Michael Baker
January 11, 2012 – 10:38AM
The Age
ANALYSIS
A couple of weeks before Christmas, Amazon.com made a strike against its US store-based competition that a lot of them thought was going a bit too far. Using Amazon’s mobile app called Price Check, customers could scan selected products in stores and then buy the same things from Amazon at a discount.
To many, this was another step in the direction of the store-based retailer’s worst nightmare – that they were becoming mere showrooms for Amazon and other e-commerce operators. Even politicians were incensed, including Maine Senator Olympia Snowe, who gave Amazon a dressing-down for attacking the Main Street retailers that employ so many workers.
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Yet bricks and mortar retailers in America had a very decent year in 2011. Retail sales rose by 6.9 per cent in the year through October according to the US Census Bureau. This was not simply a demand-side revival. Rather, technology, which was once erroneously perceived to be physical stores’ permanent undoing, had increasingly been used to rejuvenate them. Start-ups are being conceived around the idea of driving traffic into stores rather than siphoning it away.
Take Reqoop for example, a fashion e-magazine with a difference. Shoppers snap photos of fashion items using a Reqoop app, which then appear on Reqoop’s website with a blurb on where the photo was taken. Reqoop’s editors use the pictures as inputs into their fashion commentaries, to identify new trends and to write about stores, all of which drive shopper visits to the stores themselves. But the key thing was that mainstream US retailers themselves got game again, using a whole slew of technologies to ride the comeback trail.
Meanwhile, what were Australia’s retail chains doing? Many experienced a miserable year of declining sales, while e-commerce grew by by more than 35 per cent. Mainstream retailers were slow to make technology investments and increasingly fearful that their real estate commitments might bury them. Yet few politicians like Olympia Snowe are going in to bat for these poor souls.
On the contrary, after e-commerce got above the radar there was no stopping it from becoming the most celebrated new retail channel in Australia since the arrival of the shopping centre more than half a century ago. Consumers loved it. They embraced it with the same fervour in which they rejected the people they perceived as whining rip-off artists – namely, the leadership of Australia’s major retail chains.
Despite the self-evident justice of a level playing field on GST for all merchandise, whether sourced from domestic stores or from overseas internet sites, anyone who risked taking sides against e-commerce was liable to the accusation of being blatantly anti-consumer or at best a fuddy-duddy.
So the store has been left to fend for itself. To thrive again in Australia, the store must do more, and do it without the help of the politicians. Yet despite the gloom, and completely against the run of play, 2012 will see the re-emergence of the store from the shadow of e-commerce. To be sure, the store will not completely recover until most of those who have been running the industry leave it. And the growth of e-commerce sales will continue to outpace that of stores for some years to come. But the store will still take important steps forward.
So how will it accomplish that? It will start by following the US and the increasingly global model of harnessing the very technological forces that have caused Australian retailers so much hurt in recent years, culminating in 2011’s dismal showing.
Global retailers are making huge investments in cross-channel retailing and Australian retailers are slowly coming to grips with the idea that they must do the same. Some, though not all, will even behave as though they know this. Those who do will revive some of the lost “cool†of mainstream Australian operators, leading to a turnaround in store productivity later in 2012. This turnaround will be all the more pronounced because marginal stores will be closed on a more aggressive timetable than in the past.
A second opportunity will lie in ditching antiquated service models both in word and deed, and substituting expensive ignorance for new technology. In other words, employees on the sales floor will be increasingly empowered with the same digital devices and tools that their customers have, enabling them to locate inventory across the entire distribution network, retrieve product information, and communicate with each other.
Fewer employees will be required but in Australia they are expensive, largely untrainable and who can still find them on the sales floor nowadays anyway?
A third opportunity lies in increasing the size of specialty stores to make them shoppable and interesting, to enable visual merchandisers to do a decent job for a change as they have always done in America. This, however, is less likely to happen soon because it flies in the face of traditional Australian shopping centre economic theory, which insists on itsy bitsy stores. Poky little boutiques will remain the norm, except when larger footprints are demanded by international fashion retailers like Zara, Forever 21 and Uniqlo.
Technology is the best chance for Australia’s store-based retailers. It is about to take over in ways that will lead to the revival of the store as a selling institution, and not just a showroom, as many cynics argue. E-commerce was just a decoy – the real technology revolution will soon show itself.
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