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Warehouse prepares for Amazon juggernaut

NZN 8/03/2017 Jonathan Underhill

Warehouse Group says it is a question of when not if Amazon arrives in New Zealand and estimates the online shopping giant will strip $4 billion to $5 billion out of Australia's retail market while becoming a more convenient option for Kiwi shoppers.

Chief executive Nick Grayston said e-commerce only makes up about 10 per cent of the New Zealand market, much lower than in other developed countries

But Warehouse has to prepare for increased disruption and part of the response is to move away from a "transactional relationship" with customers where price is the only determinant, to "an engagement model" which could include walk-in health clinics, a return to pharmacies, financial advice and mobile services.

"Amazon's already a threat but one we're embracing to make ourselves better," Mr Grayston said. "We know we will not compete only on price."

Based in Australia, Amazon would be able to service New Zealand "a lot quicker" than when local shoppers were placing orders to the UK or the US.

"Our strategy is to get our retail fundamentals right in today's changing retail environment and invest to remain relevant for our customers," Mr Grayston said.

"We must compete effectively and ensure the sustainability of our business in the long term. The company must evolve and not doing so is the riskiest decision this company could make."

Warehouse's online sales rose 25 per cent to $106 million in its first half. Net profit dropped 76 per cent to $13.6 million after the retailer took an impairment charge against its financial services unit, recognised restructuring costs and earned less from its Red Shed department stores.

Total sales rose 3.3 per cent to $1.6 billion.

The result included a $22.7 million goodwill impairment against the company's Financial Service Group, which in 2015 bought out its joint venture partner Westpac, taking control of a $57m loan book and leaving the retailer to relaunch its store cards.

Financial Services recorded a first-half operating loss of $5.2m, up from a loss of $2.7m a year earlier.

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