$24b takeover could knock on NZ's door

The big transtasman electrical retail buying group National Associated Retail Traders Australia (Narta) says one knock-on effect of Australia's biggest takeover may be a move on a couple of New Zealand retailers of electrical appliances.

Conglomerate Wesfarmers, advised by Gresham Partners and Macquarie Bank, is taking over Australia's second-largest retailer, Coles, in a A$22 billion ($24.5 billion) deal.

Narta managing director Kay Spencer urged delegates at the buying group's annual conference in San Francisco to question how retailers could compete with mass merchants as they battled each other for market dominance.

In Australasia, Woolworths and Wesfarmers were becoming the local equivalent of America's giant Sears and Wal-Marts.

If one of these companies acquired the Officeworks stationery chain in the break-up of Coles, their buying power would increase in proportion to smaller players.

"The Wesfarmers/Gresham relationships could see them make a run on The Warehouse in NZ or Noel Leeming to give scale in electrical," she said.

The Narta group this month moved into New Zealand following the JB Hi-Fi acquisition of Hill and Stewart's New Zealand operations, and also signed up cooking specialist Autel and the largest South Island electrical retailer, Smith City.

It has a 26 per cent market share, in this country, the same size order book as its two largest competitors and a larger market share than Australia.

Spencer said the control that retailers once enjoyed over consumers had changed dramatically.

"The internet has given consumers - and indeed suppliers - the liberty to change the way they do business."

Spencer said manufacturers were using the internet more strategically than most retailers, and customers were searching manufacturer sites for pre-purchase information.

"Clever manufacturers have extended the online consumer experience to education and tutorials, prior to purchase. Education and demonstration, which was once the role of traditional retailers, is now in the hands of manufacturers," said Ms Spencer.

And some leading manufacturers were taking more direct control of their brands, bypassing traditional retail channels and changing traditional distribution systems. An example was Apple, with its own stores, retail outlets, kiosks and now vending machines.

"We begrudgingly support Apple, knowing there is a great danger in losing our customer if we don't."

Retailers could compete only by becoming so big that suppliers could not ignore their sales volumes, or by "owning" the shopping experience.

An American independent retailer, Abt, had spent $400 million on a standalone store near Chicago, paid its staff above average wages, told them to say yes to any reasonable customer request and treated the internet as a window to its soul.

One sales staff member alone at the store generates $60 million in sales for the business.

- NZPA

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