Retail

It wouldn't be a bad job. Surrounded by makeup and perfume all day but one of New Zealand's biggest retailers can't seem to get anyone to do it.

As the unemployment rate reaches a 10-year high, with the number of unemployed people now standing at 168,000, Farmers is struggling to fill 30 jobs manning its beauty and fragrance counters.

The human resources department has been reduced to running recruitment evenings in Hamilton and Auckland to inform candidates about a career in the beauty industry and to identify the qualities that make sales professionals.

"We're interested in hearing from new beauty graduates, seasoned industry professionals and sales professionals looking for a change in industry," says Sheila Naidoo, head of HR for Farmers. According to recent statistics from the Department of Labour, there should be an overload of retail workers in the job market, said Ms Naidoo.

"Even if they don't have beauty industry experience, if they have a passion for beauty products and a desire to work with prestigious brands, we can train them," she said.

Lorraine Reay, Clinique counter manager at Farmers, Hamilton city store, prides herself on being able to connect with people.

"Being a counter manager is a bit like being a successful real estate agent. You have to think of yourself as being self-employed, even though you work for Farmers."

Ms Naidoo said Farmers was looking for staff like Ms Reay who had come to Farmers with previous experience in hospitality.

Ms Naidoo said Farmers was willing to look beyond an applicant's immediate work experience to fill the positions.

She said while beauty may be considered more of a female industry several men were doing well at Farmers.

David Marris, fragrance sales professional, celebrated his sixth anniversary at Farmers Hamilton store this month.

Asked what type of person is suited to a career in fragrance or cosmetics, Mr Marris said: "A focus on customer service is essential . . . and of course a love for the product certainly helps."

Ms Naidoo said the recruitment drive would start at the new Farmers store opening at The Base, in Te Rapa, Hamilton on May 4.

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Vacancies galore: Lorraine Feay, of Clinique, and David Marris, of Fragrance in a Farmers store where their products are sold. However, Farmers is struggling to get good employees for its beauty departments.
Picture: KATRINA BIELESKI

A Wellington retail worker says she hopes this Easter won’t be the last one she has off to spend with her family, amid fresh attempts to remove Easter trading restrictions from two National Party MPs.
 
National Distribution Union (NDU) vice president Margaret Dornan, a Wellington worker, said that many retail workers already had very little family time, and taking away Easter trading restrictions would make it worse.
 

The best thing to have in business, South Island hotels entrepreneur Earl Hagaman once mused, is a monopoly. At the time he was intent on buying the Christchurch Casino because of its protected monopoly status. Compared with owning and running hotels in a highly competitive market, owning a monopoly like the casino was a business dream, Mr Hagaman reasoned.

By that logic, the next best thing must be a duopoly, where two big players have the market sewn up. This is the case in the New Zealand grocery market, where home-grown co-operative Foodstuffs and Australian-owned Progressive Enterprises dominate. Figures from the Organisation for Economic Co-operation and Development (OECD) show the giants are enjoying a very happy duopoly.

According to the OECD, grocery prices have risen 42 per cent in New Zealand in the past decade, while those in Australia, which also has a market dominated by two players, have risen 41 per cent. By comparison countries with more competition – Britain and the United States – have experienced more moderate rates of grocery price rises.

On the face of it there appears to be no shortage of competition between our big two. Both advertise extensively, constantly refreshing their offerings and rethinking their approach. The owner of Timaru's New World, under the Foodstuffs banner, has spent a small fortune redeveloping the Highfield supermarket and its mall and is taking on another 75 staff. You don't do that if you're not sitting pretty in a comfortable duopoly.

Likewise Progressive is spending up large to rebrand its Woolworths stores and its Church Street supermarket has just had a makeover.

While the big two argue their competition is cut-throat the suspicion is that it's become more of a handbags-at-dawn affair than a pitched battle. Critics believe they are going through the routine while protecting established positions which see the consumer lose out.

That is what the Australian Government believes and there has been a lot of jumping up and down about the OECD figures, and talk of bringing the "blowtorch" of competition to the incumbents.

In New Zealand The Warehouse had a crack at the duopoly and failed miserably. Supermarkets do have competition in the form of alternative meat and fruit and vegetable outlets, but there is precious little competition in terms of groceries.

