RETAIL INSIGHT PAPER. Quarterly Outlook : Spring 2015

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1 RETAIL INSIGHT PAPER Quarterly Outlook : Spring 2015

2 This paper provides a high level insight into the current retail markets in Australia and the United Kingdom (UK), with a review of the American market and its opportunities for employees, businesses and consumers. Quarterly Outlook : Spring

3 The market split in Australia s grocery market still shows a relative duopoly and the continued rise of the discounter. Snapshot of Retail in Australia Quarterly Outlook : Spring Woolworths and Wesfarmers have become two of the top seven retailers globally by net profiles according to Bloomberg 1, reflecting the relative duopoly in the Australian grocery market. Four companies take up 95% of the market, with Woolworths and Coles sharing 72-74%, and Aldi and IGA taking a combined 20-22%. By way of comparison, 70% of the UK grocery market is shared between five major retailers. China s top five retailers share only 38% of their market and the USA s largest player only takes 25% market share. 2 Despite this split, previous competition rulings have said the Australian sector is workably competitive and not unduly concentrated. 3 The Australian grocery market grew 7% in the last year, but Woolworths share of it has fallen by 1.5%. 4 Recent industry analysis showed their grocery prices have remained relatively flat, while Coles prices have fallen more sharply. Product prices of private labels at both supermarkets fell by 6.1% in the second quarter, though branded products fell by 5.1% at Coles compared to 2.6% at Woolworths 5. Woolworths sales growth has now failed to match that of its competitor for 21 consecutive quarters as Coles goes from strength to strength, seeing a 5.3% increase in food and liquor sales according to Wesfarmers full year results. In June Coles was ordered to pay a $12 million refund to some suppliers, following an independent review of two proceedings in 2014, in which the Federal Court of Australia found that Coles has engaged in unconscionable conduct when dealing with some suppliers in Woolworths is making 1,200 roles redundant due to a change in their business practices, as well as selling property assets at a loss, paying the one off cost of $270 million to streamline their operations further. This includes the sale of ten premium format Thomas Dux stores due to the associated high operating costs. IGA launched a national initiative in July, price matching everyday items to the large supermarket chains. With Lidl due to enter the market, looking to further increase its current $128 billion in worldwide sales, the size of the grocery market is growing more slowly than the supply side. This means Lidl is sure to take market share from Coles and Woolworths, who are already feeling the pinch as Aldi grows, explains J. Davis, Australian Food News writer 7. Also rumoured to be entering the food retail sector are the South African owners of David Jones, with a premium supermarket offering. Following its announcement of expansion into WA and SA, Aldi has recently released more details of its $750 million investment plan: The SA distribution centre should be taking suppliers inventory from 1 February 2016, to support the 50 stores planned for that state alone. Aldi has also released sales performance data from 2010 to 2013 to demonstrate that it has been paying enough tax, following accusations to the contrary. This new information shows it is generating a pre-tax profit margin of 5.2% and has plenty of scope to invest more in price if required. 8 Aldi currently holds 11% of the NSW, VIC and QLD market share. 9 Discount department stores such as Target, Kmart and Big W, and valuebased retailers like Fantastic Furniture, The Reject Shop and CottonOn are reportedly under threat from two new international competitors entering their markets this year. South African business Mr Price is due to open its first two Australian stores in October selling private label apparel, homewares, footwear and sporting goods. The largest off-price retailer in the USA, TJ Maxx, is aiming to open 100 stores in Australia in the next ten years, leveraging its purchase of Trade Secrets for $108 million. Home improvement retailers have shown strong performance, seeing sales increase by 19.8% in the fourth quarter of the financial year. 10 Specifically, earnings at Bunnings increased 11.1% to $1,088 million on revenue growth of 11.6%. 11 Timber and Hardware enjoyed a 21.9% increase and Masters a 17.7% increase. 12 Elsewhere in the Woolworths portfolio, Big W s sales have dropped by 12% this quarter in stores that have been open for 12 months or longer. 13 In apparel, H&M is building on the success of its 2014 arrival in Melbourne, opening its first store in Perth and a second in VIC, hoping to continue its successful increase in sales, which hit 11% in Q2. Ted Baker has launched its first Australian transactional website and is opening four stores. Conversely American Apparel is closing stores amid falling global sales.

