, what customers have been interested in but
not purchased and so on, we are able to offer a curated in-store
shopping experience. 


-----

R E A D Y F O R T O M O R R O W


Many retailers have gone up for sale successfully over the last couple of years.

Here are the 10 things to focus on to follow in their footsteps.

Luke Lawrentschuk, Partner, Mergers & Acquisitions, KPMG Australia


THE PAST TWO YEARS BROUGHT AN UNPRECEDENTED BOOM
in M&A activity across the retail sector. Many retailers not only
enjoyed record profit margins, many of those that sold their
business achieved extraordinary outcomes.

Now the economic landscape is changing, with the RBA lifting

interest rates and the appetite for retail transactions slowing,
compared with the highs of the immediate post-Covid period.
While activity may be coming back to pre-pandemic levels, there
remains a strong market appetite to buy good retailers that have
adapted to the new normal and are future-fit, with strong digital
DNA and clearly defined brand identities.

M&A activity*


So how do you get your retail business ready for a


transaction? Here are 10 areas to focus on to position yourself
to become investor-ready today.

Know your target audience
Being able to define your target audience clearly and

1


articulate how your brand is positioned to address this market
is critical to any transaction. Buyers and investors will often
compare you to other brands in the market, so being able to
clearly define your brand’s key elements is very important.

It’s surprising, but some retailers assume people

automatically understand their brand and target audience.
When trying to sell your retail business or find an investor,
interested parties won’t have the same intricate knowledge of
your brand.

Therefore, before commencing any transaction, retailers should:


800

700

600

500

400

300

200

100

0

2017 2018 2019 2020 2021



-  Be able to succinctly describe and define your brand. This

includes your target customer, product range and price points.



-  Have a clear point of differentiation from your competitors

and be able to describe this relative to other brands.



-  Know and understand your target audience and why they

buy your brand.


Be clear on your objectives
Investors or buyers will almost certainly ask you the

2

reason for any transaction. It is important to have a compelling
response. You should be clear on:


2022


Global Australia

*Note: M&A activity defined as acquisitions, mergers and divestments that closed between
November 2017 and October 2022, undisclosed value deals are excluded. Source: Mergermarket as
at 21 November 2022.



-  What you are looking for from the transaction. Do you

want to sell down, exit, raise equity to fund growth, find a
partner to add value?


-----

R E A D Y F O R T O M O R R O W

Corporations, investors, funds and

“
their shareholders are increasingly looking
for opportunities to invest in companies
with positive ESG characteristics.”



-  Your preferred timing. Transactions typically take 6-9

months to implement, so work backwards from when
you want to complete a transaction. Also, transactions
are time-consuming so be conscious of key retail and
marketing periods before you embark on a sale.

Financial information and growth strategy
Retailers that have a generic or unrealistic growth story are

3

often marked down during any transaction process. Investors
nowadays undertake a large amount of commercial due
diligence before they invest and they are good at identifying
genuine growth stories, particularly in the retail space. It’s
crucial that before embarking on any transaction, retailers:

-  Develop a credible and realistic growth story that is

tailored to their own circumstances. This may include
new stores, new geographies/overseas expansion, new
product categories, and growth for each channel, including
digital sales.

-  Have a credible set of financial forecasts (3-5 years) that

supports their strategic plan and vice versa. Financial
forecasts should preferably include a three-way model,
dashboards with key information, key assumptions and
outputs. These should allow potential buyers or investors
to analyse the business at a channel, brand, geographic or
store-by-store level.

-  As part of any historical or forecast financial information

provided to potential investors or buyers, make sure the
key retail metrics that matter are captured. This will be
different for all retailers, whether traditional bricks-andmortar, pureplay online or omnichannel. Be able to provide
things such as:

-  Store numbers, including new store openings/metrics

-  New store opening costs, capital expenditure/fitout

costs and working capital

-  Demographic analysis on customers and new store

locations

-  Customer data – retention/churn, basket sizes, loyalty

-  Company growth and ‘four wall’ P&L

-  Gross margins, at various levels (channel, brand, store)

-  Online metrics (unique visits, average order value,

conversion rates) and omnichannel metrics

-  Inventory performance by category and SKU, stock

turns, regular/clearance stock

-  Head-office costs and infrastructure to support growth

-  ROI for marketing, ROAS

-  Key overheads by category (e.g. selling expenses,

labour)

-  Profit margins on a group, channel, geographic and

brand level.

Management team and resources
Potential investors and buyers will want assurances that

4

you have the right team and resources to deliver on your future
strategy. Areas that are often underestimated or overlooked are


finance, senior management, marketing, store management and
merchandising. As a retailer scales, these are the positions that
often require further depth and resources.

Questions you need to be asking before any transaction are:

-  Do you have the right team to support your 3- to 5-year

strategic plan, particularly in key areas that are crucial to
the execution of the strategic plan?

-  Do you need to bring in any additional talent or resources

to deliver on your plan?

-  How will the founders be involved in the company after

the sale? Many buyers will demand the owners’ ongoing
involvement (in some capacity) if they are seen to be the
‘secret sauce’ behind a brand, especially in a creative,
fashion or design-led retail business.

Security around supply chain
The Covid-19 pandemic and geopolitical tensions have

5

emphasised the importance of retailers shoring up their supply
chain. Retailers should ask themselves:

-  Do we have good relationships with our suppliers and

manufacturing partners? How can these be improved to
provide greater security around the supply chain?

-  Are the forecasts deliverable from a supply-chain

perspective – for both pricing and the ability to scale?

-  What price certainty do we have over manufacturing costs

that will underpin our margins?

Stock
In light of recent impacts and disruptions to supply

6

chains globally from the war in Ukraine, investors are
looking more critically at a retailer’s stock when assessing
a potential transaction.

With the aid of digital tools and analysis in due diligence,

investors are diving deeper into the data around stock.
Consequently, they have become more sophisticated at
identifying any underlying stock issues in retail targets. Some of
the key points that retailers need to address:

-  Having ‘clean’ stock (low obsolescence, current season

and on-trend) will be critical to any interested parties.
Make sure any obsolescence and provisioning is
correctly reflected in your balance sheet and P&L before
commencing any sale.

-  Stock levels should be adequate for current trading,

including in terms of seasonality and fashion trends,
and should be able to support growth to deliver on your
strategic plan.

-  Retailers should be able to explain to any buyers the

volumes, mix and ageing of their stock in the context of
current trading and future needs.

-  Being able to show a breakdown of stock by season, basic

lines and new products is important. Also, being able to
explain stock volumes in the context of stock production
cycles and seasonality factors is key. If these issues ►


-----

R E A D Y F O R T O M O R R O W


cannot be adequately explained to
an investor, they will err on the side
of discounting stock values and a
company’s maintainable margins,
which has a direct impact on
transaction value.

Cyber-security and data health
Recent examples of high-profile

7

data breaches have emphasised the
importance of cyber-security and
highlighted the adverse impacts of any
breach. Accordingly, the potential brand
damage (or even class actions) to any
retailer from a data breach is a real risk
that will be front of mind for all investors
as they assess a potential transaction.

