The changing shape of retail

Rob Scott

11 minute read

Last month, successful business leader, Olympic rower and ANU College of Business and Economics (CBE) alumnus, Rob Scott, presented at a College event about the ongoing challenges faced by the retail industry. 

As Managing Director and Chief Executive Officer (CEO) of Wesfarmers, he discussed current and future market trends, and answered many questions posed by attendees.

Rob has since provided his responses to several additional enquiries, including some on the topics of business innovation, supply chains, sustainability and advice for aspiring retailers.

What innovations can we expect to see from Wesfarmers? What innovation are you most excited about in the retail industry?

There are many exciting innovations taking place at Wesfarmers and in the retail industry, which is great news for customers. 

At Wesfarmers, our focus on technology is all about delivering better experiences for our customers and improving the efficiency and competitiveness of our business. Our most exciting technology-enabled strategy for 2022 is to develop a market-leading data and digital ecosystem, which will better connect our great brands with the public, deliver better value and experiences to customers, and create new growth opportunities. In the last four years, we have attracted over 400 experts in advanced analytics and digital solutions to our team, and we’re now building our capabilities for the years ahead. We’ve committed to spend around A$100 million to develop the data and digital ecosystem this financial year. 

More broadly in the retail industry, one innovation that we see has a lot of potential for transforming the customer experience is augmented or virtual reality. We are already seeing this at Kmart and Bunnings through our dedicated product apps that allow you to see how our products fit in your home. As the technology continues to evolve and customer take-up increases, this will change the way customers browse, shop, and interact with their favourite brands. 

How do you see data and technology changing the Wesfarmers supply chain and adjacent supply chains?

We see data and technology as a key enabler for retailers to improve their sustainability practices, as it can facilitate greater transparency of supply chains – to the benefit of both the retailer and customer. Technology such as robotics in supply chains can reduce manual handling and improve safety outcomes, while allowing team members to focus on more value-adding roles and customer service. Globally we have seen retailers use technology to improve their products’ traceability and provide quality assurance. Leveraging data in our supply chains will also allow us to become more efficient and ensure that our customers have their favourite products available in store or online when they need them. 

What can the Australian Government do to encourage a thriving Australian retail industry?

We see lots of opportunity for the Government to focus on productivity enhancing reforms to drive growth in not only the Australian retail industry, but the economy overall. After a couple of years in crisis-management mode, we should now be focussing on the policies and reform necessary to create long-term, sustainable economic growth. 

In the retail industry, one area of opportunity is to remove restrictions on retail trading hours, giving consumers the right and convenience to shop where they choose at the time they wish. This will encourage retail trade and level the playing field for Australian retailers coming up against global online players, such as Amazon. Another area is tax reform. State taxes such as payroll tax and stamp duty are some of the most inefficient taxes that penalise businesses such as retail that rely on in-store personnel and physical stores to service customers.

What are some of the most productive ways your businesses have tapped into Australian research organisations to figure out or create potential futures of retail?

At Wesfarmers, we see great value in collaborating with Australia’s world-class research talent. While we deal with a number of organisations, one firm we have multiple touch points with across our business is CSIRO. We see a lot of opportunities to work with CSIRO to reduce our emissions intensity, particularly in our Chemicals, Energy and Fertilisers business. In the retail space, we see opportunities to tap into their ongoing work across data science and artificial intelligence. Our businesses engage with various research organisations around the world, with a focus on different industries.

Are you seeing supply-chain issues leading to an increased cost of goods sold, which will then require increased prices on shelves for consumers? 

Inflationary pressure has emerged in some specific areas of our business, and have been amplified by the COVID-related disruptions of global supply chains. Examples include international container shipping, structural timber, cotton, and some job families such as construction, engineering and technology. More recently, the supply chain challenges have become more localised, driven by various industrial actions and COVID-related restrictions that impact availability of workers in supply chain.

Given the amount of global monetary and fiscal stimulus, and supply side constraints, there is always a risk that inflation may be higher than expected. We are committed to keeping our prices as low as possible in our retail businesses because our customers depend on us for the lowest prices.

Given what you covered around ethical and sustainable suppliers, how do you offer such low prices? 

Wesfarmers has a strong ethical sourcing program that seeks to ensure human rights are understood and respected across our supply chain. In FY21, our ethical-sourcing audit programs covered 2,066 suppliers across our business, and our ~ 800-team members located in key sourcing countries allowed us to continue to conduct supplier visits and audits during COVID. 

In our view, it is wrong to assume that a low-price product is not sustainable (and conversely that higher-priced items are more sustainable). This is demonstrated by our strong performance in the 2021 Fashion Transparency Index, a global ranking of 250 brands that takes into account human rights, environmental policies, and supply chain operations. Kmart and Target were the highest ranking brands in Australia and came in ahead of reputable (and expensive) global brands such as Patagonia.

Businesses such as Kmart can offer lower prices because they design and source their products directly in very large volumes and have end-to-end control of over 80 per cent of the products they sell. This helps us keep prices low and deliver more sustainable outcomes through the supply chain.

What change towards sustainability have you found most rewarding to work towards, for both you and your team?  

I am extremely proud of all the work we are doing across our divisions addressing multiple sustainability issues. Our work covers ethical sourcing and human rights, advancing reconciliation, circular economy strategies, reducing waste, packaging and plastic, and many other issues. We see operating sustainability as not only good for customers, suppliers, our team members, and the environment – it is also just good business.

I find that our scale gives us the ability to drive change at an industry level. I see this in our international sourcing processes within Kmart, our engagement with communities in Bunnings, and the leading role our chemicals business is playing in reducing emissions intensity in ammonia nitrate production.

If I was to pick one area, I am most proud of the fact we have created thousands of jobs for indigenous Australians and we now have employment parity for Aboriginal and Torres Strait Islanders across Wesfarmers, representing over three per cent of our Australian workforce.

Is being CEO fun? Can you switch off on the weekend? 

I find my job fun, most of the time! To operate at your best, you have to find time to switch off but as CEO, you can’t always control the time to do so. Generally, I feel I can find enough time to do things like exercise and spend time with my family, which is most important.

What advice would you give to young and aspiring retailers who have an idea and drive, but are not quite sure where to start? 

If you want to build a career in retail, there is no substitute for getting a job on the shop floor. This gives you the most important insight into the industry, with direct exposure to customers. Then I would encourage you to be eager to learn and focus on your own personal development. Work for a company that provides you with scope to develop and that you are proud to work for.

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