4 British shoppers confidence has not grown in line with the economy and searching for value has become an ingrained customer behaviour. Snapshot of Retail in the UK The UK economy is showing further signs of improvement saw the fastest rate of growth, to 2.6%, since 2007 Unemployment has fallen to 7.3% from the 2011 peak of 8.4% Wages have begun to outpace inflation Disposable income has risen to 10.1%. 14 Despite this, UK consumers still seem to be cautious: Analysts are attributing this behaviour to the desire to balance the budget and an ongoing search for value. 15 It has been suggested British shoppers have become more astute in their spending since economic times were last this strong, and are diverting the money they could spend on groceries into other things as they are yet to see a sustained period of growth in wages: Their confidence has not grown in line with the economy and searching for value has become an ingrained customer behaviour. Acknowledging the importance to customers of more for less, Lidl and Iceland have both made recent moves towards quality over price. Iceland acknowledges that lower prices aren t its differentiator anymore: Their new power of frozen advertising campaign seeks to educate shoppers about the benefits of frozen food, in an effort to combat the 4.4% drop in sales experienced in the year to 27th March. 16 Lidl s new advertising campaign includes blind taste tests to highlight the quality of their products: These ads are moving the debate from cheap and cheerful to value a strong strategic statement. 17 This sentiment was echoed by Asda s CEO Andy Clarke, who recently named quality, service and a community agenda as vital to the supermarkets value equation 18, not just price competitiveness. Crowned Grocer of the Year at The Grocer s Gold Awards in July, Lidl has achieved more than 4 billion in sales and growth of more than 20% in 2014, plus a successful marketing campaign that opened it up to the British public for the first time. 19 Future initiatives for Lidl include more in-store bakeries, the trial of self-checkouts and developing their back office systems to enhance automated ordering. They are said to be considering launching an online Quarterly Outlook : Spring

5 Snapshot of Retail in the UK wine shop, following their 2014 introduction of a premium range which has seen wine sales increase by 38%. This is a departure from Lidl s simple operating model but is not unheard of: Aldi trades wine online in Australia, and Waitrose has a successful wine website. Poundland is due to open 200 new stores in the UK over the next three years, following the purchase of the controlling share by American investment company TPG. The increase will see Poundland operating upward of 500 stores, with 3,700 new employees. The new distribution centre is due for completion in April 2016 and will create 300 new jobs. As part of The Co-Op s strategy to sell off its larger stores (at a rate of per year) and focus on its convenience offering, seven stores have been sold to Marks and Spencer. The premium retailer has purchased the stores as part of its three year plan to open 250 food format stores by March 2017, including approximately 90 this year. Morrisons has announced the 25 million sale of 140 of its M Local convenience stores, in order to concentrate on its supermarket business. The majority of these stores have only been open for two years, as Morrisons sought to catch up with their competitors in the convenience arena. New CEO David Potts attributes the venture s failure to its inability to scale. Sales across Marks and Spencer increased by 1.8% in Q1 2015, with strong performances in food and online. 20 This quarter has seen the retailer release 700 new food lines, including a Taste of Britain range of locally sourced and seasonal products. Additionally, they are rolling out their free convenience service, click and collect, to 100 Simply Food stores in travel and hospital locations. John Lewis, premium department store, has started to charge 2 for their click and collect orders under 30, to make the logistics involved more sustainable. Majestic Wine has scaled back its store expansion plans after it announced a 22.5% 21 drop in full year profits. The return on investment on recently opened stores was unreasonably low and they are considering trialling new store formats, moving away from the warehouse concept. Heralded as the future of retail, 22 Apple Pay was introduced in July to Marks and Spencer, Waitrose, Alliance Boots, Pret a Manger and Spar stores. The contactless card system was launched in the US last year and will be available in 250,000 UK locations, using IPhone 6, iphone 6+ and Apple Watch. Pret a Manger hope it will help them meet their target of completing all till transactions in less than one minute. Quarterly Outlook : Spring

