Transcript:
Peter Crosby:
Welcome to Unpacking the Digital Shelf, where we explore brand manufacturing in the digital age.
Peter Crosby:
Hey everyone, Peter Crosby from the Digital Shelf Institute. In these challenging times, brands are looking for opportunities for growth and experimentation with rapid feedback. It's possible that for some, that international expansion could be part of that growth plan, and that's why we tapped into the experienced brain of Daniel Roberts, once founder of Australian product content solutions provider, SKUvantage. Now part of Salsify. Dan brings a decade of experience in the retail brand and consumer markets in Australia and New Zealand to outline for Lauren Livak, me and you, the opportunities in the market and how to best take advantage of them.
Peter Crosby:
So, Dan, thank you so much for taking time out of your very early morning and our late in the day to speak with us from the other side of the world. And you know this, but I was in Australia during my sabbatical and what a fantastic country. It was such a joy, particularly because I haven't traveled in a while to be in a new place. It was such a wonderful population. It was just, we had such a great time and it reminded me very much of the people that I've encountered working with you and your team. So I just, I'm so glad you're here to fill us in on that whole-
Daniel Roberts:
Definitely.
Peter Crosby:
Area.
Daniel Roberts:
Thanks Peter. Yeah. And it was great that you enjoyed Australia. It is definitely a unique land for those listeners who've never been there. So I'm glad you enjoyed your first trip.
Peter Crosby:
And it's got its own uniqueness in its e-commerce and digital and commerce landscape. And so I'd love for you to dig in, it's a bit different from our usual focus on North America and AMEA. And so I'd love for you to just walk our listeners through how that shows up.
Daniel Roberts:
Yeah, definitely. As you would've experienced, Australia is a very large country. You really do have to come here to appreciate just how large it is. So for example, Perth is the most isolated city in the world and it can take you five hours just to leave the country if you're flying over land from Sydney up to Singapore, and Australia's about the size of North America with the population of Florida, not including kangaroos. And it's also the most urbanized country in the world as well, about 90% of people actually live in cities, but those cities have a lot of urban sprawl. So Sydney, for example, has a population of five million people and it's actually 50% larger than Massachusetts where you currently are. So, from a geographical point of view, there's an enormous number of differences and challenges that retailers have to face and cope with.
Daniel Roberts:
But then the total economy is only about half that the size of the UK. And it's about one 15th that of the US. So when you combine those geographical challenges and also the size of the economy, you end up with retailers who exist through enormous economies of scale, you need enormous economies of scale in order to operate in the country. And so that has then led to basically a couple of large conglomerate retailers that have operated nationally. But then you have a lot of local retailers who can operate in very local, well defined regional geography, particularly pharmacies and liquor chains. And those local retailers get support through massive wholesalers who are distributing nationally to give them the capability to compete with these large conglomerates and all of this-
Peter Crosby:
When I was in Melbourne, I particularly was struck by the vast number and varieties of businesses that the business districts seem to spread everywhere across Melbourne with all sorts of small chains and then also a lot of individual retail people at a scale and a density that seemed really very Brooklyn-like almost. A lot going on.
Daniel Roberts:
Yeah, it's true. So when you're in Sydney, you would've experienced the fact there's a lot of suburbs or local suburbs that are basically all joined together. It's one great conovation with very discrete suburbs. And when I first arrived here nearly 14 years ago now, the point that I was discussing with my new boss at the time was just how over retailed Australia is. It feels like there is a lot of retail because you have Westfield who I think exists in the US as well, which is actually an Australian company. So you have a lot of shopping centers which need to be filled with retail. And as you say, you have a lot of suburbs in these large conovations. So yeah, there's a lot going on as you would've pointed out.
Peter Crosby:
And so when you put all of this together, a couple of conglomerates, a lot of local retailer chains and massive wholesalers, what does that all add up to in terms of somebody coming in to approach the market?
Daniel Roberts:
From a retailer's perspective, it's very, very challenging and comes on to brands shortly, but basically power is extremely concentrated in very, very few players. And this leads to enormous opportunities for brands that are successful, but also a lot of consequences as well around the fact that you have to penetrate through these two or three large conglomerates on the grocery side and a few of those on the pharmacy and liquor side that are the... So Aldi arrived here quite some time ago and has been successful, but other retailers have tried to enter [inaudible 00:06:36] and so on and failed and have withdrawn. So we've ended up with basically two major grocery businesses. So that's Woolworths and Coles.
