The Resilience of Non-Discretionary Retailers During Periods of Economic Instability Invent Tomorrow
Written by TMX Transform
As global economies emerge from COVID-19, market conditions remain a focus. The Australian economy’s sharp rebound, fuelled by consumer spending in e-commerce, holidays, dining out and entertainment, has been curbed. Eighteen months later, with eleven consecutive interest rate hikes, the market looks very different – inflation soaring to 7%, property rental prices at record highs, and a cost-of-living crisis that’s front-page news. According to the Australian Bureau of Statistics, while ‘growth is returning closer to pre-pandemic rates, the level of GDP is estimated to have suffered a cumulative loss of $158 billion compared to its pre-pandemic trajectory’. However, not all businesses have been adversely affected. Through these fluctuating economic times, non-discretionary retail has demonstrated far greater resilience compared to the luxury or discretionary sectors.
Understanding Non-Discretionary Businesses
Non-discretionary retailers specialise in selling essential goods or services that people require on a regular basis, such as groceries, medications, household essentials, and clothing. Due to their inherent necessity, non-discretionary businesses are less susceptible to changes in consumer spending during unpredictable economic downturns. While these businesses have the advantage of providing essential goods and services, they must navigate specific supply chain challenges to ensure the smooth operations.
1. Demand Volatility: While the demand for non-discretionary goods and services remains relatively stable, demand fluctuations can still occur due to seasonality and unforeseen events. Businesses must anticipate and respond to these fluctuations, preventing stockouts or excess inventory.
2. Inventory Management: Maintaining optimal inventory levels is crucial for non-discretionary businesses to avoid carrying costs. Inventory planning, accurate forecasting, and efficient replenishment processes are essential.
3. Supply Chain Visibility: These businesses often rely on complex supply chains involving multiple suppliers, distributors, and logistics partners. Maintaining visibility is critical to ensure timely deliveries, monitor inventory levels, and address potential bottlenecks.
4. Supplier and Vendor Management: Non-discretionary businesses depend on reliable suppliers and vendors to consistently provide essential goods and services. Managing relationships, monitoring quality standards, and ensuring timely deliveries are vital.
5. Regulatory Compliance: Non-discretionary businesses often operate in highly regulated industries such as pharmaceuticals, healthcare, and food. Compliance with industry-specific regulations adds complexity to the supply chain. Non-compliance can result in fines, product recalls, or damage to the brand reputation.
6. Last-Mile Delivery Challenges: Timely and efficient last-mile delivery is crucial for non-discretionary businesses, particularly those in the retail and pharmaceutical sectors. Factors such as traffic congestion, weather conditions, and peak periods can pose challenges.
7. Technology Integration: Embracing technology is essential for efficient supply chain management. Adopting technologies like warehouse automation, RFID tracking, and real-time analytics can enhance operational efficiency and visibility.
Despite seemingly favourable market conditions for non-discretionary retailers, achieving enduring success is not a guaranteed outcome. Optimising supply chains, cultivating customer loyalty, embracing technology, establishing a robust online presence, and undergoing digital transformations have proven to be crucial for these companies.
COVID Rebound and the Impacts on Non-Discretionary Businesses
The ongoing repercussions of the COVID-19 pandemic have had far-reaching effects on non-discretionary businesses. On one hand, the rebounding economy has brought a surge in consumer spending, providing a potential boost to non-discretionary businesses. On the other, this resurgence in spending has also led to inflationary pressures and increased competition.
While discretionary spending reached unprecedented levels during the post-COVID period, non-discretionary businesses faced the challenge of adapting to changing consumer preferences and market dynamics.
To overcome this, non-discretionary businesses must prioritise supply chain optimisation and embrace technological advancements.
Case Study: Coles Supermarkets
Australian supermarket giant, Coles Group (Coles), recently partnered with TMX Transform on a new facility in Redbank, Queensland. Equipped with state-of-the-art technology by global leader, Witron, the facility is the largest automated distribution centre in the Southern Hemisphere, highlighting Coles’ significant investment in a safer, more efficient, sustainable supply chain.
TMX were engaged to develop a highly technical design brief and architectural plans, procure a property, and project manage the delivery of the facility, including the integration of complex automation. Partnering with Coles, Witron, Goodman, and Richard Crooks Construction over five years, the fully functional 66,000 square metre facility allows Coles to handle twice the volume of goods on half the footprint. This is Coles’s biggest technology investment in the company’s 109-year history, with the second automated distribution centre opening in Kemps Creek, NSW in 2024.
Case Study: API
Australian Pharmaceutical Industries (API), the parent company of Priceline, has also made substantial changes to its supply chain. Set to be completed by 2024, API’s cutting-edge automation technology centre in Berrinda, Queensland, spanning 30,000 square meters, will support growing pharmaceutical demands, catering to areas as far north as Weipa, as far inland as Mt Isa, and as far south as Coffs Harbour. The new $50 million site will accommodate the distribution of over 2 million items per week.
Executive General Manager, Wholesale and Pharmacy Services, Doug Swan said, “I’m really pleased that we’ve partnered with TMX Transform and Charter Hall on this project. Once operational, the site will be capable of shipping out up to 2 million items per week, supporting the pharmaceutical needs of approximately 1.9 million residents.”
TMX Transform’s Property Director, Jack Moroney said “We have represented API on several projects in recent years and the overriding goal remains to ensure the real estate solutions align with the core business objectives of API now and into the future.” Embracing technology and automation has revolutionised how these retailers achieve operational success and access to market. These case studies exemplify the tangible benefits and outcomes that businesses can attain with TMX Transform, underscoring the importance of investing in supply chain solutions, and embracing warehouse automation.
Implementing Effective Solutions
Investing in optimisation is paramount for non-discretionary businesses aiming to thrive in today’s dynamic market landscape. While full-scale automation is not always necessary for everyone, incorporating technological advancements will help you stay ahead of competitors and future-proof your business. By exploring the benefits and capabilities of integrated, optimised supply chain solutions, non-discretionary businesses can pave the way for improved supply chain performance and long-term success.
