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What is the future of regional distribution?

The landscape of regional towns has constantly been a debate over the influence and presence of big city corporate brands and the role of local independent business built on a foundation of relationships. 

Evidence would suggest these are increasingly convergent paths when it comes to the business landscape of regional towns all over the world. The combination of a recognised national brand with local ownership is evidenced by the growth of owner operator businesses such as Telstra, Terry White Pharmacy, Mitre 10, Escape Travel, and Autobarn to name a few.  The owner operator model is not a recent revelation to country areas.  In response to high fixed costs and reduced population density many groups such as Darrell Lea, RACV and Australia Post resorted to licence arrangements of various forms.

 
Why in recent years has the activity increased in terms of national brands and owner operator regional models?
There is significant competitive pressure being placed on local or company operated businesses by national owner operated regional models.
 
 A number of the pre-1998 owner operator/co-operative/marketing group business models are also failing to comply with the Franchise Code of Conduct that was implemented in October 1998 within the Trade Practices Act leaving these groups with needless exposure to litigation risk.
 
In the opinion of DC Strategy the next few years will likely see a continuation of this trend of restructuring regional business models creating the further expansion of recognised national brands.  For the reasons indicated above there are opportunities for many businesses if a profitable business model can be identified and implemented.
 
There are a number of sectors where the specialist labour force required are becoming increasingly difficult to not only source but importantly retain. The recent expansion of Escape Travel into regional areas is a good example of the use of franchising as a human resource strategy. The role of local relationships and the fact potential pool of employees in regional areas is less, and in many cases shrinking, poses some interesting challenges for groups looking to secure market share or increase their distribution.
It is worth noting that the street is not all one-way traffic.  Groups such as Fernwood Women’s Health Club and Bendigo Bank have launched successful metropolitan expansion on a foundation of regional origins. The process of groups growing below the metropolitan radar and then expanding is a trend that will continue into the future.
 
In any analysis the total cost and benefit of the regional business model must be focused beyond the unit/store profit or return on investment.  There are a number of hidden costs or revenues in the investment that are often not analysed as they are assumed as part of the status quo or are not well understood. From a cost perspective examples include the head office support costs including travel costs, area managers, senior management time, and additional freight or costs of goods or services sold. From a revenue perspective the extended periods where stock is low or even absent costs money as does the delay in bringing new products or services to more remote areas. These amongst many other issues should all be taken into account when making the decision of how or why to have a regional presence.