Daniel Roberts:
Woolworths used to be a major conglomerate, including hardware, electronics, general merchandise, food, and liquor. They have demerged a lot of those businesses now, but they're still the largest grocery retailer. And then number two is Coles, which also used to be part of a very large conglomerate called Wesfarmers. But they have literally just demerged and then you have a number of many, many pharmacy businesses. I don't know if you appreciated that when you were here, Peter, but it seems like there's a pharmacy every couple of hundred meters as you are walking down most high streets.
Peter Crosby:
I did when I needed to get an emergency COVID test to get out of the country. So I appreciated that I didn't have to look too far.
Daniel Roberts:
It could also be because you're always having to put huge amounts of sunscreen on yourself through an average summer, not like the summer we're currently having, but there's really only one major online pharmacy business. Chemist Warehouse. They have well over 50, even 60% of the market.
Peter Crosby:
Wow.
Daniel Roberts:
And from a liquor perspective, I think 50% of all liquor in Australia is bought through one business, which is Endeavor Group, but there are many, there is a very long tail of smaller ones. So yeah. So you've got these two strong retailers in the form of Woolworths and Coles and you've got equivalents in other categories of pharmacy, liquor and pets actually as well. So yes, as a brand entering the market that's what you have to face into. You have to deal with, if you're not successful in one of those major ones, you're not going to be successful at all. Whereas in the UK, you've got five or six major retailers. In the US, you've got dozens.
Daniel Roberts:
So there's many more opportunities to be successful without having to have all your eggs in one basket. So another point to consider is the fact that Australia is actually extremely ethnically diverse. 30% of the population wasn't born here. And I actually checked that number before I came on because when I got here it used to be 25% and I wanted to see where it was up to, and that number is correct. 30% of the population weren't born here. And by comparison, it's only 14% in the UK and 14% in the US. So that leads to a huge diversity of tastes and therefore opportunities for brands as well. So if you have a product that you think is going to work in a particular ethnic group or within a particular segment of the population, there are opportunities to go after.
Lauren Livak:
And when you're thinking about brands who might be trying to enter the space, especially from an e-commerce perspective, Australia really started with more of an open approach around content versus where we are in the North America EMEA regions. Can you talk a little bit about that?
Daniel Roberts:
Yeah. Australia's quite an interesting market. There was quite a strong legacy of print catalog here. Well, up until very recently until COVID actually, and what that required was a central point where images could be gathered and distributed to people who were making catalogs. So there has always been this open catalog way of distributing images within Australia and CPG retailers have free access or have historically had free access to this broad catalog of product content, covering liquor, grocery, health and beauty and pets. And because basically without that as a small retailer, I would have absolutely no hope whatsoever of sourcing these images from such a diversity of suppliers to create my flyers and my catalogs for my own local print media. And what this also has done is it's made it possible for smaller retailers to compete with larger retailers and serve their local communities, not only in print, but also now in digital as well.
Daniel Roberts:
So as the world has moved from print to digital, that same open catalog approach has survived. And so any retailer in Australia actually has access to a very broad and deep open catalog of product images and product content. What this also does is it makes it easier to accelerate digital innovation, because if I'm launching a digital product business of some description selling third party products, then I can actually get access to their product images without having to source them myself or without having to get them from the supplier and expect the supplier to provide them. So this makes it easier for people who want to start apps and other services, and sometimes too easy because you end up with a lot of silly businesses that start as well, but then they can basically get through that hurdle of getting product content more quickly.
Daniel Roberts:
This open catalog also makes it easier for brands to distribute product content to their customers without having to deal with lots of Dropbox and file sharing requests that are coming in from them. So they're not dealing day to day with these tedious tasks and they can actually focus on the higher value adding activity of driving their digital strategy and so on and not having to deal with all of these requests. And so it does actually save them a huge amount of time. Because it's an open catalog you want to have as many retailers on the catalog, downloading product content as possible. And so an open catalog makes it really easy for retailers to sign up. They literally fill in their details and they get access to this content for free, which I think is probably unique in its scope and scale and ease in the world, which basically gives an absolute minimal barrier to retailers and is therefore hugely beneficial to brands.
Peter Crosby:
So Dan, you've talked about the overall commerce landscape, how have you seen the e-commerce landscape in Australia develop over recent years? What's happening there? What's on the move?
