Online Should be Saving Australian Retail, Not Killing It

Recent financial reports regarding our biggest retailers in Australia paint a picture of dire straits. David Jones, Myer and Harvey Norman all publish concerns that profits may be down as much as 15 percent by the end of the year and this is on the back of a previous poor year.

Such bad financial news is not that uncommon in today’s current financial climate. All over the world businesses are struggling and looking at ways to maintain profitability – some local importers even going to extreme measures to form cartels, potentially alienating customers in the process.

It would also be of little surprise that the previous mentioned businesses receive less than 1 percent of their total sales from online. Which should make you wonder; if online retail is predicted by NAB Online Retail survey to keep growing as much as 20 percent year-on-year over the next few years, why is there not more interest and emphasis on online? As a shareholder in these businesses shouldn’t you be demanding online effort and mobile phone presence over and above the $300 million store upgrades?

Macy’s, the giant US retailer, recently announced a retail sales increase of 7.3 percent for comparable store sales for the first quarter of the year, with online sales raising by 35 percent – some incredible sales figures indeed from an economy often touted as not even being as strong as ours at the moment.

Overall online sales for Macy’s are estimated to be between 7-8 percent of total retail sales. It is little wonder that Macy’s are able to survive tough economic conditions better than some of our local traders. Macy’s, perhaps through tougher economic conditions and perhaps due to increased competition, has recently taken on some drastic changes to the business to try and ensure profitability and long term survival. Integrating operations, consolidating divisions, providing customer-centric local initiatives and developing an e-commerce business and online order fulfilment have been the schemes implemented to help achieve this growth.

So why can’t it be done locally? Why do big bricks-and-mortar traders have to continually offer tired and old arguments about not moving online and not embracing the future? When we look over the world to other well established bricks-and-mortar sellers (some of the sales percentage from their online efforts are very impressive, John Lewis in the UK over 16 percent, Saks over 9 percent and Marks & Spencer nearly 6 percent) and will surely continue to grow and add not only profits, but brand value and an engagement with the next generations of shoppers.

The worry is that the longer change takes to occur the more overseas sellers will strategically target Australian consumers and the more potential job losses we might see. To the bricks-and-mortar guys I say, “Online isn’t the enemy”. It might actually be the best friend you have.