6 Movers and shakers Woolworths CEO Grant O Brien announced his retirement in June, after working in the business for 28 years. The CEO since 2011, O Brien will remain in his position until November to ensure a streamlined handover to his successor. Woolworths are looking externally to fill their top position, both in the UK and the local market, and are reportedly willing to consider those without grocery, or even retail, backgrounds. In the UK, Simon Twigger has moved from his role as MD of Convenience at Sainsbury s to Trading Director at Poundland. Its co-founder Laurence Edwards has left after 40 years, following the sale of his majority stake to TPG. Asda has announced two new VPs in food trading, with Derek Lawlor taking on fresh and Phil Briggs managing grocery. Matt Davies, with previous experience at Halfords, has joined Tesco as the UK and Ireland CEO. Stewart Smith became the new Trading Director at Nisa. At Morrisons, the latest executive to leave since David Potts s arrival is HR Director Emily Lawson. John Dixon, the Head of Clothing at Marks and Spencer, has resigned after 26 years in the business. Dixon started out on the shopfloor and took over clothing and homewares in He is due to be replaced by Head of Food Steve Rowe. Internationally, Matthias Raimund has moved on from his role as CEO of Lidl Germany, being replaced by CEO of Lidl Italy, Daniel Marash. William Patrick O Neill is replacing Jeff Adams at the helm of Tesco in Turkey, further suggesting that the focus of divestment has shifted from Turkey to South Korea. Barnes and Noble booksellers in the US has taken on Sears Canada CEO Ronald Boire, before the company splits into two in August. Quarterly Outlook : Spring

7 A Look Across the Pacific Setting the Scene There has long been a strong link between the UK and Australian retail industries as organisations such as Asda, Waitrose, Tesco, Coles and Woolworths look to each other for private label initiatives, celebrity sponsors, advertising inspiration, supply chain practices and talent acquisition ideas. The UK retail market is mature, highly competitive and is often seen as a breeding ground for innovation. Countdown in New Zealand and Coles in Australia are known to have openly sourced for various roles from British shores as well as their own, right up to their top jobs. Perhaps somewhat overlooked in the hunting ground of Australian retailers though is the US. The US retail market serves a population of million, across a country roughly the size of Australia. American retailers have a huge presence in the UK and Australia, with recognisable brands such as Walmart, Gap, Starbucks, Target and Toys R Us in most large cities. Top level talent is often mobile between the three markets: Greg Foran the current CEO of Walmart is a former executive of Woolworths. Don Stallings from Lowe s in the US was seconded to Masters Home Improvement in Australia, before being replaced by Matt Tyson from B&Q in the UK. Previous Coles CEO Ian McCleod moved from Asda in the UK, to Coles in Australia then to BiL0 in the USA. Mark Ibbotson, COO of Asda, recently moved to parent company Walmart in the US and Lidl Ireland president Brendan Proctor is moving to the US to lead the market entry of Lidl as its president. While this isn t to say American talent is the answer to all Australian retailers hard-to-fill roles, it could be a worthwhile location to consider for those planning international sourcing campaigns. With one third of Americans now in possession of a passport, double the number in 2004, and the continued expansion of e-commerce, why wouldn t outward looking Australian retailers capitalise on the nature of global retail and differentiate themselves from their competition, heading stateside to recruit across the Pacific? What s Happening in the US Retail Market? The unemployment rate in America is in decline, and currently stands at 5.5%. American consumers are responding in kind and starting to spend again but, much like the UK market, value still reigns. Consumers are cautious after the hardship faced since the GFC and now they are spending again, they re doing so in areas that are most important to them. Consumer spending at US department stores has fallen 7.7% since July 2011, as customers are apparently placing less value on clothing and more on cars, housing, healthcare and leisure. 23 Both Macy s and JC Penneys count home improvement and décor as their top performing categories, which have been outperforming the whole retail sector since the first quarter of At the beginning of the year, Forbes projected the trends that US shoppers would see throughout These included retailers wooing shoppers with food 24 as Macy s, Uniqlo and Urban Outfitters add Starbucks, champagne lounges and restaurants to attract customers into their flagship stores and away from online competitors. Retailers exploiting the health and wellbeing trend that started out as a fringe movement of people interested in organic food, yoga and shopping at Whole Foods 25 was also expected in 2015, as they acknowledged the movement was here to stay has apparently not seen any huge new fashion trends akin to the popularity of skinny jeans of 2005 and the coloured pants of 2012, that sent customers running to the shops: Fashion-wise the big seller this year has been athletic, performance based clothing 26, leading many apparel retailers such as Abercrombie and Fitch, American Eagle, Aeropostale, Wet Seal and J Crew to suffer, closing stores and shedding staff. Target is reportedly considering testing a grocery delivery service in the US to complement a broader suite of digital initiatives to roll out over the upcoming year. It has identified grocery as a significant opportunity to expand into, and is planning to stock categories such as coffee, healthy snacks, wine and beer. The brand will also focus on sourcing organic, local and wellness ranges to reflect a shift in consumer preferences. Quarterly Outlook : Spring