Daniel Roberts:
Yeah. It's interesting. Bricks and mortar retailers were relatively slow to seize the opportunity and that gave the potential for a lot of pure plays to start in the early 2010s, if you like. And also for eBay to get a really strong foothold here in the early 2000s. So for the first part of the century, eBay was by far the biggest online player with a lot of sellers on eBay who actually became major retailers in their own right. But like everywhere else in the world, eBay is losing their power to Amazon. Amazon turned up a few years ago and like everywhere they go, they have now transformed online shopping both logistically and within the product verticals in which they play. But a number of the major retailers have now invested significantly in e-commerce and Woolworths and Coles, two major grocery retailers have multi-billion dollar grocery operations, which are very credible and very sophisticated and starting to get on a par with international counterparts and they are becoming extremely competitive.
Daniel Roberts:
In pharmacy there has been less competition and we still have the dominance of one major player in the form of Chemist Warehouse though other pharmacy chains are now finally starting to invest. Liquor is largely dominated by the two major bricks and mortar players, but pet has been actually quite interesting where the bricks and mortar pet retailers took some time to respond, which gave the opportunity for a pure play to emerge called Pet Circle who have done extremely well and have really defined the e-commerce landscape for pet within that category. But now again, also the bricks and mortar retailers are finally starting to address. And so that space is going to become more competitive within that category as well. So, it's constantly changing and evolving. But one thing that is interesting is just the rise in the marketplace, which I know has happened in other countries as well, but it seems that anybody who is selling anything is now deciding to bolt on a marketplace as well. So you have the largest online electrical retailer who's now bolted on a marketplace and you buy anything from this electrical retailer, this, and-
Peter Crosby:
When you say anything do you mean anything or anything electric?
Daniel Roberts:
Pretty much.
Peter Crosby:
Oh my gosh.
Daniel Roberts:
Yeah, pretty much, pretty much. So there's a business called Marketplacer, which is a competitor to Miracle and Marketplacer is an Australian business. And this Marketplacer enables anybody who has a website to bolt on a marketplace and they have been very successful in adding marketplaces to a number of well-established retailers.
Peter Crosby:
[inaudible 00:16:22] spirit of the outback is I would credit that to.
Daniel Roberts:
Yeah, exactly. Yeah, exactly.
Peter Crosby:
The frontier spirit.
Daniel Roberts:
Yeah, exactly. It's sort of like, well, or going to, I'm selling A and people who buy A also buy B. So I think I might as well start selling B seeing as I can sell it through a marketplace at no cost to me, that seems to be the rationale that people are using to implement these things. But that does actually lead to a lot of interesting opportunities for brands because with the rise in the marketplace that actually does actually move the power back to the brands because the problem of getting the eyeballs is taken away for you because the retailer is dealing with that challenge. And if you've got a good product and you are on all of these marketplaces, you're going to sell the product , so in that way, the power is actually moving back to the brands. And it's also meaning that they're not singularly dependent on Amazon as well, which is developing a significant presence in a number of categories.
Lauren Livak:
And for brands who are looking to break into the Australian market, what would you suggest in terms of strategy, whether it's around content or where to focus or thinking about marketplaces, what would you suggest?
Daniel Roberts:
So whilst Australia has few players within the grocery sector, even in the grocery sector it is incredibly competitive. It is a knife fight really between the two major grocery retailers. And so you need to be well-prepared when you're coming to the market. So you need to have really good product content that is absolutely essential to communicate the features and benefits of the range that you're bringing to this market. And you really need to go above and beyond what established players have in order to be noticed in order to create that change in shopper behavior. And then what you also need to understand is that Australia is a reasonably well-regulated place and retailers have their own standards around how to meet those regulations and also what they require as well. So you need to understand what it is that retailers want in order to satisfy both the regulatory and also their minimum standards to actually sell online in this country. None of these things are particularly challenging. You don't want to fail by not presenting your products well on digital channels and giving consumers the information they need to properly engage with your products.
Lauren Livak:
And Dan, do you have any examples that you could think of about brands that may have done something different with content or something that stands out to your point about differentiating themselves?
Daniel Roberts:
Yeah. One would be Baraka. So in Australia, a very high proportion of vitamins I bought online strangely and may be the case in other markets and Baraka have actually done an incredible job of leveraging the opportunities around rich content and other types of content to make their product stand out on online retailers. And so I think they're one of the ones we use as a gold standard when we're illustrating to other brands about how they can seize the opportunities of digital. So Baraka certainly is one. L'Oreal more generally has done a very good job at seizing the opportunities of digital both in traditional channels, but also direct to consumers. And so looking at some of their brands in terms of what they have done in Australia sets a good benchmark for how to enter the market.
