Woolies, Coles figure among world’s Top 20 retailers

Jon Condon, 07/02/2013


Australia’s major supermarket groups Woolworths and Coles are both listed among the Top 20 retailers in the world by financial consulting group Deloitte in its recent “Global Powers of Retailing” report.

The report analysed 250 retailers worldwide, finding that Woolworths ranked 17th based on 2011 retail sales revenue of US$54.6 billion. Rival, Coles (part of Wesfarmers group) was 18th, with revenue of US$52.2b for the year.

United States-based Wal-mart was again named the world's largest retailer, with US-based Costco and German-based Aldi, both of which have established a presence in Australia, ranked sixth and eighth respectively.

Eight of the top ten in terms of sales revenue are food and grocery retailers, ranging from traditional supermarket/hypermarket formats to ‘no frills’ cash-and-carry warehouse clubs like Costco, or ‘discount store’ formats like Aldi.

Despite the difficult economic environment across the world, the report (click here to view full report, refer to Top 250 list starting on page 20) clearly shows that the largest retailers continue to expand. Wal-Mart, for example grew sales by another 5.1pc, to reach US$446 billion for the year. Just one of the Top 25 retailers showed declining revenue for 2011.

More than 80pc of the Top 250 retailers posted an increase in retail revenue, with most of the companies experiencing declining sales being due to business divestment or restructuring rather than a deterioration of their core business.

The report surprisingly lists Wesfarmers (Coles) as the world’s fastest growing retailer, with annual growth rate from 2006-2011 of 59.2pc, but this figure is distorted because Wesfarmers did not buy the Coles business until 2007, meaning it started from a much lower base figure.

The 'fastest growing' list shows a clear bias towards businesses in developing countries, including China and Russia.  

Another trend evident among the Top Ten retailers was globalisation. The ten largest retailers operated in 16.7 countries on average, nearly twice as many as the average for the entire group. Revenue from foreign operations accounted for nearly one-third of the total Top Ten retail sales.

“With many retailers facing challenging economic conditions in local markets, there has been a clear drive to seek growth opportunities overseas in countries with stronger economic conditions and growth prospects,” the report said.

This had been evident in Australia where there had been an influx of overseas retailers over the past few years. In the supermarket/fresh food section, this is evidenced by the arrival of discount warehouse retailer, Costco, plus the Aldi supermarket chain.

Coles and Woolworths were unusual among the Top 20 listings, being confined to operations in Australia and NZ only. Just four other Top 20 listings were limited to operations in two countries or less, and they mostly involved the huge US market.

Of the Top 250 retailers, 49 began operations in a new country in 2011, the report found, with a combined total of 107 new market entries (up from 88 in 2010) involving 72 different countries (57 in 2010).

In contrast with countries like Japan where major retailers struggled to maintain revenue growth in 2011 (the major Daiei supermarket chain was minus 3.5pc for the year, for example), retail revenue soared for companies based in Africa/Middle East, Latin America and other parts of the Asia/Pacific.

Growth continued to be fuelled by burgeoning middle classes, youthful populations and sizable foreign direct investment. Somewhat greater pricing flexibility in these markets also resulted in above-average profitability for retailers in those regions.

“With domestic growth prospects stalling for many retailers in North America and Europe, the relative strength of the Australian economy has tempted some overseas retailers to consider entering the Australian market,” the report said.

“For many global retailers, Australia represents a relatively untapped market. Its geographical location, opposing seasons to North America and Europe, smaller critical mass and more attractive growth opportunities in domestic markets in Europe and the US have meant that Australia has remained somewhat sheltered from many international competitors.”

However, with many economies in Europe and North America experiencing significantly declines in growth, Australia had become of more interest to global retailers.

While forecast retail growth rates in Australia of 2.9pc for 2012-13 were relatively modest, they were still higher than many growth rates in North America and Europe, Deloitte said.

Similarly, with an advanced economy and stable political and legislative structures, setting up operations in Australia was a relatively easier prospect than doing so in other less developed countries. It also allowed global retailers to use this expansion into Australia as a springboard into the potentially highly lucrative growth economies in Asia.

With the strengthening of the Australian dollar and the increasing use of online as a medium for shopping, many Australians had taken to purchasing products from overseas, the report said.

“This has awakened global retailers to demand for their products from Australian consumers. It has also given them vital information on what Australian consumers want, which is a significant benefit when setting up business in Australia.”

Within the Australian context, the report said retail conditions differed widely across the States.

“Retail conditions are strongest in Australia’s mining jurisdictions, with sales continuing to boom in WA, followed by reasonably strong rates of growth in the NT and Queensland. Across the non-mining states, conditions have improved of late in NSW, but are still quite weak in Victoria, SA, and Tasmania.”

Looking ahead, it was likely to be back to the reality of a ‘hard slog’ for Australian retailers in 2013, the report warned.

“The labour market is weak and there is no immediate fillip to support employment growth – although an expected decline in the $A might help over time. In the meantime, real wages growth might moderate, as inflation picks up further from its recent cyclical lows.

“Interest rates are low and possibly heading lower while house prices are showing signs of life, so there are some supports for greater consumer confidence – but perhaps not enough to maintain short-term momentum,” the report said.

For retailers it’s all still a far cry from the pre-GFC days, but the macro-reality is that income growth is modest and these days consumers are taking a more measured approach to borrowing and spending than they have in the past.


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