Why ecommerce will continue to outstrip physical retail in Australia
The retail sector performance in Australia is considered fair with tight margins that, for many smaller retailers, continue to decrease.
Online retailers continue to put pressure on bricks-and-mortar stores, so retailers must adopt new strategies to remain competitive. However, this requires both the willingness to change and a financial investment.
The outlook for 2018 includes more of the same, and business insolvencies are expected to remain stable, according to the recent Atradius Market Monitor report.
- Myer appoints John King as CEO: Ex-House of Fraser boss to take on Amazon
- What does Amazon’s arrival mean for Australian retailers?
- Read the latest edition of ANZ’s Business Chief magazine
Mark Hoppe, managing director, ANZ, Atradius, said: “Retail is a competitive and volatile market, so sudden and unexpected defaults can’t be ruled out. Australia has seen many high-profile retailers become insolvent over the past few years and there’s no real reason to think this trend will reverse or even slow down. For this reason, the sector performance assessment for Australia is fair rather than good, despite ongoing sales growth.”
The Australian market is likely to be affected by slower household spending growth, triggered by a weaker housing market and subdued growth in household income. Online retailers will drive growth, especially given Australia’s well-established online banking system and a well-developed logistics infrastructure.
Established bricks-and-mortar retailers continue to compete by expanding their online presence but smaller retailers find it harder to compete, particularly on price and convenience. Therefore, more store closures and businesses downsizing are expected.
Payments in retail tend to be good and no major increases in payment delays or insolvencies are expected in 2018. Financing conditions remain generally positive, and most loans are sanctioned for working capital management and with no major breach of covenants.
Hoppe added: “Given the fundamental shift in the retail industry towards online sales and digitalisation, Atradius has adopted a cautious approach when assessing businesses with traditional, offline sales channels. Therefore, besides focusing on the financial situation of buyers, Atradius also assess management’s ability to adapt to changes within the industry.”
The Market Monitor found that the household appliance and consumer electronics markets are likely to be the best performers in 2018. The worst performers are likely to include automotive/transport, construction and construction materials, metals, paper, steel and textiles.
Hoppe commented: “When it comes to the consumer durables retail industry, Australia looks to be set to fare about on par with most countries in the world. The worst-performing countries are likely to include Denmark, Poland, Brazil, New Zealand, and the United Arab Emirates. The best-performing countries will be Sweden and Taiwan. Australian exporters should bear this in mind when considering which countries to do business in or with.
“Regardless of how positive an industry’s outlook may be, it always pays to conduct due diligence regarding each customer an organisation plans to do business with. Trade credit insurance can also help you assess the financial capacity of a buyer to pay and reduce the risk associated with non-payments that could result in insolvency.”
Rainmaking + ESG Launch Supply Chain Resilience Accelerator
Rainmaking, one of the world’s leading corporate innovation and venture development firms that create, accelerate and scale new business, has partnered with Enterprise Singapore (ESG), a government agency that champions enterprise development, to launch Singapore’s first ‘Supply Chain Resilience Accelerator’.
The new programme will unite startups and enterprises to boost scalable technology solutions that help fuel supply chain resilience by addressing pain points in transport and logistics.
Over the last 13 years, Rainmaking has launched 30 ventures totalling US$2bn, including Startupbootcamp. Having invested in over 900 startups that have raised more than US$1bn, Startupbootcamp is one of the world’s most active global investors and accelerators.
The new programme looks to help build more resilient supply chains for Singapore’s burgeoning network of startups by leveraging its advantageous position as a global trade and connectivity hub. As part of the Supply Chain Resilience Accelerator programme, no less than 20 startups with high-growth potential will have the opportunity to become a part of Singapore’s vibrant ecosystem of startups.
Calling Supply Chain Solution Startups!
The programme will kick off with an open call for startups who specialise in supply chain solutions for end-to-end visibility, analytics, automation and sustainability.
Applicants will then be shortlisted and receive nurturing from Rainmaking, fostering valuable engagements with corporates to drive scalable pilots with the aim to stimulate investment opportunities.
“Covid-19 exposed the fragility of global trade, and the Supply Chain Resilience Accelerator is our opportunity to spot weak links and build back better. Piloting outside tech can be an incredibly efficient way to test viable solutions to big problems, provided you de-risk and design for scale. Our programme does precisely this by helping corporate decision-makers and startups to work on compelling business opportunities, anticipate operational risks, and ultimately co-create solutions fit for wider industry adoption,” said Angela Noronha, Director for Open Innovation at Rainmaking.
Pilots will run from Singapore, with the objective that relevant organisations may adopt successful solutions globally. To that end, Rainmaking is currently engaging with enterprises specialising in varying industry verticals and have expressed interest in partnering.
“Even as we continue to work with startups and corporations all over the globe, we are so pleased to be anchoring this program out of Singapore. With a perfect storm of tech talent, corporate innovators, and robust institutional support, it’s the ideal launchpad for testing new solutions that have the potential to change entire industries. We look forward to driving the transformation with the ecosystem,” added Angela Noronha.
One of the first selected corporate partners is Cargill, a leader in innovating and decarbonising food supply chains.
"Cargill is constantly exploring ways to improve the way we work and service our customers. Sustainability, smart manufacturing and supply chain optimisation are key areas of focus for us; exploring these from Singapore, where so many key players are already innovating, will help us form valuable partnerships from day one. We look forward to joining Rainmaking and ESG on this journey to work with, support, and grow the startup community by keeping them connected to industry needs,” said Dirk Robers, Cargill Digital Labs.
In order to raise awareness on the importance of building resilience and how technology can be leveraged to mitigate risks of disruption, industry outreach efforts will include fireside chats, discussions and demo days.
In July, Rainmaking will host a virtual insight sharing event for innovation partners as well as a ‘Deal Friday’ session that connects businesses, investors, and selected startups with investment and partnership opportunities.
Programme events will also benefit Institutes of Higher Learning by offering exposure to how advanced practitioners leverage new technologies to transform traditional supply chain management and share real-world case studies and lessons learned, better equipping next-gen supply chain leaders.
“As an advocate of market-oriented open innovation, we welcome programmes like the Supply Chain Resilience Accelerator, which aims to help companies resolve operational pain points, strengthen supply chain resilience and spur growth in a post-pandemic world. With a strong track record in driving open innovation initiatives for the transport and supply chain industry, we believe that Rainmaking’s in-depth knowledge of the ecosystem and network of global partners can complement Singapore’s efforts in accelerating our business community’s adoption of tech-enabled tools, to better manage future disruptions and capture opportunities arising from shifts in global supply chains. This will in turn help to strengthen our local ecosystem and Singapore’s status as a global hub for trade and connectivity,” said Law Chung Ming, Executive Director for Transport and Logistics, Enterprise Singapore.