The arrival of Woolworths South Africa will disrupt the retail sector – for the better

The arrival of Woolworths South Africa will disrupt the retail sector – for the better

The imminent arrival of a new retailer, well owner, into Australia in the form of South Africa’s Woolworths, should be welcomed. I don’t mean that in any pejorative way, just that each time a new set of eyes looks at our retail environment a few things happen.

We adopt new techniques and approaches to retailing, marketing, sourcing and distribution from other parts of the world. On the back of this, generally speaking, the prices of goods sold in these stores and websites become lower and the choice for shoppers wider. And these new owners, or leaders in retail, generally speaking, generate better profits and reinvest those profits in growth. They actually create more jobs over the medium term.

So what will Woolworths SA bring to DJs AU? Well many of you have heard me use the term “category creep” in relation to US and UK retailing. A situation where the retailing space committed to just grocery shopping expands to offer prescription medication, or alcohol, or clothing.  Or where a fuel retailer expands into snacks and coffee, then flowers, fresh food, dry cleaning and alcohol. All based on the prevailing, and impermanent zoning and retailing laws in each state or country.

Well Woolworths in SA, and via its franchises in other countries, has done a good job of getting the shopper into its stores with good clothing product ranges, price and service and then over time offering the option of shopping for food too.

Many retail observers note the link between Woolworth SA and the UK’s Marks & Spencer. M&S turned its ailing pure clothing business around a decade or two ago with the introduction of well priced, own brand, high quality food.

M&S still does it well today. Stand in a queue on any given evening in an M&S store and listen to men and women talking on their mobile phones to their significant other to ascertain which wine or dessert they want with their “10 pound” two course meal for two. That’s 10 pounds (16 dollars), including a bottle of wine.

For me the key thing about the arrival of Woolies SA (we’ll need a new name you know) is that it will positively disrupt not just the department store end of Australian retailing, but the food, alcohol and homewares sectors too. Granted not by as much, but it will do things differently in order to grow more profitably than DJs has done for some time. And yes. I sold my DJs shares last week. Something had to change.

Kevin Moore is a retail expert and the chairman of Crossmark Asia-Pacific Holdings.


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