AUSTRALIAN RETAIL LANDSCAPE 2016

Cash rate: 2%

CPI: 1.7%

Household consumption 0.8%

Household savings: 7.6%

Unemployment: 6%

Annualised GDP: 3%

AUSTRALIA: KEY STATISTICS

CONSUMER LED SPENDING CREATING A REBALANCED, RESILIENT ECONOMY

SIZE, SCOPE & DIRECTION OF AUSTRALIAN RETAIL

FINAL HOUSEHOLD CONSUMPTION EXPENDITURE $924B: non-discretionary subject to higher inflation than discretionary

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

$0

$50

$100

$150

$200

Other

Clothing &

footwear

Furnishings & hh equip

Com

munications

Recreation

Hotels, cafes, rests

Tobacco

Alcohol

Vehicles

Operate vehicles

Food

Transport

Insurance/ fin serv

Education

Health

Utilities

Rent & related

6.2%

8.7%

7.1%

8.5%

5.2%5.3%

4.1%

3.2%

4.4%

3.1%

5.2%4.8%

3.6%

2.4%

3.2%

1.9%

4.8%

$199

$23

$59

$43

$83

$29

$91

$46

$19$16$16

$62

$91

$21

$39

$29

$60

4.8%

1.9%

3.2%

2.4%

3.6%

4.8%5.2%

3.1%

4.4%

3.2%

4.1%

5.3% 5.2%

8.5%

7.1%

8.7%

6.2%

Source: ABS National Accounts, September 2015

$ bi

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Discretionary 53%

Non - Discretionary 47%

TOTAL DISCRETIONARY EXPENDITURE $398B: after food, recreation & experiences highest value & growth

0%

1%

2%

3%

4%

5%

6%

$0

$25

$50

$75

$100

Other

Clothing &

footwear

Furnishings & hh equip

Com

munications

Recreation

Hotels, cafes, rests

Tobacco

Alcohol

Vehicles

Operate vehicles

Food

4.1%

3.2%

4.4%

3.1%

5.2%

4.8%

3.6%

2.4%

3.2%

1.9%

4.8%

$91

$46

$19$16$16

$62

$91

$21

$39

$29

$60

4.8%

1.9%

3.2%

2.4%

3.6%

4.8%

5.2%

3.1%

4.4%

3.2%

4.1%

Source: ABS National Accounts, September 2015

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TOTAL RETAIL $292B: Australians still obsessed with home improvement, increasingly

living an eat-out lifestyle & shopping online

-5%

-3%

-1%

1%

3%

5%

7%

9%

$0

$25

$50

$75

$100

Supermarket

Liquor

Specialist food

Furniture, floor, h'ware

Electrical

Hardw

are & g'dn

Clothing

Footwear &

acc'ry

Dep't stores

N'paper &

books

Other recreational

Pharmacy &

cosmetic

Other retail

Cafes, rest's, cater

Takeaway

4%

7.2%

5.8%

4.2%

1.4%

-4.1%

-0.1%

1.6%

2.9%

6.1%

1%

3.5%

1.1%

4%4.2%

$16

$24

$16$16

$5$3

$19

$8

$15$18

$20

$14

$9$11

$99

4.2% 4%

1.1%

3.5%

1%

6.1%

2.9%

1.6%

-0.1%

-4.1%

1.4%

4.2%

5.8%

7.2%

4%

Source: ABS Retail Trade, December 2015

$ bi

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TOTAL RETAIL $292B: Australians still obsessed with home improvement

-5%

-3%

-1%

1%

3%

5%

7%

9%

$0

$25

$50

$75

$100

Supermarket

Liquor

Specialist food

Furniture, floor, h'ware

Electrical

Hardw

are & g'dn

Clothing

Footwear &

acc'ry

Dep't stores

N'paper &

books

Other recreational

Pharmacy &

cosmetic

Other retail

Cafes, rest's, cater

Takeaway

4%

7.2%

5.8%

4.2%

1.4%

-4.1%

-0.1%

1.6%

2.9%

6.1%

1%

3.5%

1.1%

4%4.2%

$16

$24

$16$16

$5$3

$19

$8

$15$18

$20

$14

$9$11

$99

4.2% 4%

1.1%

3.5%

1%

6.1%

2.9%

1.6%

-0.1%

-4.1%

1.4%

4.2%

5.8%

7.2%

4%

Source: ABS Retail Trade, December 2015

$ bi

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R:

Australia’s love affair with property has seen price to income ratios match the highest in the world

Many are questioning not just if, but when the bubble might burst…

THREE REASONS HOME IMPROVEMENT WILL REMAIN SOLID

we enjoy relatively positive economic conditions

OFFSET SAVINGS ACCOUNTS

Offset accounts unaccounted for Relatively stable unemployment (c. 6%) Record low interest rates

