“You have to grab the bully by the horns”, retail billionaire Mike Ashley said to the House of Commons’ Housing, Communities and Local Government Committee in the UK as he proposed a 20 percent tax for online retailers.
The colourful owner of the Sports Direct chain, as well as retail businesses like Evans Cycles and Agent Provocateur, with stakes in Debenhams and French Connection, reportedly believes that online retailers should pay to keep bricks-and-mortar retail alive.
Speaking to the Government Committee earlier in the week, Ashley put forth his proposal to save the High Street, claiming the internet is responsible for the death of traditional bricks-and-mortar shopping strips. According to the retail veteran, these shopping precincts have “already died” and are currently at “the bottom of the swimming pool”.
To resurrect these failed strips, he believes they need to be given a massive “electric shock”, proposing retailers that make more than 20 percent of their sales online should have to pay an extra 20 percent tax on the online portion of their revenue. In defence of his controversial plan, he said that he would also have to pay extra taxes, as Sports Direct currently generates £400 million online annually.
He also believes that landlords need to cut rents by 25 percent, while landlords should waive business property rates and retailers should reduce dividend payments by 25 percent.
The plan is undeniably controversial, especially considering it would be unreasonable to see thriving online retailers pick up the slack for bricks-and-mortar businesses that are falling behind. In any case, innovation is at the heart of the survival of physical retail, and with the current surge in cross-channel trade sweeping the world, there is definitely still a market for profitable physical retail models.
It could be argued that iconic shopping strips have taken more of a hit in the UK than they have in Australia, especially considering online retail accounts for close to 20 percent of the UK’s total retail sales, while Australia is still sitting at less than 10 percent. However, a walk down Victoria’s once-thriving inner city shopping streets could see Aussie’s claiming the local market has been impacted as much as overseas counterparts.
In the 12-months since Amazon launched down under, Australians are yet to see too much of an impact on the local industry, with Nicola Clement, director and principal consultant at Meraki Digital and former global head of e-commerce at Smiggle saying Amazon isn’t too much of a threat to Australia… “yet”. “Many retailers so far haven’t seen the impacts from Amazon’s launch and while Amazon keeps putting out press releases talking up their successes, they’ve only just past year one, so all of their year on year stats were always going to look good,” she says. However, as the business starts to open more distribution centres, expand its Prime offerings and offer more sales and discounts, it will likely, in the long-term, become just as powerful in Australia as it is in other overseas markets.
But, Clement says there are opportunities for retailers to thrive in the current retail climate, even in the midst of Amazon, as long as they are “focused on selling to their customers, wherever the customer chooses to shop”, while also continuing to “innovate, create outstanding customer experiences and differentiate their direct channel offerings.
“The bigger issue, I think, is that many retailers are still putting their heads in the sand.”
Despite the boldness of Ashley’solution to the booming online retail industry and struggling bricks-and-mortar one, his thoughts on the sector’s resurrection could resonate with traditional retailers that are struggling to make headwinds in the new digital economy, with brands like EB Games, BCF, Supercheap Auto, Harvey Norman and David Jones all reportedly seeing a drop in monthly visits YOY, according to a report by Mindshare and Neilsen Digital Ratings.