As more retailers move online or decide

to capture customers’ personal details
for marketing and loyalty purposes, this
creates more potential risks.

It’s crucial to ensure retailers have

strong data health and security around
customer details. Retailers should
consider getting an independent health
check of their cyber-security to identify
any weaknesses prior to commencement
of a transaction.

Key agreements in place
and compliant

8

While preparing for any transaction, all
key store leases, employee contracts
and supply agreements should be up to
date and signed. Interested parties will
request copies of these key documents
and often we see that these are out
of date, unsigned or can’t be located


upon request. Get your ‘housekeeping’
on key agreements done well ahead of
a sale process, as this can often take
time, particularly if you’re dealing with
larger landlords or multiple suppliers and
employee groups.

Compliance around employee

contracts and industry awards has
become a hot issue in the retail sector
over the last five years. This has been
underscored by several high-profile
cases of non-compliance in this area.
Investors are very aware of potential
employee contract/award compliance
issues and are spending a lot more time
on this matter in due diligence. Common
compliance issues we see include:

-  Incorrect calculation of employee

hours and wage payments

-  Incorrect classification of employees

-  Underpayment of penalty rates

-  Underpayment of employee

allowances.

Environmental, Social &
Governance (ESG)

9

Consumers are demanding greater
accountability on ESG considerations,
particularly from retail and lifestyle
brands that in many ways represent
a customer’s identity and ideology.
Whether it’s climate change,
sustainability, pollution of the oceans,
inclusiveness, ethical sourcing, gender/
religious/ethnic oppression or other
social matters, consumers are voting
with their wallets.


Likewise, corporations, investors,

funds and their shareholders are
increasingly looking for opportunities
to invest in companies with positive
ESG characteristics. Investors are now
scoring retailers on ESG attributes
during due diligence.

Retailers need to be clear on their

brand’s ESG impact, priorities and strategy.
This captures the end-to-end impact
of your business, from sustainability
of sourcing to the final product. As
investor and consumer expectations and
preferences shift, you need to make sure
you are conscious of what your target
consumers or potential buyers of your
company want (and expect).

Appointing the right advisers
Choose a trusted team with retail

10

or consumer transaction experience.
This includes M&A and legal advisers,
accountants, and due diligence advisers.
Your advisers are the mouthpiece for
your brand, so pick ones that know retail
and consumer brands well so they can
clearly articulate your brand’s unique
value proposition.

Seek advice on your current business

structure and your ability to execute any
transaction (tax, corporate structure).

To maximise the potential outcome,

your chosen advisers can support
preparing your business for sale prior to
taking it to market – from structuring
it to evaluating potential areas of
improvement or risk, to collating the
right information for due diligence.


-----

R E A D Y F O R T O M O R R O W

New Zealand retailers have an opportunity to tap further growth in

online sales, but wage increases, dips in consumer demand and

supply costs will all be challenges.

Leon Bowker, Partner, Deal Advisory, KPMG in New Zealand

NEW ZEALAND RETAILERS HAVE BEEN ON A ROLLER-COASTER transformation to improve online customer experience with
ride for the past few years. In 2020 and 2021, trading conditions fulfilment and data tools that increase consumer engagement
supported strong trading performance for many retailers. Over and spending. Digital transformation remains a journey for many
this period, low interest rates contributed to rapid house price retailers, requiring future investment to meet their ambitions
inflation, driving an increase in household wealth. The effect of and remain competitive. KPMG’s global CEO outlook[6] indicated
more money in consumers’ pockets, combined with restrictions that many CEOs have paused or are expecting to pause digital
on international travel, resulted in a rise in discretionary transformation strategies to prepare for a recession. But
spending, with retail sales growing 10.2 per cent between 2020 retailers considering pausing ongoing digital investment will
and 2021. The year 2022 told a different story. need to examine the potential impact on growth and long-

Last year, economic conditions were dominated by the term competitiveness from these decisions, particularly given

cost-of-living crisis (with annual inflation running at 7.3 per cent the growth in online trading and the expectation that further
at June 2022[1]), a softening of the housing market (house prices international retailers will expand into New Zealand.
were 8.1 per cent lower in September 2022 than in September
2021[2]) and continued growth in interest rates to manage inflation. Labour: Labour remains top of mind for many retailers. With
This has placed financial pressure on many households, leaving underlying wage inflation and current cost-of-living pressures,
less discretionary money available. Meanwhile, as in Australia the living wage – which many retailers sign up to, including the
and many other countries, New Zealand retailers are facing Warehouse Group – has increased to NZ$23.65/hr, compared
operating pressures, with rising wage inflation, staff shortages with a minimum wage of NZ$21.20/hr. Staffing shortages
and increases in the cost of goods. resulting from historically low unemployment and immigration

As we approach 2023, there are many key challenges and restrictions are also hampering many retail businesses’ efforts

opportunities for New Zealand retailers to manage. to meet customer demand. Existing cost pressures are likely

to be exacerbated by new fair pay legislation coming into
force in December 2022 that introduces sector-wide collective
agreements that set minimum terms for workers. With the
continued inflationary pressures and staffing shortages, retailers

Digital transformation

can expect to face continued wage increases this year, which
will put further pressure on margins.

remains a journey for
“

Retailers are facing challenging economic conditions this

many retailers, requiring

year, which are expected to affect consumer demand and drive

future investment.” continued cost pressures. We believe retailers in New Zealand

should be focusing on:

Supply and stock: After years of lean and just-in-time supply- 1. Carefully managing inventory levels to balance supply
chain management, businesses have been severely disrupted, and demand side risks. Optimising inventory levels will be
with freight time and costs still well above normal levels. To critical for retailers as consumer demand and spending are
manage the continuing uncertainty around timeframes, retailers challenged.
have had to invest in additional stock levels. This investment 2. Mitigating wage inflation and staff shortages. Best-in-class
has come at a time when the cost of goods has been increasing. retailers will be focusing on recruitment strategies and
As a result, at June 2022, stock levels were about 12 per cent leveraging increased immigration following the pandemic,
higher, by value, than in June 2021 for core retailers, excluding as well as clearly understanding and implementing staffing
fuel, motor vehicles and parts.[3] However, electrical and structures that drive down costs while still allowing the
electronic goods (25 per cent higher), hardware, building, and business to achieve its targets.
garden supplies (24 per cent higher), and department stores 3. Continuing to invest in digital transformation programs. There
(18 per cent higher), have had even greater increases, which was a clear step change towards online trading during the
has made an impact on cash flow for retailers. There are signs, pandemic and New Zealand is poised for even further growth
however, that some of the supply-chain disruption is easing. in online trading. As more international retailers expand into
A key focus for retailers in 2023 will be unwinding some of the the country, having strong digital DNA will provide some
investment in working capital and optimising inventory levels. defence against new entrants into the market.