In Timaru consumers have the option of a farmers' market. If the success of the first one, last weekend, is anything to go by, the supermarkets' traditional market is being nibbled around the edges. But until The Warehouse gets its act together, or someone else arrives, there seems precious little consumers or the Government can do.

Waikato supermarket owners are "blown away" by figures showing a 42.5 per cent rise in food prices since 2000.

The news has prompted Labour consumer spokeswoman Carol Beaumont to call for the Government to encourage more competition in the supermarket sector.

New Zealand grocery prices have risen 42.5 per cent between 2000 and 2009, followed by Australia which pays 41.3 per cent more, Britain's prices rose 32.9 per cent and America's were up 28.4 per cent, according to a study out yesterday.

Pak `n Save Mill St owner Glenn Miller said he was trying to obtain a grocery bill from nine years ago as he and his staff doubted the cost of many grocery items had risen to that extent.

He said a can of spaghetti cost 90c in 2000 and now customers would pay $1.09 for the same can. "At Pak n Save the margin we enjoy is lower than many other countries in the world and we think we are still very competitive given manufacturing cost and we try and keep our overheads down," said Mr Miller, who believes Pak `n Save is extremely competitive.

Vege King owner Swaran Singh said prices at his Fairfield fruit and vegetable shop would have risen by up to 10 per cent at the most. In some cases prices had not changed. He said the price tag on asparagus had stayed at $3.99 since 2000.

Progressive Enterprises, which owns Countdown, Woolworths and Foodtown, blamed international events such as drought as the main drivers of food inflation. Progressive spokesman Bill Moore said the group was consistently striving to offer the best prices and its profitability had remained at between 3 and 4 per cent since Australian-owned Woolworths Limited purchased Progressive four years ago. The group said there was plenty of competition between supermarkets, delis, butchers, green grocers and bakeries.

But Ms Beaumont has questioned why New Zealand is not following the example of Australia's Competition Minister, Craig Emerson, whose government was taking "hard measures" and lowering the barriers to other retailers competing with Coles and Woolworths on that side of the Tasman.

She was critical of Consumer Affairs Minister Heather Roy's suggestion that New Zealanders "shop around" to combat some of the fastest-rising food prices in the developed world, saying it had attracted widespread criticism. It was "poor advice" to families struggling with soaring food bills, Ms Beaumont said.

Public comments on news websites and on talkback radio produced a stream of consumers critical of grocery pricing, with many calling for overseas chains such as Aldi and Costco to compete against New Zealand's Foodstuffs (which owns Pak `n Save and New World) and Progressive Enterprises.

Hamish Wilson, of Consumer New Zealand, said there had been some attempts by other companies, such as The Warehouse, to break into the supermarket sector "but it's pretty difficult". The controversy arose in the wake of the Australian study which says the price of food in New Zealand has risen faster than in any other OECD country other than Korea.

- With NZPA

The wallet has been a bit lighter over the past 10 years if new figures are anything to go by with food prices both in New Zealand and Australia rocketing up more than 40%.

And experts say it's because New Zealand has only got two major supermarket chains, with a stranglehold on prices.

Statistics prove the cost of food in New Zealand has increased more than almost anywhere else in the 30 countries that make up the developed world.

The OECD figures show Korea had the biggest grocery price hikes over the past decade, 48%. In New Zealand, they went up 42% and Australia was close behind on 41%, all significantly higher than the OECD average of 33%.

A competition expert at the University of New South Wales, Frank Zumbo, says it's not fair on consumers on both sides of the Tasman. "We're paying more than competitor countries and the reality is consumers are being ripped off," he says.

He says consumers are being ripped off because both in New Zealand and Australia two supermarket heavyweights have a stranglehold on shoppers' wallets. Zumbo says Coles and Woolworths control 80% of the Australian grocery market.

In New Zealand, Foodstuffs owns Pak 'n' Save and New World, and Progressive Enterprises runs Foodtown, Countdown and Woolworths.

Hamish Wilson of Consumer New Zealand says this does lead to a lack of competition. "There've been some attempts by people like The Warehouse to try and break into it but it's pretty difficult," he says.

And it seems the increases are not going all the way down the food chain. Ken Robertson of Horticulture New Zealand says vegetable and fruit growers probably have not seen any real price increases in the past 10 years.

