Officeworks customers flock to cheaper products, much like in the supermarkets, amid cost of living pressures

The retailer is investing in new fulfilment centres and warehouses, as well as private label stationery, as consumers look to save money in the face of cost of living pressures.

Officeworks boss Sarah Hunter is witnessing more of her customers snapping up private label stationery and office supplies from its store shelves as interest rates ratchet higher and the cost of living pinches household budgets, mirroring the shift in consumer behaviour also experienced by the supermarkets.

Ms Hunter says it is a trend to value by the customer that has been evident for at least the last year, with the office suppliers retailer investing heavily in its breadth and depth of private label products to offer shoppers a real alternative to the brands.

And as the economic outlook tightens, interest rates remain high and consumers are counting the pennies, Officeworks believes its private label offering will continue to shine.

Although Officeworks doesn’t release its penetration of private label products from its proportion of total sales, Ms Hunter said that in the key stationery, education and art categories more than 50 per cent of sales were coming from cheaper – as well as typically higher margin – private label offers.

“I think the fact that we have such a strong private label business, and we offer a number of different price points across the same product, means that it does allow us to offer the customer choice when it comes to price.

“And as a result we have seen strong growth in our private label products that are still great quality but sometimes at a lower price and often at a lower price than the equivalent of branded products.

“So we are seeing customers make choices around how they fill their baskets,” Ms Hunter told The Australian on Monday after she unveiled Officeworks’ new purpose-built import distribution centre in Altona, Melbourne, that has consolidated three other facilities and will drive the retailer’s future efficiencies and productivity.

Officeworks boss Sarah Hunter in the Richmond store in Melbourne. Picture: David Geraghty/The Australian

Officeworks is part of the Wesfarmers stable of retail chains, with Ms Hunter appointed the boss of Officeworks in January 2019. Prior to that, she was the demerger program director at Coles when it was spun off from Wesfarmers.

“We are seeing strong growth in our private label business. I would say it is very similar to the last (Wesfarmers) investor strategy day when I talked about this, almost a year ago, is the continuation of this trend, and we have invested heavily in building these private label brands that are phenomenal brands, we have increased the scale of the ranges, and we are seeing good growth off the back of that investment, and we are seeing customers choose those products.”

The growth in popularity of private label products mirrors similar trends seen at the nation’s leading supermarket chains Woolworths and Coles where customers are opting to fill their baskets and trolleys with own-brand groceries to help alleviate cost of living pressures.

The other key investment Officeworks is making is in strengthening and streamlining its supply chain, with Ms Hunter and her executive team looking to capture more productivity and savings, which is proving a handy buffer against rising inflation and mushroom business costs such as energy and labour.

Its new 40,000 sqm import distribution centre in Altona is built around the promise of improving stock availability and inventory management, enabling a more efficient flow of stock to stores and customers.

“This has less automation, it still has a lot of efficiency, but it is where all our furniture comes in and a lot of our big and bulky paper for example comes in there and from there some goes out direct to customer but a lot to our stores,” she said.

“It’s about relieving capacity to allow for growth, so this facility that’s 40,000 square metres allows us to consolidate from three different facilities down to one and this one is purpose built which means it is far more efficient as well.

“So not only do we save costs, because we are going from three (sites) to one, we’re also saving costs because it’s far more efficient in how it is laid out, and it gives us growth capacity.”

Through the early years of Covid-19 and lockdowns which saw customers migrate to online shopping, Officeworks realised it needed to radically grow its online potential.

“So we have got a lot of capacity for growth now which was one of the big challenges during Covid with the peakiness of that and also the growth that we saw online – it really stretched us,” Ms Hunter said.

“It has been built with sustainability in mind, but it is also far more cost-efficient for us.”

The solar panel system at the new Altona site is expected to save Officeworks at least $30,000 a year in energy bills.

The Altona site now open for business will link arms with Officeworks’ 15,000 sqm customer fulfilment centre nearby in Derrimut, which is powered by 116 solar-powered autonomous mobile robots and 32 sortation robots. A new customer fulfilment centre harnessing the same technology is currently in development in Perth.