You may have heard online retail behemoth Amazon will soon be establishing the first of many fulfilment centres in Dandenong South, Victoria.
It’ll make receiving your online purchases that much quicker, but it’s also a move that will further disrupt a dwindling retail market; experts predict the e-commerce market could double in the next decade.
UTS academic in marketing Bruce Perrott has been following the changes in retail and online shopping and has written previously on the poor strategy of Australian retailers providing an opening to overseas names like Zara and H&M to enter the local market.
Now, with Amazon dominating the online retail world (it’s worth $427 billion and number three on Forbes’ list of the world’s most innovative companies), Perrott says Australian retailers are again falling behind their peers in jumping on emerging online opportunities and catering to today’s modern consumer.
“Traditional brick and mortar retail businesses have had problems embracing e-business so that it becomes an integral part of the whole. They see the two aspects of doing business separate and distinctive,” Perrott says.
“As consumers move online to access information, products and services, the lack of integration becomes more of an inhibitor to growth and business development.”
Amazon has mastered this integration and effectiveness in the e-commerce-to-retail evolution through algorithms that forecast consumer habits and needs, through speedy order fulfilment and shipping innovation. It makes a visit to a department store seem almost cumbersome for today’s time poor and savvy shopper.
Amazon has also introduced Amazon Go, a hybrid supermarket and pick up store for people who order online. Here their accounts are automatically charged for the items collected without going through a checkout line.
“Australian retail has been slow to innovate and change. We’re seeing problematic performance by retailers, reflected in falling revenue and customer support.”
Perrott believes there has been an element of denial in the sector’s declining performance. Last month, David Jones reported a 25.3 per cent decrease in operating profit on revenue of $2.214 billion for 2017 (an increase of only one per cent from 2016).
“The drop in performance was attributed to a decline in consumer confidence and spending in combination with high utility costs, personal debt, decreases in consumer disposable income, concerns about the housing market and low wages growth.
“And yet, there was no mention of competition and changes in peoples’ shopping preferences and needs,” says Perrott.
“The traditional retail model in Australia, where products are laid to await an interested buyer, is costly and inefficient. When a customer comes along, there is little or no service to provide the information and advice that they may need to make a decision purchase.
“The customer doesn’t become engaged as a repeat and loyal supporter of that retail brand. Is it any wonder that retail is not providing growth that firms like Amazon and Apple are experiencing?”
Perrott uses the Apple store as an example of retail done well in this day and age, targeting consumers and relying less on the general approach of many large Australian retailers. Apple stores generate more revenue on a per-square-foot basis than any other retail chain in the world.
“At an Apple store consumers are engaged in meaningful advice on the products and services of interest. They come back for follow up courses on how to use the product, which keeps them attached to the brand.”
Shopping mall viability has been impacted in the US by changes in retail buying habits, with many regional centres falling into bankruptcy. In an attempt to innovate and avoid a similar fate, Perrott says the Scentre Group has recently added more than 100 new retailers to 39 Westfield malls, with food, home renovations and technology some of the growth areas. Food is being seen as important catalyst to entice shoppers to visit retail locations on a more frequent basis.
“You’ll see many shops changing with new approaches and new retail concepts at key Westfield centres. The face of retail may be changing as never before.”