Online: Online shopping has increased substantially over
the last two years (52 per cent higher in 2021 than in 2019[4]), 1 Consumer price index: June 2022 quarter, Stats NZ
with a total online spend of NZ$7.7 billion in 2021, albeit that 2 REINZ residential statistics report for September 2022
represented only 11 per cent of total retail spending that year[5]. 3 Stats NZ, based on seasonally adjusted retail sales values excluding motor vehicles
While this remains below other international markets, more and parts, and fuel
growth is forecast in New Zealand. Of the country’s online 4 ‘Kiwis spend $7.67 billion online in 2021’, NZ Post
spending, 71 per cent is captured by domestic retailers. As 5 ‘2021 New Zealand Commerce review’, NZ Post
a result, retail businesses are continuing to invest in digital 6 KPMG 2022 CEO Outlook


-----

**Let customers shop how**
**and when they want**

CLICK AND COLLECT LOCKERS


-----

Retail

Profiles


-----

R E T A I L P R O F I L E S

Fun with colour

and growth

Rebecca Vallance explains how her latest collections
will help maintain her connection with customers as

her label moves onto shelves overseas.

By Heather McIlvaine


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R E T A I L P R O F I L E S

can be enjoyed by mother and daughter.
I have two little boys but the natural
progression for the brand is a little girls’
collection, also to be tied back to our
Resort collection.

We continue

“
to see huge
growth in the US
and European
markets.”

For every brand extension that we

do, it’s always important to me that it’s
a natural evolution. This year, we are
launching an Essentials category, which
will include our signature structured
tailored suits in more neutral, classic
tones, as well as camisoles and tanks to


_Australian Retail Outlook: You recently_
won the people’s choice award at the
2022 Australian Fashion Laureate.
Congratulations! Why do you think your
brand is so beloved by your customers?
Rebecca Vallance: I am so honoured to
be the recipient of the People’s Choice
Award at the Australian Fashion Laureate
2022. Over 12 years ago, when I started
Rebecca Vallance and was living in
London, I would never have dreamed that
the business would be where it is today,
and it’s all thanks to our customers.

Our customers are truly what drive me.

When designing, I always have them front
of mind. I want them to always feel
the best version of themselves when
wearing a Rebecca Vallance piece.

I am also so grateful to have such

incredible and talented people in my
team. Some have even been with me
since the early days around my kitchen
table as young people and now head up
departments 12 years later. I want my
customers to feel as though they are a
part of a community when purchasing a
Rebecca Vallance piece.

ARO: What has the past year been like for
Rebecca Vallance?
RV: This past year has been a big one
for growth at Rebecca Vallance, both in
Australia and internationally. We recently
became stocked in the UK. We are also
looking to expand our retail presence
internationally, with bricks-and-mortar
stores in London and New York.

ARO: How has the luxury fashion space
changed since Covid-19? What new
opportunities or challenges do you see in
this space?
RV: The fashion industry was one of many
badly affected by Covid, it was a great
time for us to sit back as a business and
look at everything we were doing. As a
brand, we did pivot during this time, to
launch a casual and sportif line. However,
in a post-Covid world, we are seeing a
return to celebrating occasions, big and
small, as well as dressing up and having
fun with fashion, bringing a whole new
dimension to the joy of getting dressed.
For our post-pandemic collections, think
sequins, diamante trims, exaggerated
silhouettes, and pops of colour. We want
our customers to feel like they are the
most glamorous person in the room.

ARO: You recently launched your first
collection of children’s clothing. What
was the thinking behind that? And do you
plan to enter any other new categories in
the future?
RV: Creating a line of little girls’ dresses
to sit alongside our ready-to-wear
collections was always a dream of mine.
When designing our most recent Resort
collection, I found our palette and prints
easily lent themselves to a childrenswear
capsule. They are fun and adorable
adaptations of our Resort collection that


be paired with some of our bolder pants
or skirts.

ARO: What are your top priorities for the
business in 2023?
RV: Rebecca Vallance continues to grow
globally. It has recently been stocked in
Joseph in London, and soon will be in
Selfridges there as well. We continue to
see huge growth in the US and European
markets. It’s exciting for an Australian
brand to have continued success on a
global scale.

We also have an international retail roll

out coming for 2023.

ARO: What is your overall attitude about
the year ahead and why?
RV: We are very optimistic at Rebecca
Vallance. We have an amazing team that
is growing each day and working hard
to deliver the best for our customers.
Long term, we’d love to continue to
build on our international presence as
we commence our international retail
roll out.


-----

R E T A I L P R O F I L E S

Making the

bed better:

Sheet Society

From bootstrapping with $20K in 2017 to a $30 million

turnover today, Sheet Society is on a mission to

change the way we think about and buy our bedding.

By Joshua Gliddon


-----

R E T A I L P R O F I L E S

consisted of three people. But during
lockdown, Australians moved into online
shopping with a vengeance and Sheet
Society saw massive growth. Its team
expanded to 35, with about the same
number of contractors and part-timers.

“We were really well positioned

with the right product at the right
time,” Worley recalled. “The year 2022
was [about expanding] our resourcing
capability in line with being a mid-sized
business, and so I think we’re really
well positioned to make a big impact
in 2023.”

Worley said Sheet Society’s mission is

to make the bed better, observing that
in business sometimes what you decide
not to do is more important than what
you do.

This is why the company isn’t going

to expand its product line up beyond
bedding. There will be no tableware,
no candles, and no towels. For Sheet
Society, it’s all about the bed.

And while they’re not expanding

beyond bedding, Sheet Society is
launching products true to its ethos.

“We launched a new category in

January [2023] that we’re calling bed
basics,” Worley said.

Bed basics is a range of mattress

and pillow protectors made with 100
per cent natural fibres. They are not
sexy products, Worley said, but they
are something she and the team really
believe in because they help prolong
the life of a customer’s bedding.
By extending the life of sheets and
pillowcases, Sheet Society is also
fulfilling its sustainability mission,


HAYLEY WORLEY WAS UNHAPPY. AROUND

10 years ago, she was shopping for
sheets at Myer and couldn’t find
anything she liked. The sheets came in a
big plastic block and included products
like a flat sheet, which she didn’t use.
They were scratchy, she recalled, and
were not something she was proud to
have spent $500 on.

With a background in the fashion

industry, Worley had skills in dealing
with fabrics, colours and textiles and
had regularly travelled between Australia
and China, working with fabric mills and
manufacturers.

But fashion is a fast-paced world

and she wanted to find a role where
she could apply those hard-won skills
in a business that moved a little more
slowly. The Myer experience was a
lightbulb moment. Worley said she
found it hard to reconcile the fact the
process of buying clothes and sheets
was so different.

“If you take some clothes into a

fitting room at a store, you can take
off what you are wearing, try them on
and see if you like them,” she said. “But
with sheets, it was kind of missing that
personalisation step.”

So she decided to do something

about it.

Mix and match – the choice is yours
In 2017, Worley and her life partner, Andy,
founded Sheet Society in Brunswick,
Victoria. Like all great ideas, her concept
was a simple one: let people choose
the pieces of bedding they needed and
ignore what they didn’t require, make
the product sustainable, and use only
natural fibres and dyes.

The couple bootstrapped the business

– which is still privately held – with
$20,000 in savings, and they were on
track to turn over $30 million in 2022,
Worley said. They’ve also expanded into
international markets, with a presence
in New Zealand, Canada, the US and
the UK. Add to that two bricks-andmortar retail locations, with more under
consideration, and Sheet Society is in
a perfect position to capitalise on a
growing consumer base that cares about
quality, style, choice, and sustainability
in their bedding.