Peter Crosby:
And Dan, earlier you had talked about the massive distributors that are in the market. And I would imagine for a lot of brands who are entering the market, a distributor may be the way to go given the time zone and the specifics of your market and needing to understand that and how do you be successful. A, is that true? And B, if a brand wants to work with a distributor, what are the things that they should keep in mind in terms of choosing the right distributor, or even be able to get the attention of the right distributor?
Daniel Roberts:
Yeah. There's two types of distributors as you use the word distributor there, there are people who are physically distributing the product, which there's a company called The Distributors here, which is a major one.
Peter Crosby:
That's so perfect.
Daniel Roberts:
Yeah. It does what it says on the tin. And then there's Met Cash and there's a number of others. Those people aren't necessarily the people you would turn to help you land a product in Australia. They're the people who get your product from A to B with the very big, large distances involved. What you do have is a very rich set of companies who actually help you get your brand into Australia and will basically act as your team on the ground. So I think your question probably relates more to people who are going to help you land a product in Australia. There's plenty of those because there's... So they're like distribution partners, I would say, rather than people who are necessarily going to actually physically hold the stock for you.
Daniel Roberts:
So, Australia is very, very competitive and only 10% of products typically survive three to five years in this market. So you need, when you're looking at who is that distribution partner, you need somebody who is incredibly competent, who is up for the knife fight with the major retailers, but has the battle stars of knowing how those relationships work and actually has some well-established, good relationships as well. You can't just have somebody naively walking into Woolworths, Coles and Chemist Warehouse and pitching up a product when they've never done it before. There's obviously a first time for everybody, but you would rather choose someone who actually knows how those relationships work and how those conversations flow. So you really want to have somebody who's got a proven track record to achieve the results that you want.
Daniel Roberts:
And they need to understand the dynamics of your particular sector, because they vary enormously by sector. They need to have a clear go to market strategy for your range and are they prepared to invest and make it successful? There's a lot of people trying to launch products in Australia and in order to be successful, you need to have focus. So you need to be choosing a distribution partner who's going to give your products that focus and isn't just going to give up when they meet the first barrier. You need to be absolutely clear on what everybody is going to be accountable for and what the plan is and what the metrics are that you are going to be holding them accountable for because you're working across very large time zones. As we are talking now, it's 6:00 in the evening for you.
Daniel Roberts:
And it's 7:00 in the morning for me here. So you can't have long conference calls trying to work things out. You're going to be largely leaving your distribution partner in Australia to do things on their own volition. So you want to make sure that they are going to be executing a plan well and delivering on those metrics. And then you have to ask yourself the question, is it worth you actually putting one or two people locally in Australia to support the launch of your products here with that distribution partner, maybe even temporarily, just so you can see how things are working out and to give them the support that they need. But one thing that is critical is to make sure that the distribution partner you choose is actually supported by the brand as well, that they are actually making money from day one because if they're not making money or they can't see a path to making money because they're not being given the necessary support, then they're not going to give your brand the focus and they're going to become disinterested.
Daniel Roberts:
So while the risks and the effort are significant to both penetrate and grow your brand in Australia, if done well because of the concentration of power, the rewards can be very significant. So when I arrived in Australia, the global multinationals actually used to refer to Australia as Treasure Island because profits were so significant. Woolworths used to be the most profitable grocery retailer in the world. But with the arrival of Aldi, the profit pool has somewhat reduced, but there are still enormous opportunities here. The thing to remember is that Australia is still a growing economy. We haven't had a recession here for about 30 years. The population is still growing and unlike many other markets there's a comparably diverse population. And so there are still a lot of opportunities for brands who are interested in new markets to go after.
Peter Crosby:
Well, Dan, thank you so much for coming in and giving us this survey. I think in this moment in time where everyone's trying to figure out where the growth is coming from, where are the new opportunities, certainly one of those available to any brand is operating in new markets and so it's great to hear that survey of what the opportunity is and how the market works. And we're grateful to have this chat with you. So thanks for joining us.
Daniel Roberts:
Yeah. Thanks Peter. Thanks Lauren. It was great to chat with you again.
Peter Crosby:
Thanks again to Dan for sharing his market expertise with us. Don't forget to swing over to digitalshelfinstitute.org for more research and content to help you and your team on the journey to win the digital shelf. Thanks for being part of our community.