SOLID & COMPETITIVE WORKFORCE

EASE OF DEBT SERVICING

LOWER DEBT TO PRICE RATIOS C. 2007-08 STABLE HOUSEHOLDS

LOW COSTS OF SERVICING DEBBT

TOTAL RETAIL $292B: Australians increasingly living an eat-out lifestyle

-5%

-3%

-1%

1%

3%

5%

7%

9%

$0

$25

$50

$75

$100

Supermarket

Liquor

Specialist food

Furniture, floor, h'ware

Electrical

Hardw

are & g'dn

Clothing

Footwear &

acc'ry

Dep't stores

N'paper &

books

Other recreational

Pharmacy &

cosmetic

Other retail

Cafes, rest's, cater

Takeaway

4%

7.2%

5.8%

4.2%

1.4%

-4.1%

-0.1%

1.6%

2.9%

6.1%

1%

3.5%

1.1%

4%4.2%

$16

$24

$16$16

$5$3

$19

$8

$15$18

$20

$14

$9$11

$99

4.2% 4%

1.1%

3.5%

1%

6.1%

2.9%

1.6%

-0.1%

-4.1%

1.4%

4.2%

5.8%

7.2%

4%

Source: ABS Retail Trade, December 2015

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Eating out & up is on the rise…

THREE REASONS EATING OUT IS ON THE RISE

Our love of food is ever growing

DIVERSITY

Cultural diversity has exploded food choice

Millennial consumer outsourcing services

Increasing sophistication

SHIFT TO DIFM HIGHER EXPECTATIONS

EXPERIENCE CONVENIENCE PREMIUMISATION

TOTAL RETAIL $292B: And online is on the rise

-5%

-3%

-1%

1%

3%

5%

7%

9%

$0

$25

$50

$75

$100

Supermarket

Liquor

Specialist food

Furniture, floor, h'ware

Electrical

Hardw

are & g'dn

Clothing

Footwear &

acc'ry

Dep't stores

N'paper &

books

Other recreational

Pharmacy &

cosmetic

Other retail

Cafes, rest's, cater

Takeaway

4%

7.2%

5.8%

4.2%

1.4%

-4.1%

-0.1%

1.6%

2.9%

6.1%

1%

3.5%

1.1%

4%4.2%

$16

$24

$16$16

$5$3

$19

$8

$15$18

$20

$14

$9$11

$99

4.2% 4%

1.1%

3.5%

1%

6.1%

2.9%

1.6%

-0.1%

-4.1%

1.4%

4.2%

5.8%

7.2%

4%

Source: ABS Retail Trade, December 2015

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Online retail continues to grow, estimated at $22.1bn 2014, a 7% increase on the year prior

THREE REASONS ONLINE CONTINUES TO TRANSFORM RETAIL

We are increasingly connected

CONVENIENCE

International delivery standards reaching Australia

Increasing expectation of recognition Ultimate accessibility

PERSONALISATION EASE

INSTANT GRATIFICATION RELEVANCE EXPERIENCE

WHO’S WINNING, WHO’S LOSING & WHY?

