Big local retailers will thrive if they embrace online trading
By Wayde Bull, Planning Director at Principals.
It’s a lobbyist’s lot to exaggerate the misfortunes of their cause. As does the Retail Coalition, the pressure group backed by retailing heavyweights Solomon Lew, Gerry Harvey and Bernie Brookes. They’re pressing the government to introduce GST on products bought from online retailers overseas, in the interests of protecting local livelihoods – their own clearly included.
That local retailers now face vigorous competition from online businesses all over the world isn’t in question. Nor is there any doubt that online channels are making it easier by the day for customers to identify the best-value products and services, wherever in the world they may be found. The scale strengths that are inherent in bricks-and-mortar retailing don’t drive success in the way they used to.
But the extent of the home town advantage that local businesses enjoy in the online shopping sector is heavily underplayed in this debate.
At best, online purchases account for 10 per cent of Australian credit card transactions, the Reserve Bank says. Of this, the lion’s share still goes to local, not offshore businesses. Data drawn from a Principals study shows 70 per cent of Australian’s online purchases in February 2011 were in support of local businesses.
Granted, in some of the most discretionary sectors, such as cosmetics, software, music and books, the bulk of Australians’ online purchases are now sourced overseas, or via global device stores such as iTunes. The ease with which these lightweight, or no-weight, products can be shipped here, combined with the often deep price savings available offshore (far greater than a GST will ever bridge), suggest that further closures of book and music stores will be difficult to stem.
But in a far longer list of sectors, local businesses hold a very dominant share of online purchasing. Groceries, wine, beer and spirits, insurance, travel services, event ticketing, stationery, computer and large electrical appliance sectors are close to captive markets for local online retailers. Either the bulkiness of the physical goods, the regulated nature of the local markets or the need to be physically close to customers (practically or emotionally) greatly favours local merchants.
So there are abundant opportunities for local retailers to prosper online by combining new online services with their existing physical network strengths – not to compete on lowest price, but to offer convenience, brand familiarity, fair value and close-at-hand service in equal measure.
When one visits the online stores of the big Australian retailers their ambivalence in making the transition to online trading as a natural extension of their core business is clearly evident, none more so than the big department stores, which offer a paltry array of online merchandise when compared to their global peers.
Herein lies the hope for local retailers. Despite a pretty thin local online fashion offer and acknowledging a real pricing disadvantage versus offshore competitors, local businesses still captured most of Australians’ online fashion and footwear purchases in February: 55 per cent against 45 per cent.
It’s not difficult to understand why Messrs Lew, Brookes and friends are seeking a little pricing assistance from the government to hold their fragile lead. But surely the greater opportunity is to build real online excitement, choice and heartfelt service into their online stores, in a way that’s truly integrated with their existing bricks-and-mortar networks, to deliver all-round value that pure price competition can’t match.
Wayde Bull is the planning director of the brand consultancy Principals.
Published in The Sydney Morning Herald and The Age Business Day – 18th March 2011
First published in The Sydney Morning Herald Business Day - 18th March 2011
