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Down the track - railways' lessons for retail

  • Opinion
  • October 31, 2017
  • Greg Harford
Down the track - railways' lessons for retail

More than a century ago, railways were critical to the development of New Zealand as a nation and were a key part of our national infrastructure. Communities clamoured for rail connections, and the railways were the way that we shifted our goods to market. 

Over time, competition emerged. As roads and vehicles improved, road transport started to nibble away at the railways' unassailable position - the solution was to place limits on how far you could transport goods by road. In the 1930s, the Government made it illegal to transport goods more than 30 miles by road. That meant that if you wanted to shift, say, a shipment of retail goods from the port at Wellington to the fledgling town of Paraparaumu Beach, you were legally required to do it by train - shifting only onto road transport for the final couple of miles from the railway station down to the beach.

Over time, these restrictions were relaxed, and ultimately removed in the 1980s - and while the trucking industry has never looked back, the railways have never been the same again. But while we now have a strong trucking industry, the real competition for the movement of people and freight is aviation. 

For railway employees from the 1950s, it would have been unbelievable to think that there would be hourly flights between Auckland and Wellington carrying people and freight; and inconceivable to think that those flights can cost substantially less than the price of a cross-town taxi or a month's subscription to the New Zealand Herald.

The lesson is that disruptive change can come from anywhere, and we often don't see it. History is littered with examples. In broadcasting, Sky TV's formerly unassailable position as the darling of the sharemarket is under real pressure as online streaming services carves away chunks of its subscription revenue. When we deregulated the postal market in the 1990s there was real public concern about competitors would gut New Zealand Post of its letter volumes, while very few people recognised that the real threat was competition from the Internet and apps on cellphones. Taxis have spent years fighting each other, and are now under enormous pressure from new disruptive alternatives such as Uber. In retail, we were concerned for years about big firms opening department stores in small towns, but now even large retail chains are concerned about the existential threat of Amazon from abroad. And even the threat of Amazon may be dwarfed by the Alibaba ecosystem with its simply massive scale.

But if we can't always see change coming, how can we prepare for it? The first step is to recognise that markets do change, and to build resilience in our businesses to help navigate through changing times. What are the things we can do to build customer loyalty, differentiate ourselves from others and reinvent the way we do things to keep costs down and provide better and more innovative customer services? We're increasingly seeing coffee and kids' entertainment being provided as part of a retail experience, as well as innovations in digital and online retailing and logistics.

How are you preparing?

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