In most Organisation for Economic Co-operation and Development (OECD) countries, consumer spending for the last two years has been flat (0.5 percent growth and a three percent decline in the UK). Forecasts for 2013 are similar. Retail sales are also expected to be flat over the next 18 months with mild growth predictions expected for 2014 (1.0 to 1.5 percent).

KPMG cited ‘sustainability’ as the major issue facing retailers. I don’t agree. Companies that rely on better times to come along for survival will most likely fail. Retailers should instead look to military strategist Carl von Clausewitz, who said “the best form of defence is attack” in his classic book On War. Clausewitz also warned about inaction – “it is even better to act quickly and err than to hesitate until the time of action is past”. Retailers can take this approach by thinking about growth instead of survival, eliminating waste and reducing expenses.

In retail, there’s a fundamental element that must apply – you can’t do well if your costs are too high. This carries on from the ‘good old days’ prior to 2008 when many retailers inherited bloated cost bases. Therefore, retailers should apply Clausewitz’s theory to “pursue one great decisive aim with force and determination” to eliminate waste and reduce operating costs.

But how do you remove unnecessary waste and expense?

Systems and data communications often have a hefty price tag in the retail world. But we need to be concerned about more than just the costs of information technology in the business. In order to have an efficient and effective organisation, retailers require a moderately priced, highly capable and reliable system.

One of Retail Directions’ customers reported an annual net profit increase of £120,000 per store once they deployed our software. A world-class, end-to-end software system, coupled with a successful retail foundation allowed the retailer to release the latent capabilities within the business.

Logistics must be in order

The systems act as the backbone to any retail business. Once these are in order, retailers can turn to logistics. Clausewitz addressed the supply chain in the 1830s, saying “there is nothing more common than to find considerations of supply affecting the strategic lines of a campaign and a war”. This idea still applies today. Most retailers have clunky supply chains. Another Retail Directions customer experienced a £0.48 per item saving within the supply chain after implementing our software into their warehouse. With around two million items of stock moving through the warehouse, this translated into nearly £1 million extra in their bottom line. For them, this was a 20 percent improvement.

Process-oriented business management

There’s a third area that must be addressed in order to create a seamless retail operation – process-orientated business management. Also known as Total Quality Management. This management methodology, while not widely practised in Australia, allowed Japan to increase their GDP ten-fold within less than 40 years.

There are many elements to TQM but one of the most important is the ability to distinguish between process issues and incidents. Process issues require process improvements and the latter needs case-by-case handling. TQM principals are worth analysis but it will take time and a different way of thinking. If you’re able to master this then you business should see the results.

Results speak for themselves

Finally, when all the handbrakes on your business are released, you will be able to see the results of being a good merchant and a great trader. Retailers can learn much from Clausewitz’s way of thinking – “everything in war is very simple; but the simplest thing is difficult”. This is true in retail also. When the going gets tough take inspiration from Clausewitz: “if the leader is filled with high ambition and if he pursues his aims with audacity and strength of will, he will reach them in spite of all obstacles.”

The post Tackling Retail Challenges: The Clausewitz Way appeared first on Power Retail.

Pureplay retailer, Yihaodian, developed the campaign in conjunction with Ogilvy and Mather Advertising Shanghai, in order to tempt more shoppers away from physical outlets.

Shoppers aren’t able to shop at – let alone see – the virtual stores without the use of the Yihaodian Virtual Store App. However, the location-based phantom stores are probably a good enough reason to download the app, for the locals in Shanghai, Beijing, Guangzhou and Shenzhen.

Yihaodian Chairman Yu Gang has expressed his excitement for the initiative, describing the full-featured stores for those who won’t have time to check them out before the campaign finishes.