8 A Look Across the Pacific Who s Who? Kantar Worldpanel s ranking of the top 100 US retailers is seen as the definitive overview of the industry and can be found below. For those looking to the US to recruit, the unfamiliar names and the geographic spread of retailers can be confusing. Here we focus on a selection of these organisations and where they fit in to the industry, to give a high level insight in to the American retail market. Rank Company 2014 Retail Sales 2014 Stores Rank Company 2014 Retail Sales 2014 Stores Rank Company 2014 Retail Sales 2014 Stores 1 Wal-Mart Stores $343,624,000,000 5, J.C. Penney Co. $12,184,000,000 1, PetSmart $6,073,000,000 1,291 2 The Kroger Co. $103,033,000,000 3, Aldi $11,728,000,000 1, QVC $5,972,000,000 N/A 3 Costco $79,694,000, Bed Bath & Beyond $11,708,000,000 1, Chick-fil-A $5,936,000,000 1,890 4 The Home Depot $74,203,000,000 1, SUPERVALU $11,499,000,000 1, WinCo Foods $5,872,000, Walgreen $72,671,000,000 8, Eleven $11,390,000,000 8, Tractor Supply Co. $5,820,000,000 1,382 6 Target $72,618,000,000 1, Ross Stores $11,032,000,000 1, Barnes & Noble $5,790,000,000 1,364 7 CVS Caremark $67,974,000,000 7, Verizon Wireless $10,959,000,000 7, A&P $5,630,000, Lowe s Companies $54,805,000,000 1, Starbucks $10,604,000,000 12, AVB Brandsource $5,268,000,000 3,018 9 Amazon.com $49,353,000,000 N/A 43 Family Dollar Stores $10,489,000,000 8, Signet Jewelers $5,251,,000,000 2, Safeway $36,330,000,000 1, Bi-Lo $10,362,000, Foot Locker $5,239,000,000 2, Best Buy $35,957,000,000 1, L Brands $10,303,000,000 2, Big Lots $5,177,000,000 1, McDonald s $35,447,000,000 14, Menard $9,689,000, Hudson s Bay $5,174,000, Publix Super Markets $30,560,000,000 1, Trader Joe s $9,388,000, Alimentation $5,167,000,000 4, Apple Store / itunes $28,380,000, Wendy s $8,886,000,000 5, Defense Commissary $4,890,000, Macy s $28,027,000, Burger King Worldwide $8,517,000,000 7, Neiman Marcus $4,823,000, Rite Aid $26,528,000,000 4, Dollar Tree $8,390,000,000 5, Jack in the Box $4,781,000,000 2, Royal Ahold / Ahold USA $25,976,000, Hy-Vee $7,895,000, Ascena Retail Group $4,713,000,000 3, Sears Holdings $25,763,000,000 1, Army / Air Force $7,738,000, Burlington Coat Factory $4,707,000, TJX $22,206,000,000 2, Dunkin Brands Group $7,720,000,000 10, Ikea North America $4,611,000, H-E-B Grocery $19,819,000, Health Mart Systems $7,623,000,000 3, Williams-Sonoma $4,591,000, Walmart s 2014 retail sales were higher than those of the second, third, fourth and fifth ranked companies combined (Kroger, Costco, Home Depot and Walgreens respectively). 21 YUM! Brands $19,727,000,000 17, Albertsons $19,458,000,000 1, Kohl s $19,023,000,000 1, Dollar General $18,910,000,000 11, Delhaize America $17,069,000,000 1, AutoZone $7,523,000,000 4, Toys R Us $7,450,000,000 1, Wegmans Food Market $7,405,000, O Reilly Automotive $7,216,000,000 4, DineEquity $7,137,000,000 3, Save Mart Supermarkets $4,518,000, Panera Bread Company $4,487,000,000 1, Advance Auto Parts $4,379,000,000 4, Michaels Stores $4,277,000,000 1, True Value Co. $4,117,000,000 4, Meijer $15,689,000, Giant Eagle $7,056,000, Domino s Pizza $4,116,000,000 5, WakeFern / ShopRite $14,985,000, Sherwin-Williams $7,047,000,000 3, Belk $4,110,000, Ace Hardware $14,299,000,000 4, Dick s Sporting Goods $6,811,000, Chipotle Mexican Grill $4,069,000,000 1, BJ s Wholesale Club $13,811,000, Staples $6,607,000,000 1, Sonic $4,033,000,000 3, Whole Foods Market $13,642,000, Office Depot $6,587,000,000 1, Stater Bros. Holdings $3,910,000, Doctor s Assoc. / Subway $13,389,000,000 27, Dillard s $6,490,000, Price Chopper $3,890,000, Nordstrom $13,259,000, Good Neighbor $6,414,000,000 3, Dell $3,868,000,000 N/A Quarterly Outlook : Spring Gap $13,071,000,000 2, AT&T Wireless $12,960,000,000 2, Darden Restaurants $6,259,000,000 2, GameStop $6,225,000,000 4,198