“Even with a slowing economy,

when we talk to consumers, they
are really focused on more considered
and thoughtful purchasing decisions,”
Worley said. “They want products that
will last longer and are of a higher
quality, and that aligns very closely
with our brand values.”

It’s all about the bed
Before Covid-19 hit, Worley’s team


keeping old product out of landfill for as
long as possible, and delivering longterm value to its customers.

“That’s why I love e-commerce so

much,” she said. “Customers can shop
with brands that are experts at doing
one thing really well.

“We’re experts in things for the bed,

and that’s good enough for us.”

A unified customer experience
Although Sheet Society has only two
retail outlets, it doesn’t view online
and in-store shopping as different
experiences for customers. Some
shoppers will want to come to a store
and look at the product, then go home
and order it. Others will buy on the spot.
And an even greater number simply go
to the website and shop there.

“When you’re in-store, the person

standing in front of you is really
important and it’s also critical to look at
the online sessions in the same light.”
Worley explained. “Although that person
is not looking you in the eye, they have
still chosen to come to your website to
buy something.”

We’re experts

“
in things for the
bed, and that’s good
enough for us.”

She said it all comes down to making

sure the customer has the right journey.
Sheet Society is investing heavily in
its online presence to improve the
shopping experience. The retailer wants
customers to feel inspired and confident
about mixing and matching products,
and Worley has observed that what
shoppers want has shifted. A couple
of years ago, it was all about the one
or two colours everyone was buying
that season. Now it’s more spread out,
with customers seeking to buy sheets
reflecting their personal style.

The company is also leaning heavily

into augmented reality (AR), with an app
that lets customers dress a 3D bed in
the sheets and pillowcase styles and
colours of their choosing so they can get
an idea of what the product will look like
in their home.

But Worley also admits its early

days for AR. “I don’t know that it
gets customers across the line, but
it was important to position ourselves
as experts,” she said. “Investing in that
sort of technology brings credibility to
the brand.”


-----

R E T A I L P R O F I L E S

Why July is full of

optimism about the

journey ahead

Coming off a strong rebound from Covid in 2022, the

luggage retailer’s founder Richard Li sees a big year

ahead due to surges in travel.

By Aron Lewin


-----

R E T A I L P R O F I L E S

came crashing down. The last few years
have truly tested our resilience, but we
used the down time to focus on product
development, as our mission at July has
always been to create great products.

In July 2021, we launched in the US, as

they were back travelling so much faster
than us here in Australia. The market is
huge over there but we made an impact,
and quickly we sold 10 times more cases
than we’d predicted. That growth has
only accelerated over the past year and
it supported us back at home whilst we
dealt with ongoing travel restrictions in
the latter half of 2021.

All the people

“
I’ve spoken to
have made plans
to travel in 2023
or the year after.”

ARO: What is your approach to
e-commerce and bricks-and-mortar, and
where do you see in-store shopping going
in 2023?
RL: We launched as an online-only
business, but our retail stores have
played a key role in our growth. We’ve
found that customers love being able
to interact with the products, feel the
multi-stop handle and the SilentMove
wheels, and meet our amazing team.

We opened our first store outside of

Victoria in September 2022 – our new
space at The Galeries. We have more
website visitors from Sydney than any
other city in the world, so it was only
natural that we would open a retail store
there. Since then, we have seen hundreds
of new and returning customers come
through the doors and have been thrilled
to bring them the July experience in
person.

We’ve certainly seen an increase in the

number of customers shopping in person,
across all age groups and demographics.
Our bricks-and-mortar stores have been
extremely profitable and we plan to open
more across Australia and internationally
in the future.


_Australian Retail Outlook: What was_
July’s performance like in 2022?
Richard Li: 2022 was an incredible year
for us. Following two years of lockdowns
and travel restrictions, it’s been so
exciting to see how much we’ve grown in
the past 12 months. During Covid-19, we
lost over 95 per cent of our revenue.

Since then, we’ve grown enormously,

over 640 per cent in FY22, and are now
doing more than 10 times the pre-Covid
revenue. In 2022, we launched nine new
products, opened additional retail stores
across Melbourne and our first in Sydney,
held an in-person press event in the US
and achieved our best day of sales ever
in November.

ARO: Looking back, are there any high
and low points that stand out to you?
RL: After the past two years with Covid,
it’s hard to see anything from 2022
as a low point – it was a fantastic year.
The resurgence of travel has driven
our growth to unprecedented levels
and we’re reaching new heights every
day. We’ve grown the team, opened
new stores and repeatedly smashed
sales targets.

The problems we have are great, as

they come from growth, but they’re still
problems. Notably, we’ve had to expand
the team to meet the demands of our
growing business, and that’s been a
challenge in the current market. In our
retail stores, we’ve even been flying
Sydney team members down here to
Melbourne for retail shifts. We’re proud
to have an even bigger team now that is
agile, dynamic and solutions focused. We
can’t wait to see what this new cohort at
July achieves.

A highlight from 2022 was our

partnership with the Olympics and
Commonwealth Games. It’s been a huge
achievement and an honour for our
business to provide July cases to Aussie
athletes representing our country across
the globe. We’re just four years old, so
this partnership felt like a coming-of-age
moment for us.

ARO: How did you adapt the business to
get through the pandemic?
RL: Covid was incredibly hard for us.
In early 2020, we had just opened our
first retail store at QV in Melbourne and
had plans to open more, and we had
countless products coming down the
pipeline. We were feeling so good about
the year ahead, until March, when it all


ARO: How do you think the cost of living
and other economic challenges will
affect July in 2023?
RL: We use publicly available airline
booking data to predict how busy we
anticipate being, and currently the
data is showing that Australians will be
travelling extensively this year. The way
people travel is constantly changing and
evolving, but excitement and exploration
is truly a part of our DNA as Aussies.

We don’t think the increases in cost

of living will affect July’s performance in
2023, because people were not allowed
to travel for the two Covid years. All the
people I’ve spoken to have made plans to
travel in 2023 or the year after.

ARO: How do you plan to expand the
business in 2023?
RL: Global expansion is an important
part of July’s strategy and in June 2023,
we’re planning to enter the European
and UK markets [online]. We don’t have
international retail stores just yet, but
they’re certainly in our plans.

Any stores that we open across

Australia and internationally will have
the same look and feel as our current
spaces. It’s important to us to maintain
the essence of the July brand as we
move to a global stage.

ARO: Do you expect to face any major
challenges in 2023, and if so, how will
you navigate them?
RL: We predict that further international
expansion will be our biggest challenge in
2023. Learning new markets and making
a splash in some of the most competitive
commercial settings worldwide won’t
be easy, but we’re really excited for the
challenge. We’ll engage with experts we
can learn from and spend time on the
ground wherever possible.

Additionally, the international

difficulties with supply chains have
been well documented, but they are
an ongoing issue. We’re predicting that
procuring stock may be a concern, so
we’re planning and ordering much earlier
than we have previously.