“The most distinguishing feature of our augmented reality 3D virtual stores is its bringing online shopping to the offline world, combining the advantages of online and traditional retail through constant innovation,” Gang said, according to Campaign Brief Asia. “Not only is this one-stop shopping experience cost-effective, it’s a direct home delivery service that’s free from the restrictions of store location, shelf space and operating hours through its mobile and e-commerce capabilities.”

Labelled ‘a world-first’, this ploy from Yihaodian is bound to be repeated elsewhere soon enough – it may even serve as a glimpse into the future of bricks-and-mortar retail, where certain features are coupled with augmented reality functionality.

The post Chinese Online Retailer Battles Bricks-and-Mortar with Invisible Stores appeared first on Power Retail.

The Purchase Path of Online Buyers in 2012 was recently produced by Forrester Research in conjunction with the eBay-owned e-commerce services provider, GSI Commerce, with the goal to assess exactly how online shoppers were being influenced by the various marketing touchpoints along the digital path to purchase.

After a review of 77,000 online transactions that took place over a two-week period during April 2012, the study concluded that paid search was the highest performing marketing tactic, when it came to acquiring new customers. In fact, Forrester reiterated the importance of search by naming it “the single most important tactic” for those retailers seeking new customers.

The study also found that 39 percent of online transactions from new customers began with clicks from paid or organic search results. Additionally, 7 percent of new customers were inclined to type in a specific URL to find a website, while 6 percent would use a search engine together with at least one other tactic.

While paid search worked wonders in attracting new customers, the study found that email marketing was more effective in driving purchases from repeat customers. According to the report, 17 percent of repeat customers were using email, along with one other marketing tactic, to find products of interest. That’s compared to just 4 percent of new consumers that were likely influenced by email marketing.

About 30 percent of online transactions from repeat shoppers were the direct outcome of a click on an email that was sent from a retailer. Forrester suggested that existing customers were more likely to be receptive to retailers’ marketing messages and therefore, email marketing was the most effective tactic in influencing shoppers to make repeat purchases.

At a time when social networks such as Twitter, Facebook, LinkedIn and Pinterest have taken on significant prominence, perhaps the most surprising finding to come out of the study was this: social channels were not all that meaningful when it comes to influencing sales online. The study found that less than 1 percent of e-commerce transactions – for both new and repeat shoppers – could actually be traced back to social networks. Before readers commence outrage, check out the influence of email versus social media on repeat customers in the graph below.

While paid search and email marketing influenced the most conversions from new and repeat customers, social media worked best as a way to generate awareness about brands, products, and services.

What are your thoughts on the findings? Do the results from your social media efforts tell a different story?

The post Email and Paid Search Biggest Influencers of Online Sales appeared first on Power Retail.

However, one element has been missing from the online garment purchasing process – how can you tell if the item fits? The inability to accurately judge how a piece will look before the sale is preventing some shoppers from buying online.  But this may soon be a thing of the past should one enterprising Estonian business has its way.

Fits.me have turned to robots invented by Estonian universities that can change in size and shape in order to help their customers get the right fit.

“Our robots and the Virtual Fitting Room technology have solved the main problem that online clothing retailers face – the lack of a fitting room,” Fits.me’s Co-founder, Heikki Haldre said.

Measurement data, uploaded by customers to the Virtual Fitting Room site, is then recreated on the variable robotic mannequins in order to get a realistic sense of how a given garment will look.

Estonian universities invented the shape-changing robots used by Fits.me.

The robots can assume around 100,000 different body shapes, but only 2,000 are being used for commercial purposes at this stage. They have already attracted attention from online fashion retailer Otto, men’s luxury brand Ermenegildo Zegna, as well as the American retailer Park & Bond.

Fits.me has surveyed the stores using the technology, and reports that these brands have seen a 57 percent increase in sales on average. It has also highlighted a 35 percent average drop in returns.

The Estonian robots are a great example of how innovation can transform the retail sector, but don’t expect every online clothing store to jump on the bandwagon immediately. The Fits.me Virtual Fitting Room will be in high demand, however deploying the technology can take a while.