9 A Look Across the Pacific #1 WALMART No. of US employees: 1.4 million US CEO: Greg Foran Headquarters: Bentonville, Arkansas Sector: Discount Department and Variety #4 HOME DEPOT No. of employees: 371,000 CEO: Craig Menear Headquarters: Atlanta, Georgia Sector: Home Improvement Walmart s 2014 retail sales were higher than those of the second, third, fourth and fifth ranked companies combined (Kroger, Costco, Home Depot and Walgreens respectively). It is a truth universally acknowledged that a Walmart store can be found within 15 minutes of 90% of the American population. It is well known as a low cost, one stop shop for millions across the USA, stocking items across a huge variety of categories, from food and clothing to homewares and sporting goods such as bikes, fishing gear and, famously, guns. In an insightful barometer of American politics and culture, August 2015 saw Walmart announce that it would stop selling semi-automatic rifles due to a slump in demand, despite FBI figures indicating that gun sales remain strong. Enjoying $343 billion in annual sales and taking 25% share of the grocery market, Walmart has experienced three consecutive quarters of same store sales gains in the US. It also operates in 26 other countries. Walmart s small format Neighbourhood Markets currently account for 10% of its store count and are more conveniently located in urban areas than the hypermarket-style Supercenters, which are so large they tend to be housed on city outskirts. As CEO Greg Foran asserts that the retail giant can t rely on price alone to attract shoppers and wants to focus more on customer experience, retail analysts expect Neighbourhood Markets to be a growth area for Walmart, focusing on their strongest categories of pharmacy, fuel and groceries. Research by Time showed that Walmart store managers are among the highest paid in the country, just behind Costco, and are a diversityfocused employer: 57% of their employees are female. 27 Having come under fire for paying its lower level employees poorly, Walmart increased the minimum wage for thousands of its US workers to $9 per hour in April, in an effort to make stores more appealing to shoppers. However, reports have emerged more recently that some stores are reducing employees hours to counter the associated rise in costs. Home Depot is the world s largest home improvement retailer, and holds 60% of all revenues in the US home improvement industry. Spring is the busiest season for Home Depot and in February 2015 they were looking to hire 80,000 new employees to cope with demand. As the US economy starts to bounce back, Americans are feeling more positive about their homes: House values, mortgage rates and job markets are all improving, and consumers are spending more in this sector. Home Depot has seen a 1.7% increase in spend on the average receipt to $59.42, which is the highest quarterly average since The business experienced a notorious cyber-security hack in April 2014, which has been named the seventh worst data breach on record. 56 million payment card details were stolen across the US and Canada, apparently originating from a stolen password from a vendor. Home Depot introduced new mobile technology, First Phone, earlier this year. Designed specifically for the retail sector, it is designed to enhance the efficiency of the instore experience, enabling customers to check out and locate products faster. Other national players in this sector include Lowes at #8, Homebase, Ace Hardware at #28 and Ikea at #87. Walmart s 2014 retail sales were higher than those of the second, third, fourth and fifth ranked companies combined (Kroger, Costco, Home Depot and Walgreens respectively). Between 1992 and 2009, Home Depot employed 570 Olympic hopefuls in its Olympic Job Opportunity Program. The program provided athletes with benefits and flexibility for training and competition. Quarterly Outlook : Spring