ARO: Are there any other goals or future
plans that you’d like to share?
RL: We want to open more stores across
Australia and keep developing great
products that our customers love. Our
mission is to become an iconic Aussie
brand and export – and we’re well on our
way to achieving that goal.


-----

##### Get Ship Done.


-----

R E T A I L P R O F I L E S

Dan Murphy’s sees

plenty to toast in 2023

The economy might be slowing, but the alcohol retailer’s MD

says an omnichannel strategy, premium sales and growth in

low- and no-alcohol will buoy a strong year.

By Joshua Gliddon


IT TURNS OUT DAN MURPHY WAS A REAL
person and not just a corporate avatar
designed to make customers feel they’re
buying local when, in fact, they’re getting
their alcohol from one of Australia’s
largest liquor retailers. Endeavour Group
was previously part of Woolworths and
subsequently spun off and listed (along
with BWS, and hotel and gambling
assets) on the Australian Securities
Exchange in 2021.

Murphy opened his first bottle shop in

1952 in Chapel Street, Prahran, Victoria,
and differentiated the business by
offering a guarantee to beat competitors’


prices. He was also a winemaker and
journalist who founded the first wine
club in Australia.

Although he eventually expanded

to five stores in Victoria, his methods
were controversial, with claims he
achieved his low prices by avoiding sales
tax (there is no suggestion Endeavour
Group uses this tactic). Murphy sold his
business to Woolworths in 1998, and
the company has expanded its footprint
to 262 stores right across Australia. It
also has a significant online presence,
claiming 50 per cent of all online
Australian liquor sales.


Economic headwinds don’t worry
Dan Murphy’s
Dan Murphy’s managing director Agi
Pfeiffer-Smith said the retailer hasn’t
seen any evidence of customers
choosing cheaper drinks, despite the
slowing economy and poor outlook for
economic activity in 2023.

“We haven’t seen any indication of

customers trading down when it comes
to the products they shop for with us,”
Pfeiffer-Smith said.

Pfeiffer-Smith stepped into the MD job

in July 2022, shifting across from a role
as Endeavour Group’s chief strategy ►


-----

R E T A I L P R O F I L E S

picking up a bottle. [This is why] we are
focusing on format innovation to meet
the changing needs of customers.”

We also saw

“
our biggest week
for zero-alcohol
drinks during
Cyber Week.”

Low- and no-alcohol, premium products
A Brewers Association of Australia
budget submission states that the beer
industry is in decline. Beer consumption
has fallen almost 15 per cent in the
last decade. The submission also notes
Australia has the fourth-highest beer tax
in the industrialised world.

Pfeiffer-Smith did not directly address

the decline in beer sales and its effect
on Dan Murphy’s; however, she did note
there is a great opportunity for all drinks
categories, including beer, to innovate to
meet changing customer needs.

Dan Murphy’s has also observed a

trend towards customers wanting
to try new products, with 40 per cent
of Endeavour’s retail sales coming
from categories that did not exist eight
years ago.

One of the innovations she pointed

to is the introduction of fruity beer,
which is characterised by low bitterness
and a sweet, dominant fruit flavour
that is stronger on the palate than most
craft beers.

“[This] overcomes the flavour barrier,

that beer is perceived as bitter by some


officer. She started her career with
Boston Consulting Group in 1998, and
has previously worked with Wesfarmers
and David Jones.

The company makes a big play

on its lowest liquor price guarantee
and reviews prices every day to stay
competitive, using automatically updated
electronic price tags with an estimated
10-year battery life.

Pfeiffer-Smith said this concept was

designed to “break the compromise
between value and discovery for [our]
customers…because everyone deserves
to drink better, even in more difficult
economic times”.

“We feel confident that [this] year

we can help customers find drinks they
love, no matter what their budget is,”
Pfeiffer-Smith said, adding Dan Murphy’s
extensive portfolio means there’s a
product for every budget and every
occasion.

Growth in 2023
Omnichannel is a big focus for this year,
along with the My Dan’s membership
program, digital offerings and a drinksfocused publication, Dan’s Daily.

But it’s omnichannel getting the

bulk of the company’s attention. Dan
Murphy’s is investing in both the online
and offline consumer experience. “Digital
channels have become the new front
door to Dan Murphy’s,” Pfeiffer-Smith
said. “This means for the majority of our
customers, the first interaction they have
with us is through our app or website.”

Customers are going online to

research products before heading
in-store to buy, or they are going totally
online, getting their alcohol delivered to
their front door.

“In the future, we believe customers

will still want to visit physical stores,
but they will do so for experiences and
to engage with others, rather than just


consumers, [and it] allows us to engage
with a whole new customer base.”

The 2021 IWSR Drinks Market

Analysis No- and Low-Alcohol
Strategic Study states that the volume
of these categories in Australia
increased by 2.9 per cent in 2020.
Overall, the no- and low-alcohol market
outperformed regular alcohol, which
registered a volume decline of 1.4 per
cent over the year.

Dan Murphy’s has also noticed

this trend, with Pfeiffer-Smith saying
Australians are generally committed to
“drinking better”, be it at the premium
end of the market or in the low- and
no-alcohol segment.

“We offer Australia’s biggest range

of no-alcohol options,” she said. “We
also saw our biggest ever week for
zero-alcohol drinks during Cyber Week,
which goes to show this category is
growing in popularity.”

Giving back, sustainability, and
local sourcing
Pfeiffer-Smith said Dan Murphy’s is
focused on working with local suppliers,
meaning the shelf mix differs depending
on where the store is located. A store in
one area might stock products from
local brewers or distillers, which might
not be available at another store in a
different location.

Tasmania exemplifies this – local

winemakers and distillers there are
represented on Dan Murphy’s shelves.

Dan Murphy’s has also partnered with

GIVIT, raising $1.2 million for people in
need in conjunction with its customers.
“We are passionate about leaving a
positive imprint in all the communities
we are part of,” Pfeiffer-Smith said.

Sustainability also hasn’t been

forgotten, with 20 per cent of all stores
having solar panels and more panel rollouts planned this year.


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R E T A I L P R O F I L E S


For TerryWhite

Chemmart, pharmacy

means more in 2023

The scope of practice in the communities the chain serves is

now broader than ever, and executive GM Nick Munroe says the

business is ready to meet this challenge.

By Dean Blake


_Australian Retail Outlook: What were_
some of the highlights of 2022 for
TerryWhite Chemmart?
Nick Munroe: Last year, the TerryWhite
Chemmart (TWC) network focused on
improving the health outcomes of all
patients and our ambition to support a
better future for Australian pharmacy.
This was achieved through greater
access and extended health services,
which now include hearing clinics,
palliative care support, medications by
injection, asthma screening support,
diabetes health checks, vaccinations,


sleep services, and UTI prescriptions
in QLD and soon to be in NSW. This
expanded scope of practice has required
training, investment in even more clinic
rooms, operational changes at a store
level, and CPD for pharmacy teams.

The growth of the TWC network to

more than 500 pharmacies has created
economies of scale in operations and
procurement, the benefits of which have
been passed on to our network.

On the frontline, TerryWhite

Chemmart pharmacies have reoriented
their businesses to manage the influx of


community vaccinations, and
they’ve done this in a resilient,
determined, and compassionate way.
In the last two years, our network
has delivered over two million Covid-19
and flu vaccinations.

