Latest / Best of Business / Patrick Noone: former Costco managing director explains why it's difficult for retailers to enter the NZ market

Transcript

Patrick Noone: former Costco managing director explains why it's difficult for retailers to enter the NZ market · Best of Business

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  Speaker 1: You're listening to a podcast from news Talk ZEDB. Follow
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  Speaker 2: So Nicola Willis speaking. I've got the two names your
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  Speaker 2: only two names you need to mention in politics today
• 0:21
  Speaker 2: out there, Nichola Willison, Winston Peters. And they're both on
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  Speaker 2: the program anyway. Nichola Willis, she's here after six. At
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  Speaker 2: the weekend, had her big supermarket announcement and suggested that
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  Speaker 2: food Stuffs and Woolwurst could sell parts of their business
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  Speaker 2: to a new entrant or and this was the big
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  Speaker 2: stick that she's waving around risk the government breaking the
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  Speaker 2: duopoly up. Patrick Noon is a former managing director of
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  Speaker 2: Costco and he's with me this afternoon to talk about this.
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  Speaker 2: Good afternoon, Hello Ryan, how are you really good?
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  Speaker 1: Thanks?
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  Speaker 2: You were quite heavily involved in setting up shop here
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  Speaker 2: in New Zealand for Costco. How hard is it to do?
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  Speaker 3: Coming into a new country is always more difficult than
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  Speaker 3: there's a lot of you know, you have to work
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  Speaker 3: with a lot of the government regulations, et cetera. But
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  Speaker 3: New Zealand was a pretty much a monopoly market, so
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  Speaker 3: there was a lot of opportunity for price and bring
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  Speaker 3: goods to the country at a better price than what
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  Speaker 3: was being sold there. And also we can bring goods
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  Speaker 3: from overseas that New Zealanders couldn't get, so that we
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  Speaker 3: had a We didn't have a lot of help, but
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  Speaker 3: we saw a love opportunity in New Zealand. For sure.
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  Speaker 2: Is breaking up the supermarkets the way to go about this?
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  Speaker 2: I mean, what for you were the biggest barriers.
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  Speaker 3: The government regulation? I suppose real estate prices was a
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  Speaker 3: massive barrier and is a massive barrier. Just not a
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  Speaker 3: lot of retail space available to be purchased or a rent,
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  Speaker 3: so I think that's a huge barrier. And then logistics
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  Speaker 3: as well, getting stuff into the country at a nice
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  Speaker 3: timely manner was also of an issue, but we got
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  Speaker 3: past that in the end. But for a new entrant
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  Speaker 3: going to the market, it's simply the cost of getting
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  Speaker 3: into the market, which was a big barrier.
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  Speaker 2: And that was less to do with what the competitors
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  Speaker 2: were doing, but more to do with regulation. Do you
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  Speaker 2: mean like zoning of land and stuff?
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  Speaker 3: Yeah? Absolutely. I mean when we built a building in Auckland,
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  Speaker 3: we had to build a a three story building or
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  Speaker 3: four story building because typically a costco around the world,
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  Speaker 3: is you know fourteen hectares of land or fourteen acs
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  Speaker 3: of land I should say with you know, seven hundred
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  Speaker 3: car parking spaces on one level in New Zealand, that
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  Speaker 3: simply wasn't the bible to purchase at all. And so
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  Speaker 3: part of the cost of getting into the country is
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  Speaker 3: you have to buy a limited amount of retail land,
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  Speaker 3: which costs a lot more money to buy. And then
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  Speaker 3: because you're building a structure that's smaalty story, it costs
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  Speaker 3: two or three times more than what a typical structure
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  Speaker 3: would cost anywhere else in the world.
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  Speaker 2: With logistics that you've clearly something that COSTCO was able
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  Speaker 2: to overcome. But is that something that we just have
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  Speaker 2: to accept. I mean, we are so far away from
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  Speaker 2: the rest of the world.
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  Speaker 3: No, you don't have to accept it. All you have
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  Speaker 3: to there there has to be more more ships more
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  Speaker 3: often going into the country, which you can, which gives
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  Speaker 3: you a better certainty of supply, and that works both ways.
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  Speaker 3: It works with we were buying New Zealand merchandise to
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  Speaker 3: sold Australia, getting that certainty of sailings and getting to
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  Speaker 3: arrive on time was also pretty important. So I think
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  Speaker 3: that's a country problem, and it's the same in Australia
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  Speaker 3: as well, just a different scale.
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  Speaker 2: Are you surprised that the government hasn't just picked up
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  Speaker 2: the phone and rung Elder yet, you know, to try
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  Speaker 2: and find out what their views are. Why the hell
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  Speaker 2: they aren't coming here?
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  Speaker 3: Well, it's a good it's a really good question. I
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  Speaker 3: know that coming to New Zealand from North America, or
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  Speaker 3: coming to New Zealand from Asia, or coming to New
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  Speaker 3: Zealand from Europe, it's a long way down there, and
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  Speaker 3: to start an operation down there without any infrastructure is
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  Speaker 3: a pretty complicated business and it's whiskey. But most of
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  Speaker 3: the country, most of the companies are investing in New Zealand.
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  Speaker 3: Who can invest in New Zealand at first start of
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  Speaker 3: their operations in Australia. So they've got an infrastructure place
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  Speaker 3: like Costco did and they're able to leverage that and
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  Speaker 3: bring those goods, the same goods to market into the
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  Speaker 3: New Zilla market. So yeah, I think Oldie would be
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  Speaker 3: a great fit for the New Zellan market.
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  Speaker 2: To be honest, why do you think they're not here?
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  Speaker 3: They're a pretty conservative life. I don't have much to
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  Speaker 3: do with them, but you know they like to build
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  Speaker 3: their infrastructure and expand from there, so I would be
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  Speaker 3: surprised if they haven't looked at the New Zealand market
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  Speaker 3: in more than a few times. But I don't have
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  Speaker 3: any inside tack on why they're not there already.
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  Speaker 2: Yeah, we've definitely tried to get them on a lot
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  Speaker 2: of a number of times. It's not for lack of trying.
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  Speaker 2: Hey what's with Costco having one store? Do you think
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  Speaker 2: are their plans for more? Do you know?
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  Speaker 3: Like?
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  Speaker 2: What is that?
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  Speaker 1: Edit?
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  Speaker 3: Yeah, No, there was when I've been retired now for
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  Speaker 3: a year or a year and a bit now, so
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  Speaker 3: when I left it, it definitely was. We're looking at
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  Speaker 3: different parts of the New Zealand market Auckland and christ
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  Speaker 3: Church and Wellington with the City of Interest. So where
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  Speaker 3: that's at right now, I don't know. I can't help
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  Speaker 3: you with that one, all.
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  Speaker 2: Right, Patrick, You've helped us with a lot more than that,
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  Speaker 2: so I appreciate your time. Patrick Noon, managing director, Former
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  Speaker 2: managing director. I should say cost code.
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