ONE News approached both chains. Progressive would not appear on camera but says consumers are getting a fair deal. Foodstuffs agrees. "It is an intensely competitive industry. We certainly don't meet with Progressive and agree price increases or nothing like that," says Tony Carter of Foodstuffs.

In Australia, the government says it's going to take its "competition blowtorch" to the industry. Until that happens in New Zealand, the advice to consumers is to shop around.

Consumer Affairs Minister Heather Roy says the Australians have their blowtorch and National and the Act Party have their regulations bonfire. She says she wants more competition and they are working on taking out some of the red tape and compliance costs to encourage more competition for New Zealanders' dollars.

Zumbo is advocating a marketplace similar to Britain's where four or five big players share about 60% of the market. He says letting rivals such as Aldi have a greater market share is the only way consumers will get a fair go.

MITRE 10 has put its New Plymouth and Kaikoura bulk retail hardware stores up for sale to investors looking for a long-term income stream.

Nick Howe-Smith of Bayleys North Shore Commercial and Industrial said the Mitre 10 Solutions at 107 Beach Road, Kaikoura and Mega Mitre 10 on the corner of Vickers and Rifle Range Roads in New Plymouth could appeal to investors wanting to add modern, purpose-built facilities with long-term leases locked in.

The Kaikoura retail warehouse was built in 2007 on a 5842 square metre site close to State Highway 1. It has a total lettable building area of 1048 sq m, a garden centre of 615 sq m, landscape yard of 406 sq m and parking for 37 cars. The head lease to Mitre 10 NZ Limited is renewable in 2019 with a net rental of $152,234 plus GST per year.

The New Plymouth Mega Store is close to New Plymouth's Valley Mega Centre, a new Countdown Supermarket (under construction) and VTNZ testing station.

Opened in 2007 it has bulk retail, cafe, garden centre, inwards goods, and covered drive-through warehouse and mezzanine offices. The site is strategically located given the substantial development in this area over the last decade, said agent Daryl Devereux. It also had convenient access to State Highway 3, the route to New Plymouth CBD from the airport and the north.

The 1.7 hectare property has extensive car parking adjacent to the Countdown Supermarket, a total lettable area of 11,109 sq m and generates an annual rental of $1,220,000 plus GST.

The head lease is to Mitre 10 NZ Limited and expires on September 1, 2019 with cost price index rent reviews every three years. Tenders for both the New Plymouth and Kaikoura properties close on 28 May.

Mitre 10 general manager commercial Ray Clarke said nearly all of the 100 stores in the co- operative chain were owner- operated. The Kaikoura and New Plymouth stores were developed to expand the chain and were being sold so it could build more stores.

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Big deal: The Kaikoura (above) and New Plymouth (below) Mitre 10 bulk retail hardware stores which have been put on the market.

SOME shoppers are suspicious of a planned five-cent tax on plastic shopping bags by the Foodstuffs chain, concerned that it will serve only to boost profits.

Foodstuffs, which uses about 250 million plastic bags a year, said yesterday that, for environmental reasons, it would charge 5c for every bag sold at its New World and Four Square supermarkets from August 3.

The levy would raise $12.5m a year, if the 5c tax did not reduce the amount of bags used.

Shoppers clutching plastics bags outside Chaffers New World in Wellington had a mixed reaction to the charge yesterday.

Andre van den Assum and Annabel Gardner both said the 5c charge was acceptable, as long as it did not simply boost supermarket coffers.

"If it goes to a charity or an environmental project, that's okay," Mr van den Assum said.

Jason Strawbridge said the bag tax would probably reduce plastic bag use. "But they are just trying to make more money, really."

Foodstuffs managing director Tony Carter said profits would be used to pay for an environmental initiative that has yet to be announced. "Clearly any benefits we get as an organisation we'll pass on to consumers in other ways." A Foodstuffs spokeswoman said "a significant proportion" of funds raised by the levy would go toward environmental projects, the details of which were still being worked out.

Some shoppers welcomed the bag tax. Laura Gilkison, 15, said she would accept a levy of up to 20c. "I'm all for the environment."

Emily Hughes, 16, has just moved from Ontario, Canada, where there is also a levy on plastic bags. "Pretty much no-one uses them now."

Progressive Enterprises supermarket chain said it had no immediate plans to follow its competitor's move. Company spokesman Bill Moore said it was looking at options.