ARO: How is the rising cost of living
changing the way your customers
are shopping?
NM: Our national marketing approach
communicates the value of health, with
an ongoing promise of providing real
value every day and three weekly real


-----

R E T A I L P R O F I L E S

gross profit margins through privatelabel product sales in 2022.

Value is more

than a price and “
quality equation.
Consumers are
loyal to brands
that match their
values and service
expectations.”

ARO: Are there any new initiatives
or projects that you’re keen to launch
this year?
NM: This year will bring many
opportunities to pharmacy, as
pharmacists expand their roles in
community health. Our main focus will
be to support our network with tools
to improve the health outcomes of
patients. This will include supporting our
pharmacists in expanding their scope
of practice, and the launch of our new
digital customer platform – myTWC.


deal promotions. We have seen
a strong uplift during our regular
sales events, and our three weekly
promotions are showing a significant
year-on-year increase in customers
looking for great value.

The commitment of our pharmacy

network has led to continued strong
growth, with total sales up 13.9 per cent
and like-for-like sales up 11.9 per cent,
underpinned by script growth of 6.7 per
cent, total, and 4.8 per cent like-for-like.

ARO: Have you had to update your
pricing due to the increased cost of
goods? If so, how do you balance price
vs value in your offering?
NM: At TerryWhite Chemmart, value
is more than just a price and quality
equation. Consumers are loyal to brands
that match their values and service
expectations. Our network partners have
an unrelenting commitment to improving
health in their local communities, and
the reward for this is an increasing
number of people choosing to shop
our pharmacies.

Our private-label brands are ranged

and promoted to provide great value
to customers and improve margin to
our pharmacy owners. With ranging to
suit the pharmacy footprint, and the
industry-leading iHUB ordering system,
our pharmacy teams achieved strong


The increased scope of practice

occurring across the country is a taster
for bigger things to come. As a business,
we are prepared for this shift, and our
pharmacy teams are chomping at the bit.
The changes we’ve made to our clinic
strategy over the last two years lay a
strong foundation for taking advantage of
this industry-wide change.

MyTWC offers the convenience of a

one-stop destination where customers
can manage their health online by
enabling e-scripts and booking pharmacy
services. As we learn more about our
customers’ digital behaviours, we will
continue to evolve this platform.

At TWC, our pharmacists and

pharmacy teams will always be
central to our proposition. Recruitment
has become a major challenge for
pharmacies in recent times, and
we are supporting our network
partners with a suite of services,
including recruitment marketing,
education and intern programs, a
centralised recruitment portal, job ad
placements and a dedicated careers
team to find top-quality pharmacists
and pharmacy teams.

We are also partnering with pharmacy

schools to promote community
pharmacy as a meaningful and rewarding
career option, to secure their long-term
commitment to the industry.


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R E T A I L P R O F I L E S

Salvos Stores:

more than just charity

As the economy
weakens, Australians
will seek out even
more value and
sustainability. These
charity shops invest
in an omnichannel
experience that
provides it all.

By Joshua Gliddon


-----

R E T A I L P R O F I L E S

Online is also critical to Salvos Stores

for logistical and customer service
reasons. Customers will use the internet
to check store locations and opening
hours, as well as the types of donations
being sought. Then they might book a
home collection online, Davis said, or
donate through the online portal.

“For us, it’s about making sure the

experience is seamless across all
channels,” Davis said. “And it’s also about
bringing the typical retail experience to
life in the charitable sector.”

It’s also about

“
bringing the typical
retail experience to
life in the charitable
sector.”

Adding community stores to
the network
The second plank in Salvos Stores’
growth strategy for 2023 is building
out its network by bringing community
charity stores into the fold and
rebranding them within the corporate
format.

There are literally hundreds of non
aligned charity stores in Australia,
and Davis wants to make them part
of Salvos, upgrade their customer
experience, relocate them into higher
traffic areas, and give those community
stores a new brand.

“In corporate-speak we are

essentially acquiring another retailer,”
Davis said. “But in our case, it’s all under
one banner.”

Salvos Stores isn’t the only network of

charity shops. Well-known chains such


as Red Cross and Vinnies also have a
retail representation as a way of raising
funds for their work helping vulnerable
Australians.

But Davis doesn’t see them as

competitors, noting they all share the
same mission. “So in a sense, we are
more like collaborators.”

Which isn’t to say there are no

points of difference between chains.
Customer feedback tells Salvos Stores
its charity shops have a friendlier retail
environment than others, its stores
are well-presented, and their product
quality is generally better. Salvos also
puts a greater emphasis on customer
service, placing it a nose ahead of its
contemporaries, Davis said.

He’s also quick to note Salvos

Stores isn’t visited only by people on
low incomes, such as students, the
unemployed and retirees. Only 5 per
cent of Salvos Stores’ customers shop
there out of necessity, meaning 95 per
cent make a conscious decision to buy
from there for other reasons, including
sustainability.

“When we do our research we find all

types of Australians, from all walks of
life, are engaging with charity stores,”
he said. “And that’s a really encouraging
shift in our market.”

Investment in technology
Effective technology, from supply chain
to warehousing, as well as an easyto-use e-commerce site, are table
stakes for retailers, and Salvos Stores
is no different. Davis said over the next
two years the organisation will make
a significant investment in its retail IT
infrastructure, to support a genuine
omnichannel experience.

This means co-ordinating logistics,

warehouse and donations, along with the
retail front end, under a single, flexible
system. “It’s all about getting the right
product to the right place at the right
time,” Davis explained.

Investing in technology, rolling out

new stores and bringing others under
the corporate umbrella, as well as having
an effective e-commerce strategy, won’t
distract Salvos Stores from its reason
for being, Davis said. Those investments
will simply make it easier for the chain to
carry out its mission, which is to support
Australians in need.

“The fact is, Australia is about to

enter a season when a lot of people who
haven’t done it tough in the past are
going to do so,” he said. “It’s important
for the Salvation Army and other likeminded organisations to do what they
can to support Australians as they go
through the next chapter.

“It’s something that’s a shared

responsibility and we are looking to work
with other partners to make sure we play
our part, particularly over the next 12
months or so.”


THE AUSTRALIAN – AND GLOBAL –
economy look like it’s in for some
heavy weather in 2023. Rising inflation,
stagnating wages and supply-chain
issues will all contribute to Australians
having to tighten their belts over the
next 18 months. In recessionary times,
there’s a flight towards value for money
as consumers seek to make the most
out of their hard-earned dollar.

This is where Salvos Stores comes into

play, CEO Matt Davis said. The 362-strong
network of charity shops, found in all
states and territories, meets a particular
need for affordable consumer goods –
much like the charity sector in general.

“That’s where we really play a key role

for people who are trying to make ends
meet,” Davis said. “But shopping with us
is also a good environmental choice.”

What you might not know about

Salvos Stores is that it has a significant
online presence, with more than 70,000
items listed either on its site or through
an Ebay shopfront. Online represents
the first major plank in the organisation’s
growth strategy in 2023, and it is
seeking to establish e-commerce hubs
in all major capital cities over the next
12 months.

