Bold Moves

Five radical changes to thrive in a changing retail environment

Operating on a world stage

The Australian retail sector is set to be shaken up in a way it’s never been before. The competition will become even fiercer and, in many cases brands will find they are simply unable to compete.

Australian retailers have always faced tough competition with retail brands fighting head-to-head. As globalisation gains momentum, the Australian market is increasingly attractive to international retailers, many of whom see Australia as the 'last frontier'.

It’s time for Australian retailers to tackle the threat head on. What are you doing to combat this? You need to be bold if you want to be competitive.

PwC have developed five bold moves Australian retailers can adopt immediately not only to survive, but to thrive.

Download the full report

Bold Move #1 - Start a price war and beat global players at their own game

According to PwC’s 2016 Total retail survey, price still motivates 40 per cent of customers. Now that consumers can shop anywhere, anytime with price transparency, price is even more of a motivator.

But it’s not about dropping prices across the board. You need to be strategic about the areas of your business where you face the most serious competition in order to start a price war you can win. Focus on value perception – it's not necessarily about being cheaper on every item.

Where to start …

  • Understand your business so you can choose your battles in a price war. 
  • For premium brands, look at innovative pricing models to change the perception of price positioning.

Bold Move #2 - Cut your range by 25 per cent

Use customer demand and insights to reduce your range by one-quarter then negotiate better pricing for the remaining products.

Where to start …

  • Too much inventory bears too much cost, so differentiate your brand by streamlining your range.
  • Apply a 'good, better, best' strategy to cut costs without alienating customers.
  • Be driven by customer data when it comes to reviewing your range.

Bold Move #3 - Refocus on core activities to reduce operating costs

Non-core activities can soak up precious funds and resources that could be better invested in product innovation or omnichannel experiences – initiatives that will reap immediate rewards.

Any non-core aspect of your business should be assessed. What are you doing that is peripheral to serving the customer? Can this be outsourced or, better still, eliminated?

Where to start …

  • Focus on core activities and stop doing the things that don't pay their way.
  • It's not just about operating costs – outsource non-core tasks that can't be eliminated to increase efficiency.
  • Move away from traditional marketing methods and embrace digital marketing to lower costs and improve results.

Bold Move #4 - Shut down 25 per cent of your store network

Identifying the worst performing stores in your network and closing these down enables you to invest more money and resources in digital.

The store network of the future has flagship store locations with key satellites that offer an omnichannel experience, ensuring customers can shop anywhere, anytime, any way they want.

Where to start …

  • Reduce your 'bricks and mortar' footprint to increase profitability and customer satisfaction.
  • Invest in flagship stores rather than a national network that is spread too thin.
  • Invest in digital and specifically achieving a seamless omnichannel experience to enable customers to choose how, when and where they shop.

Bold Move #5 - Join forces with your rivals by partnering with a 'frenemy'

Practically speaking, a retailer can’t afford to invest in every customer-centric capability at the one time. Instead, identifying gaps in the customer experience – across anything from logistics and fulfilment to personalisation – and collaborate with a competitor or technology provider to address this gap, even if this goes against conventional retail wisdom.

If it’s cost-prohibitive to invest in a new technology that enhances service or customer experience, then collaborate with a potential competitor. In the changing world of retail, transparency can be an asset and collaboration will become the new normal.

Where to start …

  • Collaboration is the new normal. Form strategic partnerships to reach a larger customer base.

Where to from here?

Digital is one of the most important tools for any retailer because although 90 per cent of sales in Australia still go through a store, approximately 80 per cent of those sales start with an online experience. Digital is also shifting power from retailers to consumers.

This means a truly differentiated and unique product and customer experience is needed to improve a retailer’s brand. Following the five bold actions will help you to provide this differentiated experience and create ‘brand advocates’. While the five recommendations may be radical, it is clear that a 'business as usual' approach is not sustainable in the face of an unprecedented global onslaught on the Australian retail marketplace. That is why we believe local operators must take a bold approach to meet the new competition head on.

Retail Trends 2017: What is digital’s impact on the retail sector? Hear more from Paul Zahra.


Playback of this video is not currently available

Contact us

Chris Paxton

Partner, PwC Australia

Tel: +61 2 8266 2903

Daniel Rosenberg

Retail & Consumer Leader, Financial Advisory, PwC Australia

Tel: +61 3 8603 3886

Contact us

PwC Australia

General enquiries, PwC Australia

Tel: +61 2 8266 0000

Follow PwC Australia