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The online shopping revolution has left major Australian bricks-and-mortar retailers hurting, says Adrian Mullan. Yet, their deepening woes seem only likely to be worsened by their refusal to deal with the problem. It’s time for them to stop complaining and accept that they must make a choice: innovate or perish.

It has been riveting to observe from afar the drama being played out in the media of late as many of the heads of major Australian stores are dragged kicking and screaming into a new era where e-tail reigns.

Late last year, we had demands from retailers that the Government scrap the thousand-dollar GST exemption on purchases bought from foreign websites.

In the past few weeks, Myer and David Jones have issued an ultimatum to suppliers to lower their prices or risk being dropped from their shelves in favour of in-house brands or other more competitively priced products.

Myer CEO Bernie Brooks said it was up to suppliers to reduce prices to help bricks-and-mortar stores remain competitive in the battle against online retail.

What’s Really Driving Customers to the Web

These arguments are missing the point as to why Australian retailers are losing customers to online retail.

Let’s face it: Australians aren’t purchasing their electronic goods online simply because of a 10% price difference due to the GST in stores. For some consumer electronics, the difference between buying online from an overseas website and buying from Australian bricks-and-mortar retailers can be 50% or more. The gulf in price between some types of clothing and accessories can be similarly large.

This variation may actually be due to a number of factors, including rent and staff being more expensive in Australia than in the US and UK, and manufacturers setting prices according to what they believe to be the capacity and willingness of each market to pay.

As far as getting suppliers to lower their prices, realistically, they can only be squeezed so far, and ultimately, it will only make a marginal difference anyway.

Myer’s and David Jones’ new tactic of applying pressure on suppliers is similar to that of Target in the US. Its new strategy for 2012 is also to pressure its suppliers for better pricing. It is also that of Walmart, to mixed effect.

A Lack of Online Resources

When quizzed on this, US Target said the real problem was that people were using stores as a showroom and then making the transaction online.

By all accounts, Australian bricks-and-mortar retailers are having the same issue, and unfortunately for them, this is not going to stop happening.

There are all sorts of mobile apps which enable people to go into a store, take a snapshot of a bar code, find the price of that item online, hit a button and make their online purchase while still in the store.

While it’s difficult not to have some sympathy for bricks-and-mortar retailers, they are coming up with all kinds of excuses to avoid actually dealing with the problem. One look at some of the below-par online stores of these major Australian retailers and the issues become glaringly obvious.

The solution is twofold. First, they need better online stores. Second, they need to do some work in changing their strategies and put more resources into online.

Cannibalised By E-tail?

It is because of their own idleness in embracing online that Australian bricks-and-mortar retailers have no-one to blame but themselves if they are losing ground to overseas online retailers. In fact, they are lucky to have survived as long as they have with this head-in-the-sand approach.

If a major online player (think Amazon) moved to Australia, tomorrow it would be “game over” for many Australian retailers because of their own idleness.

The reluctance of major Australian retailers to fully embrace the e-tail revolution may be due to a fear that this will mean cannibalising their existing bricks-and-mortar businesses to online.

However, Australian consumers of all ages and demographics are already savvy to the savings they can make buying goods from overseas online stores.

It’s now time for these very vocal Australian major retailers to stop their bleating and take some bold action to embrace the world of e-tail in a big way, or risk becoming extinct.

Adrian Mullan established Ecommerce Websites in 2001 with the aim of helping businesses of all sizes transition into the online shopping field and has since assisted thousands of businesses in making the most of the online shopping opportunity.