Australian department store Myer is preparing to shift nearly 60-65% of its online fulfilment from stores to its newly revamped national distribution centre (NDC) in Ravenhall, Victoria.
Myer CEO John King confirmed the move will be finalised once the NDC becomes fully operational, expected in the first quarter of 2023.
“We're operationally testing now in a small way, but we'll be fully operational in Q1 calendar year next year,” King said. “That will give us significant savings, which we will probably outline in more detail in the next results update. So that just gives us great efficiency.”
Myer took possession of the 40,000 square metre NDC in Victoria in mid-2022.
The warehouse is expected to hold over 100,000 SKUs, with the company fitting out the facility earlier this year, including the onboarding of new technology such as pedestal sorters to sort products by store and/or carrier for cross dock, store replenishment and online orders.
The NDC will also feature more than 200 Autonomous Mobile Robots (AMRs) and three different AMR technologies - Geek+ RS8 Shuttle, P800s, and Körber’s sortation solution.
“We think that picking a product in a store compared to it being automatically picked by a robot in a distribution centre is a significant difference in the fulfilment cost,” King said. “So we'd expect that to fall to the bottom line.
“Also, the second phase of the NDC is to take on central stocks. So rather than fully allocate to stores, it gives us flexibility to send the right stock to the right place at the right time.
“That will provide us with an upside in sales and margin in terms of sending stock to the right place, and also a reduction in markdowns in that we won't be over-sending stuff to the wrong place.”
The facility is currently running on one shift. King said due to its fully automated structure and use of robots, it can run on three shifts if needed.
“We have the capacity to do that,” he said. “So it gives us certainly another billion and a half worth of sales capacity - in terms of the business if not more.”
Myer expects to deliver its first products directly to consumers from the NDC by Christmas.
The move comes as 20.5% of Myer’s overall sales came via online in FY23, with the channel growing in revenue by 163% from FY19.
In FY23, online sales were at $691 million, and returned to growth in the second half following slips in the immediate-term post-COVID.
In total, Myer’s overall FY23 sales lifted by 12.5% to $3.3 billion compared to FY22.
King said its multi-level price offerings at Myer are a key driver for customer attraction and retention.
“On the one hand, we are selling candles for $750 and fragrances for $500,” he said. “But then also people are looking at our opening price points and trading into those.
“That's the beauty of our business in that we have that ‘Good, Better, Best’ opportunity and people can trade up and trade down. It really is a mix across the park, and also it depends on the category.”
King said there is a balanced mix between brand-loyal consumers and those who are open to exploring new brands at different price points.
Chief financial officer Nigel Chadwick said Myer customers are buying into its transitional spring/summer merchandise, noting that beauty remains strong despite the slowing of consumer spending as 2023 progresses.
“We said before that, when you go into slightly tougher economic conditions, people stop spending on homeware and stop spending on men, although we still have some very successful standout home businesses within that,” Chadwick said.
“But at the moment, all I'd say is that what we're seeing is a good uptick in the new season merchandise, which is helping that improved performance from July and August.”
Meanwhile, King confirmed the company is still looking for a new location in Brisbane CBD following the closure of its Myer Centre location earlier this year.
He added that if Myer had stayed in the Myer Centre, it wouldn’t have made any money.
“We were looking to downsize the store anyway,” King said. “So we will pick up a fair chunk of that in the other stores.
“Overall, it will affect the top line a bit, but it's not gonna affect the bottom line very much at all. We're focused on the bottom line: profitable sales.”