Wesfarmers group managing director Richard Goyder says US online retail behemoth Amazon will "eat all our breakfasts, lunches and dinners", unless Australian retailers become more innovative and barriers to competition are removed.
Mr Goyder told a retail forum in Sydney on Tuesday his biggest fear was not the competitive threat from Australian retailers, but tech companies such as Amazon, which are gearing up for a major push into Australia.
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"We've got big competition online and through a physical presence … we are in a disruptive, disrupted world," Mr Goyder told about 450 retailers at the Retail Leaders forum.
Mr Goyder said online retailers such as Amazon, Google and asos.com could trade 24 hours a day, seven days a week and 365 days a year, while Australian bricks and mortar retailers, including Wesfarmers' Bunnings, Kmart, Target, Coles and Officeworks chains, were restricted by archaic trading hours and excessive regulation.
In Perth, for example, some large bricks and mortar retailers could only trade for six hours a day on Sunday, which is now the busiest shopping day of the week in other cities.
However, the concept of pure bricks and mortar retailing was fast abating and all retailers needed to have an online and social media presence, he said.
Wesfarmers' online sales reached $968 million in the December-half and each of the group's brands are investing heavily in e-commerce and digital content to better engage with customers.
Mr Goyder urged the government to develop policies that encouraged Australian companies to be globally competitive and pursue world-class productivity and innovation.
"What we need is sound economic management that encourages investment and innovation so businesses can employ more people, take calculated risks and create value for all stakeholders," he said.
The federal government's Innovation Package was a good step, but unnecessary regulations needed to be removed and new regulations should only be introduced where there were clear public benefits.
Mr Goyder also reiterated his concern about proposed changes to competition laws, particularly misuse of market power laws, saying regulating to protect certain levels of business from competition was against the national interest.
Wesfarmers' retail earnings rose 9.2 per cent in the December-half, underpinned by strong growth at Bunnings, Kmart and Officeworks and solid gains at Coles.
But earnings from Wesfarmers' coal and industrial operations plunged 88 per cent, wiping out most of the retail gains, limiting group earnings before income tax growth to 1.6 per cent.
While the challenges in the industrial division were not unexpected, Wesfarmers shares, which went ex-dividend on Monday, have fallen 10 per cent to $39.05.
Antares Capital portfolio manager John Guadagnuolo said while Coles delivered a good result investors were disappointed at the lack of leverage. Coles' earnings rose at the same rate as sales as Coles cut prices to remain competitive with Woolworths.
Mr Guadagnuolo were offshore investors were also shorting housing-related stocks in expectation of a downturn.