10 A Look Across the Pacific #15 MACY S Well-known for its eponymous annual Thanksgiving Parade in New York and as the owner of Bloomingdales, Macy s is a US household name. In competition with other department stores such as Sears (#18), Nordstrom (#32), JC Penney (#35), Dillards (#65) and Neiman Marcus (#83), Macy s recently accredited its lower quarterly sales to reduced spending by foreign tourists, a fall in consumer spending, their corporate restructure and the growth of off-price retailers such as TJ Maxx. In order to combat the falling sales, Macy s have a number of strategies in play: The first international Macy s store will open in UAE in 2018, in an effort to leverage its name and status outside the US. Macy s Backstage stores are expected to open from Q3 2015, with six outlets planned for New York and New Jersey and each will be run by only team members. One of their key business initiatives, these small offprice stores will sell a combination of merchandise, including clearance items from Macy s stores and specials at 20-80% off original price. Innovation and e-commerce are also expected to assist Macy s in addressing its fall in sales, as they trial more same day deliveries and test smart changing rooms. Changing rooms in California have been fitted with tablets, enabling customers to request clothing items they d like to try on and receive them via chute in to the room. Macy s is also looking to expand its recently acquired Bluemercury beauty chain and is planning to have 76 locations open by the end of 2015 in an effort to compete with JC Penney s Sephora brand. No. of employees: 166,900 CEO: Terry Lundgren Headquarters: Cincinatti, Ohio Sector: Department Stores Macy s Herald Square landmark store has 1.1 million square feet of retail space and is estimated to be worth $3 billion to $4 billion. Macy s is said to be considering spinning off its real estate in to a separate company to raise funds through property. Quarterly Outlook : Spring

11 A Look Across the Pacific #30 WHOLE FOODS MARKET Whole Foods Market (Whole Foods) experienced a record 8% growth in sales to $3.6 billion in the third quarter. Despite this, they have cut their annual forecast to low single digit growth for the year. A new concept store for the brand was announced in June 2015, to target millennial consumers specifically: Whole Foods 365 will be smaller stores initially opening in California, Oregon, Washington and Texas in the latter half of Whole Foods was previously deemed too expensive by this target demographic, and this new concept will focus on the sale of private label products to better align quality with value. In July 2015, Whole Foods was accused by New York City s Department of Consumer Affairs of overcharging its customers. The co-ceos issued an apology and confirmed they have rectified the issues of small percentages of their fresh food being weighed incorrectly. This follows the $800,000 fine levied against Whole Foods in California for overcharging in 2014 by allegedly selling items by the piece not the pound, placing smaller amounts in packages than states and not deducting the weight of the container when weighing items. Whole Foods has been included in Fortune s 100 Best Companies to Work For for 14 years and provides oft-reported benefits, that are voted for by the entire workforce every three years, including: Healthcare coverage for part-time workers Generous stock purchase programs 20% store discount, which increases to 30% if certain health criteria are met A company website for employees to track eating habits and maintain a healthy lifestyle Job dialogues instead of formal performance reviews Town hall-style interviews with employees for new regional presidents Transparency in each employee s earnings An option for a six week sabbatical for every 6,000 hours worked Encouragement and implementation of employees innovative ideas. Key competition in this sector comes from Wegmans (#57), Sprouts Farmers Market, Trader Joes (#47) and large supermarket chains like Aldi (#36) and Publix (#13) who are focusing heavily on their organic, sustainable and health offerings. No. of employees: 90,000 Co-CEOs: Walter E Robb IV and John Mackey Headquarters: Austin, Texas Sector: Health Food Grocery Whole Foods haven t used disposable plastic bags at their checkouts since 2008, keeping an estimated 150 million bags from landfills since then. Quarterly Outlook : Spring