“On average, it takes six to eight weeks to launch the technology at an online retailer,” said Haldre. “So we’ll have to work hard to introduce the Estonian robots to thousands or even hundreds of retailers.”

The post Virtual Fitting Room Made Possible by Estonian Robots appeared first on Power Retail.

The display, developed by German tech house, Vertigo Systems, uses simple image-projection technology, combined with a motion-capture camera and some powerful software, creating a unique user experience that is well positioned for gamification.

The technology is such an attraction that it will even help bricks-and-mortar stores to fight the war of attrition against online retailers. Well, that’s according to Andrew Becker, Managing Director at DAT Media, that oversaw the recent installation of living surface.

“Some retailers are looking at living surface as a key differentiator and a way of generating increase store traffic,” he said in a press release. “The need to create a destination and a reason for consumers to visit physical stores is now critical for bricks and mortar retailers, given the web provides such broad access to price and ranging options.”

living surface has been deployed internationally by companies such as Coca-Cola, Epson, Toyota, Heineken and Samsung, however this is the first time it has been brought to Australia. The beauty of the system is its ability to be customised for the advertising campaign at hand, so its uses are really only limited by the imagination of the marketing teams that work with it.

While Becker believes the technology is a boon for traditional retailers, Justin Huntingdon, General Manager for DAT Media points out the technology could be adapted for online needs.

“At this point, there aren’t any businesses using living surface to direct traffic online,” Huntingdon says, “however, it could be configured to be incorporated into a social media campaign, thus driving traffic to online sites.”

If you owned a living surface in a public space, how would you use it to maximise traffic?

The post Big W Debuts State of the Art Advertising appeared first on Power Retail.

The proposal comes as a result of the banks seeking to alleviate the mounting pressures to respond to demand for real-time payments and round-the-clock service. However, the move has prompted concerns from the unions who say  the application is the first step down the path of cutting pay as well as the loss of the weekend entirely.

The National Secretary of the Finance Sector Union (FSU), Leon Carter said the application was the phase one of a two-step plan to abolish penalty rates for working on the weekend.

“In the second round they will go after the money,” Carter told The Australian Financial Review. “These people have no credibility when it comes to protecting, let alone advancing, people’s conditions.

“Our industry already has the highest level of unpaid overtime in the economy. We’re not going to stand by and watch hard-won conditions eroded just because the industry wants to increase its already enormous profits at the expense of ordinary workers.”

The financial institutions made the application through Ashurst Lawyers to change the Banking, Finance and Insurance Award 2010. They have all rejected the FSU’s claims that they are seeking to remove penalty rates, with a spokesperson for ANZ even saying that the bank was “happy to support the amendment as part of the broader joint application” but that it won’t change anything because the institution already has an existing agreement in place for weekend work.

While the banks currently deny they plan changes to weekend penalty rates, the Australian Retailers Association and the National Retailers Association are seeking to have them reduced by half. The retail award currently entitles workers to 100 percent loading on Sundays, which the retail groups say is preventing some stores from opening and competing with online retail.

A Productivity Commission report in December found that the retail sector has one of the highest relative labour costs in the world, a fact that the NRA and ARA have been quick to jump on.

After the disappointment of seeing the proposed changes to the GST threshold rejected by the Productivity Commission last year, it seems bricks-and-mortar retailers have reviewed their tactics. Now, instead of asking the consumer to pay more for the pleasure of shopping, they will be demanding their staff get paid less.

The question is: will dismantling the weekend direct the struggling sector towards long-term profitability?

If retailers chase this brand of logic to its ultimate conclusion, they will also end up keeping stores open all night in order to keep up with online competitors.

The post Online Pressures Threaten the Weekend appeared first on Power Retail.