Winner: FY15 $9.5bn revenue, $1.1bn EBIT 324 outlets

Loser: FY15 $954m sales, $245m losses, 62 stores

Piggy in the middle: approx $2bn revenue, $100m EBIT, 366 locations

HOME IMPROVEMENT: APPROX $40BN: WINNERS & LOSERS

WINNER

$9.5bn revenue, $1.1bn EBIT 324 outlets

approx $2bn revenue, $100m EBIT, 366 locations

FY15 $954m sales, $245m losses, 62 stores

PIGGY IN THE MIDDLE LOSER

DOMINANT BREADTH & DEPTH SERVICE UNDERESTIMATED CATEGORY

BASICS

Winner: Est $4bn revenue, $300m EBIT 200 stores

Loser: Est $1.5bn revenue, $75m EBIT 650 stores

Piggy in the middle: approx $150m revenue, $15m EBIT, 77 stores

LIQUOR RETAIL: APPROX $18BN: WINNERS & LOSERS

WINNER

Est $4bn revenue, $300m EBIT 200 stores

approx $150m revenue, $15m EBIT, 77 stores

Est $1.5bn revenue, $75m EBIT 650 stores

PIGGY IN THE MIDDLE LOSER

DOMINANT BREADTH & DEPTH

SERVICE CONVENIENCE PRICING WITHOUT THE CHOICE

Winner: $4.55bn revenue, $432m EBIT 207 stores

Loser: $3.44bn revenue, $90m EBIT, 308 stores

Piggy in the middle: $4.11bn revenue, $114 EBIT, 152 stores

DEPARTMENT STORE RETAIL: APPROX $18BN: WINNERS & LOSERS

WINNER

$4.55bn revenue, $432m EBIT 207 stores

$3.44bn revenue, $90m EBIT, 308 stores

$4.11bn revenue, $114 EBIT, 152 stores

PIGGY IN THE MIDDLE LOSER

VELOCITY VOLUME MODEL RANGE, BRAND & PRICE CONFUSION DEMOCRATISED FASHION

Winner: Est $1bn revenue, 8 x 30,000 sqm outlets

Loser: Est $200m sales, 73 stores

Piggy in the middle: Approx $300m revenue, 60 stores

HOME & OFFICE FURNITURE: APPROX $8BN: WINNERS & LOSERS

WINNER

Est $1bn revenue, 8 x 30,000 sqm outlets

Approx $300m revenue, 60 stores Est $200m sales,

73 stores

PIGGY IN THE MIDDLE LOSER

CATEGORY KILLER HOME FASHION PRICE FIGHTER

Winner: $3.45bn revenue, $199 EBIT 171 stores

Loser: Est $1bn, $400m DEBT, 325 stores

Piggy in the middle: est $1.5bn revenue, 230 stores

CONSUMER ELECTRONICS (EXCL WHITE GOODS) APPROX $15.3BN: WINNERS & LOSERS

WINNER

$3.45bn revenue, $199 EBIT171 stores

est $1.5bn, 230 stores Est $1bn, $400m DEBT, 325 stores

PIGGY IN THE MIDDLE LOSER

RANGE & PRICE AUTHORITY GENERALIST CONFUSED MARKET POSITION

Winner: $750m revenue, 250 stores

Loser: $250m revenue, 210 stores

Piggy in the middle: $360m revenue, 303 stores

CAR AFTERMARKET PARTS & ACCESS: APPROX $5.7BN: WINNERS & LOSERS

WINNER

$750m revenue, 250 stores $360m revenue, 303 stores $250m revenue, 210 stores

PIGGY IN THE MIDDLE LOSER

DOMINANT RANGE WIDTH & PRICE PERCEPTION ASSISTED SERVICE INCONSISTENT

Winner: $100M+ revenue, 61 stores

Loser: Est $150m revenue, 160 stores

Piggy in the middle: Est $35m revenue, 3 stores

BEAUTY: APPROX $5BN: WINNERS & LOSERS

WINNER

$100M+ revenue, 61 stores

Est $35m revenue, 3 stores

Est $150m revenue160 stores

PIGGY IN THE MIDDLE LOSER

BRAND EXCLUSIVES INTERNATIONAL CACHE CONVENIENCE

Winner: Est $130m revenue first 12mths6 stores

Loser: $237m revenue, 157 stores

Piggy in the middle: approx $100m revenue, 120 stores

FASHION: APPROX $21BN: WINNERS & LOSERS

WINNER

Est $130m revenue first 12mths 6 stores

approx $100m revenue, 120 stores

$237m revenue,157 stores

PIGGY IN THE MIDDLE LOSER

EUROPEAN FAST FASHION CACHE LOCAL TREND DISPOSABLE

Winner: $120M revenue, 40 stores

Loser: $220m, 128 large format stores

Piggy in the middle: $220m, 130 stores

FOOTWEAR: APPROX $5BN: WINNERS & LOSERS

WINNER

$120M revenue, 40 stores$220m, 130 stores $220m, 128 large format stores

PIGGY IN THE MIDDLE LOSER

MOST WANTED BRANDS & FASHION FIT & FUNCTION SELF SERVICE

Winner: $700m revenue, 550 stores

Piggy in the middle: Est $600m revenue, 600 stores

Loser: $2.3bn revenue, 900 stores

TAKEAWAY FOOD: APPROX $14.8BN: WINNERS & LOSERS

WINNER

$700m revenue, $91M EBIT550 stores

Est $600m revenue, 600 stores

$2.3bn revenue, 900 stores

PIGGY IN THE MIDDLE LOSER

FAST CASUAL, MOBILE DINING

INCREMENTAL CHANGE Q,S,C,V

WHAT ARE THE IMPLICATIONS & OPPORTUNITIES?

1. Big box, small box, or online, put the consumer first

2. Always think about the experience you are delivering, whether it’s simplicity & ease or immersion & desire

3. At the bottom of the market verticality, range efficiencies & process simplicity win

4. Above the bottom, authority, wanted brands, & services win

IMPLICATIONS & OPPORTUNITIES

THANK YOU