12 A Look Across the Pacific #36 ALDI Aldi is expected to open 650 new stores throughout America in the next four years, taking it to a total of nearly 2, stores are set to open in California in 2016 alone, marking the company s first entry into the state. Aldi s expansion comes as Lidl prepares to enter the US market by 2018, making a $200 million investment in market entry to compete with existing discount operators mainly in the north east of the country. Aldi and Save A Lot (operated by SUPERVALU (#38)) are currently the main large scale operators in this market, which indicates a gap for Lidl to fill, though other discounters such as Dollar General (#24), Family Dollar (#43) and Dollar Tree (#50) are continuing to invest in the grocery area. Lidl s international success and Aldi s strong performance are likely to provoke a competitive response from existing food and discount retailers. Analysts are expecting an intense initial launch from Lidl in a tightly defined geographic area, the appointment of local suppliers and larger stores to cater for an expanded product range. Aldi s retail strategy is achieved through minimal staff, low costs, high efficiency and a quick shopping experience for its customers, realised through: Minimal counter service: Customers use self-checkout facilities No shelving in the stores: Products are wheeled on to the shopfloors on pallets Removing the need to collect shopping trolleys: Customers must return their own to receive their 25c back Low prices, without the confusion of coupons, offers or buy one get one free deals Smaller format stores: Most are between 18,000 and 20,000 square feet Stocking 1,400 SKUs instead of the 30,000 plus SKUs that are typical to most large supermarkets. Aldi has launched a new advertising campaign to broaden its appeal 28 in the US market. The campaign features a new colour scheme, contemporary look, in-store bakeries, extended fresh food space and a new strapline: Simply smarter shopping. No. of employees: 20,000 CEO: Jason Hart Headquarters: Batavia, Illinois Sector: Discount Grocery Aldi Einkauf GmbH & Compagnie ohg is split into two divisions, Aldi Sud (South) and Aldi Nord (North). The chain that is so familiar to US, Australian and British shoppers belongs to Aldi Sud, unlike the chain present in countries such as Belgium, France, Portugal and Spain. Aldi Nord bought Trader Joes in the US in 1979 and still operates under that name. Quarterly Outlook : Spring

13 Harrier Observations As Australian unemployment figures rise, and American and British levels fall, many would perceive heading overseas as a natural reaction for workers seeking new opportunities and job security. However, the niche experience and commercial acumen needed to drive success in retail businesses is not dissipating and is not always easy to find in the Australian market, regardless of economic climate. Therefore bringing talent in from other sectors and countries remains a valid solution to many senior management, category management, merchandising, digital and supply chain recruitment woes. The American, British and European retail markets are often seen to be five years ahead of the Australian. By understanding other countries biggest players, acknowledging the similarities in consumer behaviour and drawing on their experience with emerging trends and technologies, businesses heading to those locations to recruit for their hard-to-fill roles may be positioning themselves ahead of their competitors and at the forefront of their markets. Organisational structure, remuneration, career opportunity, company values, cultural awareness and a huge number of other factors will all play a part in whether a retail worker from America is globally mobile and chooses to join an Australian organisation. And of course there are logistical and financial issues for any company when it comes to sourcing, assessing and relocating overseas candidates. From both sides, cultural integration is always something to seriously consider when recruiting internationally to ensure successful transition and retention. The way in which businesses are run, the difference in benefit structures and the cultural disparities between countries will often affect those relocating. Just because more Americans are in possession of a passport, and retail talent abounds, doesn t mean cultural integration to Australia is always easy or successful. This paper does not suggest that America is the source of all retail talent, or that Australian businesses should recruit overseas, it merely introduces the US market to those who may be considering an overseas search campaign. The UK is so often seen as the hunting ground for retail talent, but the US industry gives an alternative to those looking for a different angle in their search for their new subject matter experts and their next fearless leaders. Quarterly Outlook : Spring

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