Online to bricks-and-mortar, seamlessly
“Customers in Western economies now
expect a seamless [transition] between
what happens online and what happens
in-store,” Davis explained. “Even in the
charitable sector, this is becoming the
new normal.”

That said, Salvos Stores’ online

offerings are a little different to what a
customer might find when they visit a
physical location. On the web, customers
are searching for name brands and
activity-focused goods like hiking clothes
and boots, as well as fashion labels.

“We also sell small electrical goods

and collectables, but the vast majority of
our online volume is fashion,” he said.


-----

R E T A I L P R O F I L E S

Ebay’s success:

a matter of trust

Through challenges from a tough economy to cyber-security

threats, providing safety for sellers and buyers gives the platform

the edge, MD David Ramadge says.

By Anil Prabha


_Australian Retail Outlook: What are your_
expectations for the year ahead?
David Ramadge: As inflation and interest
rates continue to rise, we are starting to
see these macroeconomic factors affect
the industry.

Value will be a top priority for

consumers throughout 2023 and buyers
will be increasingly savvy about finding
the best savings. In 2022, some retailers
overstocked their products so the start
of 2023 will see retailers selling through
their remaining goods and offering steep
discounts to move merchandise. This


environment of price fluctuations will
create challenges for SME retailers as
they try to stay competitive and navigate
pricing while they sell their excess stock.

We will see pockets of resilience in

categories consumers are passionate
about, such as car parts, luxury
handbags, and sneakers, and we expect
these to grow.

The circular economy will play

an increasingly important role in
2023 as Australians become more
environmentally conscious and Gen Z
will drive the trend. We expect pre

loved to become part of the mainstream
as consumers make more sustainable
purchase decisions.

ARO: Are there any major projects or
initiatives in the works?
DR: Looking ahead, we know that trust
remains crucial to both our buyers and
sellers. We will continue to invest in
trust initiatives, like Ebay’s Authenticity
Guarantee and Money Back Guarantee,
while improving selling tools that will
enhance the experience for buyers and
sellers.


-----

R E T A I L P R O F I L E S


Ebay partners with sellers, it does

not compete with them – we are a
platform for sellers, by sellers. In 2023,
we’re looking at finding more ways to
enhance our connection with the seller
community, enabling people to grow
and scale their businesses with helpful
resources and sharing their inspirational
success stories.

ARO: Are there any potential challenges
on your radar?
DR: Regulators in Australia and around
the world are continuing to focus on
issues like data protection, privacy, and
consumer safety, which is something we
welcome and take extremely seriously.
While any change can complicate
operations, we find that when these
issues emerge, consumers default to
what they know and trust.

With an established presence in the

Australian market for over 20 years, Ebay
has built trust, credibility and expertise
in the market and is committed to
growing economic opportunity for
B2B, B2C and consumer-to-consumer
business alike. We will continue to
invest and innovate to ensure buyers
and sellers can transact with confidence
online and drive steady innovation.

ARO: Looking back on 2022, what were
some of the biggest obstacles
you faced?
DR: In 2022, we saw that trust continued
to be important for our customers and
that shoppers were engaging more


with initiatives like Ebay’s Authenticity
Guarantee, available on sneakers and
luxury handbags. Trust, along with
safety and protection for our buyers and
sellers, will remain paramount.

We will see

pockets of resilience

“

in categories
consumers are
passionate about
such as car parts,
luxury handbags, and
sneakers, and we
expect these to grow.”

Over the last two years, Ebay Australia

has been working hard to become the
platform of choice for sellers, designed
by sellers. To better connect with our
seller community, we co-created a
seller advisory panel, which enables
us to get direct, regular feedback from
the community so we can continue to
enhance the seller experience. Our seller
Net Promoter Score has jumped 20
points in just a year. While we’re pleased
with what the team has achieved in


partnership with the panel, we can’t wait
to see how we can continue to grow
our partnership with our sellers and
continue showing up in better ways for
our seller community.

ARO: What was the biggest highlight of
2022 for Ebay?
DR: In addition to the launch of our
Authenticity Guarantee service on
sneakers and handbags, we also
launched a Fitment Guarantee for car
parts, to help Australians find and buy
parts compatible with their car.

In the current climate of increasing

scams and fear about safety online,
the most important things we continue
to invest in are safety, protection,
and trust. If you buy or sell on Ebay, you
will be protected with Ebay’s Money
Back Guarantee.

Our protection for both our buyers

and sellers makes Ebay the perfect
place to buy and sell things people love
and are passionate about.

ARO: Businesses are preparing for a
possible recession, rising inflation and
supply-chain bottlenecks in 2023. How
do you plan to insulate Ebay from all
these factors?
DR: Ebay offers everything from new,
to pre-loved and refurbished, and that
diversification is extremely valuable in
times of economic shifts. Having that
full spectrum of product offerings puts
Ebay in a good position to cater to the
changing demands of consumers.


-----

R E T A I L P R O F I L E

General Pants:

bigger britches to fill

The youth clothing retailer has plans for multichannel growth,

overseas expansion, and an internal digital transformation in 2023.

By Joshua Gliddon


-----

R E T A I L P R O F I L E

comes down to finding the right sites
and agreeing to acceptable commercial
terms. “We have a strong pipeline of
identified sites that are either under
negotiation or have been agreed upon
and will be opening in the coming
months,” he explained.

The company also sees potential

in building its in-house brands as
direct-to-consumer and third-party
wholesale brands, both domestically and
internationally.

Facioni thinks these brands can go into

the US and said General Pants is testing
the waters in this new market through
a combination of online direct-toconsumer and wholesale.

“Childrenswear is [also] something

we’re looking at and we have recently
acquired a small childrenswear brand
to help with that strategy,” Facioni said.
He’s also looking at adjacent categories,
including accessories, to help General
Pants achieve its growth goals.

Online has a solid ramp
Online represents a significant growth
opportunity for General Pants, as the
channel currently accounts for only
around a quarter of the brand’s sales.

Like many retailers, General Pants

is building a multichannel strategy
encompassing in-store and internet sales
and Facioni called this mix critical to
business success. “They’re clearly both


RICHARD FACIONI, FOUNDER AND CEO
of ACTA Capital, which counts Alquemie
Group in its portfolio, isn’t alone in
thinking the economy is facing a fair bit
of uncertainty in 2023. Alquemie Group
is the holding company for Lego Certified
Stores, SurfStitch and more – including
long-standing youth-focused clothing
retailer General Pants.

“We’re going to see a slowing of the

economy and while I believe we’ll avoid a
hard landing, everyone’s concerned about
what that means,” Facioni said.

He expects the impact to be different

across consumer groups, but he’s
confident it won’t affect the target
General Pants customer group too much,
saying they tend to be mortgage-free
and fully employed. “Nevertheless, there
will be an impact and we’re looking at
what we can do that’s within our control
to mitigate the effects [of the slowing
economy],” he explained.

Growth in 2023
Despite the headwinds, General Pants
is focused on expanding its number of
stores this year, with 60 already in place
across Australia and New Zealand. Facioni
said General Pants was “underpenetrated
in a number of key markets” and noted
online sales tend to follow store growth.