Mr Carter estimated 600 million plastic bags were used by New Zealand supermarkets annually. He would not say how much Foodstuffs paid for its bags, but it was less than 5c each.

The Warehouse Group says its moves to reduce labour costs and improve productivity were not significant enough to warrant a separate disclosure to the sharemarket.

But the National Distribution Union estimates the labour savings will be the equivalent of about 600 full-time jobs at The Warehouse. The Warehouse is running a productivity and labour costs initiative called Project Invigorate.

Chief financial officer Luke Bunt said the scheme was partly to train staff to generate more sales. It was also about labour scheduling and having the right number of staff on the shop floor at slow and busy times. "The result of Invigorate will be higher sales, but rather than redundancies, it could conceivably mean that people would be paid for fewer hours.

"It's partly about cost reductions and it's partly about increased sales, but what it isn't is about is wholesale redundancies," Bunt said.

In response to Businessday comments that the eventual reduction in hours of work at one of the country's largest retailers was a matter of public interest, Bunt said: "If we felt the number of people that may lose their job as a result of any initiative within the organisation was going to be significant we would do so [make an announcement] and we haven't said so."

Bunt said chief executive Ian Morrice had said the company was aiming to reduce costs by $30 million out of its costs base over three years. "But what he has also said is that much of that will go against offsetting inflationary pressures in the other parts of the business."

Reduction in the costs of goods, freight, productivity improvement and control of inventory were all contributing to the $30 million.

Asked about the total of labour hours that might be saved, Bunt said:

"If we felt it was so significant that it warranted separate disclosure because it was of interest to the public then we would be [disclosing it]. Unfortunately this isn't helping your story because it isn't that significant."

National Distribution Union general secretary Laila Harre said the union had a broader concern that the reduction in working hours in the retail sector would be disguised by company restructuring that took place largely through attrition.

This made it difficult for those outside the process to suggest ways retail jobs could be protected. Attrition and non-replacement of staff were just as significant in the labour market as losing jobs through redundancies. "It is true that Project Invigorate itself is not leading to redundancies, but it is also true Project Invigorate will result in a significant reduction in labour hours worked in The Warehouse."

The union's estimate of 600 full-time positions was based on the nine stores in which Project Invigorate was first implemented in Christchurch.

That was using the difference in the current funded hours and the ideal "invigorated" hours and applied to the rest of The Warehouse operation.

Bunt said The Warehouse Group did not report labour costs separately in the annual report because it was a commercially sensitive figure. There was a line called "employment costs" but that was employment costs across the entire group. Asked if they had a plan and target to reduce labour costs Bunt said,

"We do but it's not something I can comment on."

There was a plan around productivity but there were conversations for individual stores and individual people which the National Distribution Union was involved in.

Postie Plus Group's history as a listed company has been a sorry saga and I'm not holding my breath for anything much to change. That's despite the company promising to deliver a "modest" profit for the year ending July, providing the recession gets no worse.

The commentary around its latest results was mostly upbeat: a slightly smaller first-half loss, a 30% inventory reduction and a 32% debt reduction.

A closer look is far from reassuring. Yes, the bottom-line loss for the six months ended January narrowed to $2.7 million from $2.9m. However, the previous first half included the since-offloaded Arbuckles manchester chain's losses and the company's interest bill was down 31%. Stripping out these two items, the company's operating loss blew out to $3.1m, up 23.5%. Sales were down 5%, although the company was able to point to an improving trend: first-quarter sales were down 8.8%, but second- quarter sales were down only 2.3%. Inventory does seem to be under better control: it was $24.9m at January 31 compared with $35.3m a year earlier - it was up from $20.9m at July 31, but the company's second half is traditionally its strongest, so having more stock heading into it makes sense.

Ron Boskell, who was on holiday last week, has been chief executive since October 2005 and with the company since 2002, ahead of the September 2003 float. It isn't hard to argue he was handed a poisoned chalice. The company was a grab-bag of five retail chains thrown together in an unseemly hurry and floated when it was still an incoherent mess, and many of the strategies aimed at bringing it together simply didn't work.

And its warehousing and distribution system was based in Westport - a more inaccessible base would be difficult to find. It reflected the flagship Postie+ chain's origins as a Westport- based mail-order business.

