Damien Woolnough and Blair Speedy
December 14, 2012
The Australian
EFFICIENT service, friendly advice on which clothes to choose and a hassle-free exchange if it’s not quite right. Sound like shopping in another era? In fact it’s the next generation of retail experience, if you shop online.
Some online retailers are moving away from heavy discounting and basement prices to compete with bricks-and-mortar stores on what used to be their home turf: customer service.
At the forefront of this trend, which has seen shoppers abandon tinsel-strewn department stores, is Sydney based online retailer The Iconic, which is reaping the Christmas cheer, with sales quadrupling in recent weeks to nearly 5000 orders a day.
At the heart of its business model is the high standard of service, with three-hour delivery in Sydney, overnight shipping for the other capital cities and up to 100 days to exchange a purchase. Next year, the company plans to introduce a system where orders could be tracked and delivered to a customer’s location by mobile phone. New swimsuits delivered to Bondi beach perhaps?
Finn Haensel, who launched the company last year with Adam Jacobs with the backing of a group of international investors, said: “We have a lot of items at the same price as our competitors but that’s not our main difference; it’s the service.”
The three-hour courier delivery in metropolitan Sydney, which costs just under $10, has proven especially popular at Christmas time.
“Usually, 5 per cent of our orders make use of the three-hour delivery . . . at the moment it’s up to 20 per cent with people sending Christmas gifts,” Mr Haensel said.
The peak time for express deliveries is on Fridays from women ordering high heels and dresses for weekend events.
A 100-day free return period, free overnight shipping for products over $20, an active call centre, a live chat option, an advisory blog and secure payment system are the kind of services that have helped Australians overcome cultural obstacles to online shopping.
Mr Haensel said that shopping habits would continue to change.
“Rather than find out that a dress doesn’t fit and return it, we encourage shoppers to pick a few items and return the ones that don’t fit,” he said. “We cover the cost of returns.”
The Iconic launched in October last year; in September, it attracted a $US20 million investment from JPMorgan Asset Management. It started with just four staff and now has 350 employees and sells a mix of labels, mostly local but some international.
It has entered the market at the right time, with the trend towards online shopping growing apace. A survey of more than 4000 Australians conducted last week by online retailer Grays found 54 per cent of respondents preferred to browse and shop online.
Figures from NAB’s Online Retail Sales Index showed internet spending rose 26 per cent to $12.3 billion over the 12 months to the end of October, compared with overall retail sales growth of just 3.4 per cent.
According to NAB, online sales still make up only 5.6 per cent of all retail spending.
However, the Productivity Commission has estimated the online penetration of the fashion sector is about double the rest of the market.
When it comes to competition, The Iconic is looking over its shoulder at other online stores instead of department stores.
“David Jones started its website with a huge launch, but its traffic is not close to what we generate,” Mr Haensel said.
“At the moment we are much faster and much better at service. They still have that bricks-and-mortar priority.”
Their closer competition is international online retailers such as British-based ASOS. In the week ending December 8, ASOS received 837,376 unique visits while The Iconic reached 776,885 visits (Myer had 339,228 unique visitors and David Jones had 306,354 unique visitors). Myer has had a transactional website since 2008, but a little over 12 months ago the range was limited to just 8000 products.
Rival David Jones was also slow off the mark, until this year making do with an outdated website that offered little more than a handful of gift-related product lines.
While their campaign against the GST and import duty exemption for online purchases of less than $1000 from offshore retailers has garnered most attention, both companies have belatedly grasped the nettle of online retailing – a move they had little choice but to make after years of declining sales.
Both companies have tipped millions into new technology platforms – boosting Myer’s product range to more than 50,000 and DJs’ to about 90,000 – and expect online sales to eventually contribute about 10 per cent of sales revenue.
Melbourne Business School associate professor Kwang Lim said: “When something new comes along then existing firms can take a while to respond, or in the worst case they don’t respond at all, like Kodak sticking with film instead of going digital, and now they’re bankrupt.”
A study last year by the Australian Institute found the biggest objection shoppers had to buying online was that they wanted to see the item before purchasing, followed by wanting to have it immediately and not wanting to pay for shipping – all addressed by The Iconic’s sales model.
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