E-commerce is seen as the place to buy items cheaply, it’s seen by retailers as the greatest threat since the GST was introduced, and as a concern for vendors who don’t want to see their margins slashed and brand damaged. Recent success stories such as Ozsales.com.au, CatchOfTheDay, Scoopon, Supermarket Deals etc., has seen the perception of bargains online expand and dominate the online industry; but is this necessarily good for the rapidly growing, fledgling e-commerce market of Australia? Will the idea consumers hold – that everything is cheaper online – be a hindrance for our industry?

Items will always be on sale at some point of their product life cycle, but having an online sales industry dominated by bargain and discount stores is akin to having the reject shop or the $2 shop leading traditional retail.

eBay and the Bargain Tradition

eBay, Australia’s and possibly the world’s most dominant online marketplace, was built on auctions and the belief that you could grab a bargain. Gradually, eBay has seen a rapid reduction in auctions and a move to ‘buy it now’. This, combined with eBay’s recent desire to attract big brands and strengthen its position as the first port of call for Australian shoppers, may hide some other potential issues for the online space. Hitwise will report ebay.com.au is the most popular Australian online shopping venue by some distance, having over 20 percent market share. And even with a move to add brand names normally associated with traditional retail, the emphasis is still on bargains. Their recent ads promote ‘dress like a model shop like an accountant’. So even as eBay aim to move away from the perception and belief that they are a place for bargains – by placing brands such as Alannah Hill, Witchery, MIMCO etc. – the products are often heavily reduce or out of season, adding further weight to the online clearance perception.

Australia’s unique e-commerce position is partly to blame as well, given the major bricks and mortar sellers have demonstrated the energy of sloths to embrace online, whereas companies such as DealsDirect, OO, Kogan, OZ Sales have all been able to gain massive market share that otherwise might not have existed. With online sellers being dominated by discount sellers, it is little wonder that the perception that everything is cheaper online is potentially hindering Australian brands and department stores in increasing their online offering. Old-style vendors are scared to look outside the box, especially if discounting is continued or expanded, then online will interfere with long term brand development by killing price perceptions that have taken years to develop. If a widget had a perceived price of $5, but this has since shifted to $2 as a result of online discounting and clearing of products, then the long term effect on the widget will be incredible. Who would invest into developing this widget if the margins are so greatly reduced?

Australia Versus the World

Goods have always been cheaper overseas – I remember my dad telling me this as a kid – and there are many reasons why things are cheaper overseas. But only recently has it become such a major concern for many retailers. This is primarily due to the high Australian Dollar combined with the lack of local options to purchase either traditionally or online, and US and UK online retailers are keenly targeting Australian consumers. The offerings from overseas retailers are usually cheaper (including overseas post being factored in) and would most likely still be cheaper than a similar item in store locally – even if the Gerry Harvey backed notion to collect GST on every item purchased online was acted upon.

No GST on overseas items does mean products are a little cheaper, but the item’s wholesale price is typically much lower as well and costs for retailers are vastly different overseas.

The freight component is also a concern for local traders, with Australia Post’s monopoly over our great, vast country – competitive local shipping prices are hard to find. Increased freight competition and travel options for sellers based in UK, USA and China – mean it is possible to ship products cheaper from Hong Kong to Melbourne, than Melbourne to Brisbane.

A Gloomy Outlook

So what long term impacts can such a notion and perception of discounting have on an industry? Is online just destined to be the end-of-line, clearance centre in Australia, with overseas sellers filling the brand and in-season void? While such a portal can be of terrific use for consumers, who really pays in an increasingly competitive environment?

There will come a point of time when returning a profit can become impossible while selling certain products online. It is this long term possibility that might put more Australian jobs at risk. The National Retail Association reported on the 16th of March that the retail industry will shed 118,000 jobs in the next three years as a direct result of online shopping, but the risk might be in the future that online jobs will be threatened if wholesalers and suppliers are continually cutting costs and margins as thin as possible and that overseas businesses continue to fill the void vacated by traditional retailers. Often the first thing to go in a business is labour.