The company was slow to move, shifting it all to Christchurch in bits and pieces. It finally bit the bullet in January last year and shifted the last bits, the hardly unimportant store replenishment functions, to Christchurch, a move which is saving it about $1m a year in logistics' costs.

Chairman Peter van Rij gave a strong indication then of what took the company so long. "If it was a question of the heart making the decision, we would not be moving.". Implementing adequate information systems took a couple of tries, but was finally achieved in April 2007. And it's now free of Arbuckles continuing losses and pared down to just two chains, the 79-store Postie+ and the 21-store BabyCity, and its Schooltex school uniforms business, which supplies more than 1500 schools.

Boskell has always acknowledged a key change needed to be better stock control. When he took over, the company was buying stock only twice a year and anything it didn't sell was put into storage to be recycled again the following year. The combination was nasty: customers were offered tired goods and the company incurred high storage costs. The aim now is to have fresh stock in all stores every six to eight weeks to give customers a reason to return.

But it seems to be taking Boskell rather a long time to get it right. In January 2006, just after he took over, inventory stood at $29.5m and it sank to $25.8m the following July. However, by July 2007, it had blown out to $37.2m and was still at $35.3m in January last year, well after the new information systems were up and running.

In March 2007, Boskell was talking about the company having a "clean stock position" but it clearly didn't. Van Rij told last November's annual shareholders meeting about the company's "crippling stock overhang from poor buying decisions in 2006".

Perhaps Boskell does have it right now. The results posted earlier this month assured shareholders "the group has entered the second half with a clean stock position for the crucial winter selling period" and that profit margins are lifting. Possibly shareholders are taking him at his word, for now. The share price hit a 20 cent nadir in February, but was trading at 32c last week. More likely it's Kathmandu founder Janet Cameron's continuing interest. Last year she bought all Arbuckles stock and took over 13 of the stores to turn into her Dogs Breakfast Trading Company stores and, earlier this month, she announced she had lifted her stake from 15% to 17.8%.

* Jenny Ruth is a freelance financial journalist and a columnist for The Independent.

THE decision by the retail giant Woolworths to accelerate spending on store upgrades, new stores and systems for its ailing New Zealand supermarkets and Dick Smith businesses has ignited concerns about the size of the outlay in this economic climate.

The Merrill Lynch retail analyst David Errington said yesterday that while he was pleased with the company's progress, the aggressive push to expand its New Zealand stores and Dick Smith by increasing investment was a worry. It appears that Woolworths is in a hurry … and we are concerned that being in such a hurry could cause the company some short-term turbulence. We have concerns with throwing a lot of money into NZ and [Dick Smith electronics] … particularly in current economic conditions and [given that Woolworths is not the leader in those market segments]."

Woolworths should not increase its spending so quickly but improve its businesses more incrementally, he said. Pumping more money into its two weakest divisions could be "throwing good money after bad",

Woolworths had $930 million in capital expenditure in the first half across all its businesses, compared with less than $300 million by Coles.

Spending by Woolworths was 45 per cent up on the $639 million it spent in the same period last year. Over the full financial year total capex is expected to be almost $2 billion, compared with $1.1 billion a year for Coles Group businesses, which are owned by Wesfarmers.

On Friday the chief financial officer, Tom Pockett, implied that capital expenditure would also exceed $2 billion next financial year. The Woolworths decision to increase its capex comes as its British peer, Tesco, cut its allocation by about 11 per cent to less than £4 billion ($9 billion) this year, and Wal-Mart in the US said it would spend about 13 per cent, or about $US13 billion ($20.5 billion), less this year.

In its first-half result announced on Friday Woolworths said earnings in its New Zealand supermarkets fell 8 per cent and at its Australia-New Zealand Dick Smith business 27 per cent.

Woolworths supermarkets in New Zealand slashed grocery prices to win market share from the market leader, Foodstuffs, triggering lower earnings.

Costs also rose due to compulsory increases in the minimum wage for its youngest staff, and the introduction of a superannuation scheme.

Mr Errington criticised the Woolworths decision to buy the New Zealand business for $2.5 billion. "Woolworths bought a distressed, run-down asset a number of years ago, and the business is not improving." The first-half earnings of $NZ92 million ($71.5 million) did not support the $NZ2.8 billion of funds invested and was an unacceptable result, he said.