He added that the organisation now

has a store format it’s happy with and
one that is easily rolled out. But it all


important and we don’t think of them as
separate channels,” he said.

Multichannel is essential to the

General Pants offering because it allows
customers to shop when, how, and where
they want. It also informs in-store buying,
as the company has observed customers
will research products online before
purchasing them in a store.

“Stores are also important for

online fulfilment, through click-andcollect or ship from store,” he said.
And social is also a key plank for
revenue growth and transactions for the
company’s target customers.

General

“Pants is focused
on expanding its
number of stores.”

Digital transformation and business
collaboration
To grow its online and social channels,
General Pants is undertaking a digital
transformation, re-platforming from
a legacy system to a cloud-based
solution. Along with this roll-out, the
company is introducing a new ERP
system fully integrated with online to
create a seamless customer interface
across channels. These initiatives will
make General Pants a better functioning
business, he says, while also doubling
down on its investment in both its
people and its digital team.

This re-platforming isn’t limited to

General Pants. It’s a company-wide
roll-out for Alquemie Group, and all
member companies will reap the
benefits, Facioni said.

“We also see continued store

growth, and online growth, for our Lego
Certified stores and our Ginger & Smart
businesses.” The group is also launching
new businesses in 2023 to further drive
growth, including National Geographic
Apparel in partnership with Disney.
“We are also continuing to explore
collaboration opportunities across our
businesses,” he said.

Hopes for 2023
Facioni says after the events of the last
few years, the community is hoping for
an uneventful, benign 2023.

But that doesn’t negate the many

headwinds Australia and the economy are
facing this year, including inflation, the
war in Ukraine and the ongoing Covid-19
situation, which just doesn’t seem to be
going away.

“We need to stay on our toes,” Facioni

said. “I think a return to some sort of
normality would be on the top of my
2023 wish list.”


-----

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R E T A I L P R O F I L E

Single-minded about

single-use plastics

Personal-care brand Baresop has big plans for expansion, but

it’s all within the context of an ambitious plan to cut landfill

and bring water to places that need it.

By Heather McIlvaine


_Australian Retail Outlook: What’s the_
idea behind Baresop and what prompted
you to start it?
Prisca Ongaonga-Daehn: A few things
came together and compounded my
journey to the Baresop concept, which is
to provide a solution that makes it easy
for everyone to create change without
compromising their everyday lifestyle.

I had just returned to Australia

after living in Southeast Asia, where l
witnessed first-hand how much singleuse plastic was immersed in our everyday
lives. I also have an outspoken daughter
whose main wish in life is to be able to
find a solution to cleaning the Pacific
Ocean Garbage Patch. Wanting to own
the narrative and do the bit we could
to be part of the solution to this big
problem, we went on a journey to shift


our consumption habits.

Whilst it was easy to find solutions

for the kitchen space, it was a challenge
to find solutions for the bathroom.
Research on how much waste we were
creating from personal-care products
– along with the difficulty we had
finding an easy, convenient solution
that was fully closed loop and not
greenwashing – made me feel that I had
a responsibility to create the solution I
wanted and bring the community along
with me to generate positive change.

ARO: What have been some of the
biggest highlights of your growth
journey so far?
POD: We’ve made very quick progress
within a very short time, further
solidifying our conviction that our


purpose is valid. Here are a few
examples.

-  Patenting our unique active

ingredients formulation

-  Building a loyal community that is

engaged with why we exist

-  Closing a successful SAFE note seed

raise in 2022

-  Eliminating approximately half a tonne

of carbon emissions

-  Bringing onboard a strong

management team, including former
executives at L’Oréal and Jurlique and
the ex-founder of Baby Bunting

-  Expanding into retail

ARO: What are your top priorities for the
business in 2023?
POD: We want to expand our offering ►


-----

R E T A I L P R O F I L E

modern lifestyle, and relevant to the
present time.

Last but not least is purpose, how do

we ensure that our solutions are having
a positive impact on our planet and our
shared humanity?

ARO: Sustainability is clearly at the
heart of your business. Do you have any
tips or advice for brands that are at the
beginning of their sustainability journey
about how to ensure it is more than just
a buzzword?
POD: We realised early on that the only
way we were going to know if or how we
were creating change and truly making
an impact was by having an external
audit on our waste, such as shipping and
supply chain, and then offsetting those.

Here are some ways businesses can

make sure their sustainability goals are
more than just talk:

1. Set goals that are specific, measurable,

attainable and time bound (SMART)
This will help you track metrics that
are impactful and meaningful.

2. If you can, build your revenue and

link it to your sustainability goals,
this will help you avoid being another
greenwashing sustainability brand.

3. Have a third party regularly audit

the waste you’re generating (carbon,
plastic and other types) and offset it.


to service more people, which will move

us closer to our mission of eliminating
1 billion single-use plastic bottles from
landfill by 2035. This equates to 50,000
tons of CO2 avoided and 600,000
litres of water conserved. Each litre of
water we conserve, we plan to make
accessible to communities that are
running out of safe and clean water.
Because without water there is no life.
We also aim to increase our distribution,
expand into the China market, and
release innovative, waste-free personalcare products that challenge how people
see the sustainability of the personalcare category.

ARO: What are the biggest challenges you
expect to face in 2023, and how do you
plan to address them?
POD: With increasing demand for the
Baresop concept across markets, our
biggest challenge is ensuring that we
have a sustainability-friendly supply
chain as we establish large retail partners
in other markets, like the US and China.
Does this mean we need to set up
manufacturing closer to these markets?
What does that look like in terms of
logistics and capital?

The other piece is how we keep

pushing the boundaries and challenging
ourselves to be a market leader in
innovating waste-free personal-care
products that are focused on the key
user experience, empathetic to the


ARO: Longer term, what’s your
overarching vision for Baresop? Where
would you like to see the brand in the
next three to five years?
POD: We want to realise our vision of
eliminating 1 billion single-use plastic
bottles from landfill by 2035. Positive
impact is one of the key factors of
why we exist and came to be. From
2023, we plan to spend a lot more
time working with local grassroot
communities to create in-person impact
for our shared humanity and our planet.
Watch this space.


Our biggest

challenge is ensuring “
that we have a
sustainability-friendly
supply chain.”


-----

**Read the study**


-----

2023 Consumer Trends Index

**Explore global consumer attitudes and trends in personalisation, privacy,**

**messaging, advertising, brand loyalty and the rising cost of living.**

Did you know in Australia?

55% 47%


**Email reigns supreme for the channel consumers**

**purchase from most (55%) followed by social media**

**advertisements (44%) and social media posts (37%)**

52%

**When it comes to brand communications, the**

**single most frustrating experience for consumers**

**is receiving irrelevant content and offers**


**Consumers are doing more research this year than**

**last, with 47% of them taking to the web to discover**

**whether products meet their needs before purchasing**

41%

**In the last 12 months, 41% of consumers have used**

**an ad blocker – meaning that all of that ad spend is**

**less effective than years past**


**Discover the trends that will impact your bottom line in the coming**

**year, download the 2023 Digital Consumer Trends Index here:**


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