So this then presents a problem for the online industry.

The Australian e-commerce industry, according to the NAB commerce index, is 4.9 percent of all retail, but growing at 29 percent year on year, compared to 2.5 percent growth for traditional retail. Yet none of our major retailers have any meaningful presence and are unable to capitalise on this growing section of retail. First businesses to the online market and with the longest credibility (remembering how important credibility is to online sales) are typically based on offering cheaper products – think DealsDirect, Kogan, oo.com.au, CatchOfTheDay and the savvy, experienced overseas sellers that are now starting to mobilise in a serious way for the Australian consumer’s dollar. These factors have added market power, with a high AUD and an increasingly conservative Australian economy where value for money is becoming paramount.

The internet has meant that our borders are now opened up to more traders, making it potentially a boom for consumers, however with many factors pushing Australians to buy from non-Australian businesses, will local business invest the required time and effort to make a strong, viable online industry not just predicated on discounting?

Now really is the time for local retailers to be embracing and ensuring their spot online before it is too late. Soon space will be taken over by discounting businesses and overseas-based sellers, risking further job losses in the online industry.

The post Is Ongoing Discounting Good for the E-commerce Industry? appeared first on Power Retail.

Of course, Amazon is already working towards a goal that not all that many people have realised just yet – India is a perfect environment for pureplay online businesses to become truly successful. In fact, a recent report by the Boston Consulting Group says online retail in India may be a $84-billion industry by 2016, ten times more than it was in 2010.

Many people in India live in regional towns or villages that do not have access to the same stores, brands and products that people in the large cities do, but now they are beginning to find they can purchase these items online at relatively competitive prices.

“Internet penetration has allowed online consumers to actually get access to the same selection, pricing, discount and deals, that so far was available to their cousins in larger cities,” K. Vaitheeswaran, CEO of Indiaplaza.com told the Business Standard.

Not only does India have one of the world’s largest populations, it is also the world’s youngest internet population, with 75 percent of users aged under 35. Many of these have a higher disposable income than their parents did at the same age.

Of course, with such potential and scope, India has already seen a number of interesting e-commerce success stories, and there have been major innovations made along the way. One practice that some might find odd is the cash-on-delivery model that many Indian online businesses use.

“A lot of people do not understand how to use a credit card,” said Rohit Bansal, Co-founder of daily deals site Snapdeal.

So Amazon has shouldered its way onto this scene with the site, Junglee.com and it is tipped to be a success. With much of the country only just beginning to be opened up to logistics companies, the online trade is set to grow. It may be just the right environment for innovative pilot businesses to spread their wings, however many in the industry consider the competition to be too fierce. With so many options for affordable supply (all of Asia is right on its doorstep) India will surely continue to tempt entrepreneurs to try their luck.

Would your business work in India? Where else in the world do you think would be good to set up shop?

For more information on capturing international audiences, see Power Retail’s Special Report #21: Growing Globally.

The post Online Retail in India Continues to Pick Up Pace appeared first on Power Retail.

Some retailers have realised that part of the issue is simply that they aren’t online, or that they aren’t handling their existing e-commerce opportunities correctly. The convenience and ever-improving security of the channel is drawing an increasing number of consumers, which in turn makes online nearly impossible to overlook as a retailer.

Following this trend, one of the latest retailers to release a fully-fledged e-commerce alternative is Australian fashion label GASP.

The online fashion business has already proved itself as a workable model, with businesses like Birdsnest, ModCloth and SurfStitch demonstrating the power of pureplay enterprises. However, other large players are beginning to appear on our shores from the US, brands like J.Crew with a large international following and a solid foundation in their home territory.

Therefore GASP is entering the online channel against established competitors, a situation that is much more ideal than it may sound at first.

GASP now has the potential to learn from the mistakes of those businesses that went before, bringing with it all the benefits that an established fashion label has to offer. The website offers an uncluttered, stripped-back feel, while still providing a complete user experience.

