Major Aussie retailers finally embrace online shopping

Sarah Michael
news.com.au
May 30, 2012

AFTER holding out in the “retail wars”, major Australian stores are finally committing to online shopping, spending millions to ramp up their offerings.

Target is the latest to expand its online range, with owner Wesfarmers today announcing plans to spend $30 to $40 million restructuring the business, including providing 60,000 products on the web.

Other changes include reducing delivery costs to ensure lower ticket prices, investing in website functionality and driving 21 per cent month-on-month online sales growth in 2012.

The move follows Myer’s recent proposal to spend $20 to $30 million to boost internet sales, and a pledge by David Jones to spend a “large component” of its projected $70 to $80 million capital expenditure on online retail.

Commonwealth Bank senior retail analyst Andrew McLennan said major Australian retailers had lost sales by leaving their online drive so late.

Smaller retailers had been filling the gap but this current push could quickly change the balance, Mr McLennan said.

“These guys have massive buying power, scale of distribution and massive advertising budgets and when they start to reallocate that to things like Google ads they absolutely swamp the little guys,” he said.

Another benefit of “coming late to the party” was to take advantage of the innovation of the past few years, he said.

Morningstar equities analyst James Cooper said listed companies were often slower to move on major strategy of this type.

“There’s no doubt that this is a major addition to strategy for these department stores so there’s likely to be an element of indecisiveness over what scale to actually approach the new strategy,” Mr Cooper said.

“And until they convinced themselves they wanted to invest, it would have worried investors with all this cash flow disappearing.”

He said companies needed to have a firm plan to announce before taking it to the market.

Grant Harrod, CEO of multichannel-communications firm Salmat, says moving into “omni-channel” retailing was harder for established “bricks and mortar” stores.

“It challenges everything in your business, your supply chain, your merchandising strategy,” Mr Harrod said.

“But when you have your business only online you are able to move your business warts and all online.”

The executive director of online retailer Deals Direct Paul Greenberg said there was no script for online retail and companies just had to “get into the game”.

“We’ve tried different models that haven’t succeeded, we’ve opened websites and closed them, we’ve tried different categories and product lines that haven’t worked. It’s all part of it,” Mr Greenberg said.

Mr Greenberg said the slowness of the bigger players had actually held smaller retailers back because it has sent the wrong message to the public about the credibility of online shopping.

“I’m not worried about being swamped,” he said. “I think consumers will grow, I think the pie will grow and I’m happy with a smaller slice of a bigger pie.”