E-commerce specialists, Solutionists built the site to focus on a totally seamless feel, integrating inventory with point-of-sale software to afford the customer transparency when it comes to stock levels and clearance items. The site even offers a ‘Find in Store’ feature, which enables a shopper to see whether a particular item is available at a given location.

James Gilbert, Director of Solutionists, believes the key behind multichannel success is through providing true integration between on- and offline channels.

The Dotti website is just part of Just Group’s online offering.

“Many retailers treat their web stores as standalone shops, where their customers are expecting an integrated experience,” Gilbert said. “If they can get in in store, whether ‘it’ is product, stock availability, customer services or loyalty schemes, they expect to get it online as well.”

With free shipping anywhere in Australia and the ability to ship just about anywhere internationally, GASP’s online offering could manage to do what its PR team couldn’t last year in raising the brand’s profile.

GASP isn’t alone either, as other clothing brands continue to eye off the online space hungrily, with Just Group’s Chief Executive, Mark McInnes aspiring to achieve 10 percent of total sales via online by 2015. Through offerings like the Dotti website, the company has increased online sales by 100 percent in the latest half and is positioned to continue in a similar vein.

These businesses are positioned to compete strongly in their local markets where they are already well known, but their ability to succeed in the face of adversity in the form of US and UK imports will be the deciding factor when it comes to offshore expansions.

For in-depth advice on how to expand your business overseas, see Power Retail’s Special Report #21: Growing Globally.

The post Australian Fashion Labels Make a Good Fit Online appeared first on Power Retail.

Now it’s Australia’s turn.

In an exclusive partnership with fashion portal ShopStyle.com.au, J.Crew will be advertising free shipping and free returns for two months beginning today. For those that appreciate the brand’s style, the ease of delivery is sure to be tough to pass up.

Laura Yeomans, Country Manager for ShopStyle Australia explains the benefit J.Crew will bring for Australians.

“Before now, Australians would have to pay huge amounts for simple autumn/winter staples, let alone the more luxurious items like a cashmere jumper. J.Crew offers customers the chance to buy one of these for around $300 – that price is virtually unheard of here!”

ShopStyle will essentially provide the platform for J.Crew to reach its potential customers, leveraging off the already significantly large audience that the fashion website has developed in Australia. This arrangement is much easier for J.Crew than building a following from scratch, as many aussies would not be familiar with the label.

By partnering with ShopStyle, J.Crew is bringing its preppy style to Australian audiences.

“By combining ShopStyle with our partner sites, FabSugar and the Daily Life, we are Australia’s largest mid- to high-end fashion network,” Yeomans says. “We will add value by not only showcasing the great range the store has to offer, but also any other quality etailer out there that stocks the brand, such as Net-A-Porter or The Outnet.”

However, that isn’t to say that there aren’t some Australians who have been desperate to get their hands on J.Crew apparel for a long time. In fact, according to a Media Representative at J.Crew, Australia has always exhibited a high amount of “natural demand”.

“There is a natural demand from Australia that we want to meet,” the representative says. “Australia ranks sixth in terms of international traffic to J.Crew and 30 percent of customer inquiries we receive are regarding international shipping.”

With today’s international shipping expansion, J.Crew is moving from a footprint of 29 countries to 107 countries, representing a potentially huge increase in its existing customer base. Such expansions are becoming easier for companies with a strong online focus, as they tend to already have most of the required infrastructure to go international. J.Crew is certainly not the only American label that is partnering with ShopStyle, with other big labels tipped to arrive in the coming months.

“ShopStyle.com.au will be the first publisher to bring such iconic brands and put them front-and-centre before Australian audiences,” Yeomans says. “Unfortunately, I am not able to say who the others are at the moment, but it will be big news for international fashion.”

The post American Fashion Label Begins Australian Invasion appeared first on Power Retail.