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Will Australian retailers get serious online any time soon?


The apathy toward online retailing by Australia’s incumbent ‘bricks and mortar’ retailers has allowed some notable upstarts to gain a foothold in the digital shopping space. Kim Wingerei examines opportunities lost and seized.

Technically speaking, the concept of the internet was first mentioned by a group of American university nerds in 1974, including the “father of the internet, Vinton Cerf, in the “Network Working Group“. It was driven by the need for university campuses to interconnect, and facilitated by the slow but eventually universal adoption of the TCP/IP protocol.

While I was working for UUNET (WorldCom) in the late 90s, I was fascinated to meet Vinton Cerf, who was already waxing lyrical about the critical need for the world to adopt IP version 6. A decade on, IP version 6 is still struggling for universal implementation, although widely recognised as the only way forward to enable further growth of the number of devices connected to the net.

Back in 1999, the internet was still very much in its commercial infancy, although it had already spawned some spectacular success stories such as AOL and Netscape. But Lycos, AltaVista and Yahoo dominated search, and online retailing was mostly pornography.

Ten years later, online retailing has moved into the mainstream, driven by the demand of convenience, but held back by limited bandwidth and, that old chestnut, resistance to change. (Old habits die hard!)

The bandwidth limitations are finally disappearing, and when the National Broadband Network is in place some time in the next decade, 50kbs downloads will be a thing of the past. But what about those old habits?

They’re still alive and well judging by the modest number of brand-name Australian retailers that are successful online. David Jones, Myers, Safeway, JB HiFi, Harvey Norman, Clive Peters, Target, K-Mart — the list goes on. All of these physical retailers still seem to treat online as a side-show — mostly irrelevant except as a “store finder”.

There are exceptions, of course. In electronics, Dick Smith has recently removed the image of its long gone founder from the logo (finally) produced a retail website that works well. Travel and financial services are other notable exceptions. On the other hand, most telecommunications carriers have ecommerce sites that are just woeful.

We often hear how the US is way ahead of us in these areas, which is true, but not because Americans generally are early adopters. US consumers were ready for online retailing because they were used to buying from catalogues — more than 20 percent of retail transactions were once conducted through mail-order sales.

When I lived in Chicago in the late ’80s I was dumbfounded by how quickly my mailbox would fill up with catalogues of everything from undies to combine harvesters. In Australia, catalogues sales made up more like two percent of retail sales — hence the resistance to filling out an order form rather than buying “over-the-counter” was much higher.

Consequently, although Amazon is the number one online retailer with US$ 20 billion in sales, six of the top 10 web retailers in America are companies with an offline heritage, including Staples, Office Depot and Sears.

The fact that it is impossible to find a similarly authoritative and well-researched statistic for Australia is a case in point. However, companies such as DealsDirect, Grays Online, oo.com.au and Catch of the Day are not (yet) household names but large and profitable online retailers that anecdotally lead the sector in Australia.

One of Australia’s leading “brick and mortar” retailers, Gerry Harvey, is well known for his dismissive view of online retailing, and the Harvey Norman website remains a catalogue without a ‘Buy’ button. In fairness to Gerry & Co., being a franchise of sorts does complicate matters.

Many retailers are indeed franchises and this is clearly a stumbling block, as online presence does not recognise the normally geographical limitations of a franchise. However, smart use of technology, local search and similar techniques can negate this to a large degree.

Another objection often heard from experienced retailers is the fear of cannibalising in-store sales to online transactions. Better in than out, as Shrek would say. Or, in other words, better cannibalising your own sales than having it eaten up by your more online-savvy competitors!

But still the most significant objection to fully embracing online as a genuine sales channel is the FUD factor – Fear, Uncertainty and Doubt.

Fear — Providing pricing online leaves you open to predatory price competition from competitors. Yes, it does. Get over it and offer better service instead.

Uncertainty — Many retailers still don’t quite know what to do, so they choose not to. The beauty of online is that you can test and measure anything and everything, so if at once you don’t succeed, try and try and try again!

Doubt — Is it really that important? Yes it is, because people’s purchasing habits are changing.

There is a myth that with all the information now available about products online, the purchasing cycle is getting shorter and people are spending less time making up their mind. I believe the opposite is true, with information overload comes more analysis and a more informed consumer that may spend less time in store, but is likely to have spent a lot more time researching a purchase.

Along with a more discerning consumer also comes demand for better after-sales support. With good after-sales support comes repeat business. The successful retailer of the future understands how the various sales channels all work together through different phases of the buying process.

The really big difference is that — whereas in the traditional model mass retailers knew little about their customers — capturing their details early, understanding their needs, keeping them close through the purchasing process and looking after them afterwards, all at the lowest possible cost, is only available through smart use of technology. It never ceases to amaze me how many brick and mortar retailers still just ask me for a postcode and rarely try to capture more information about me, not even at the moment of truth when money is changing hands.

Or, in the words of Paul Greenberg, co-founder and CEO of Deals Direct – retail is detail. Greenberg and many like him are charging ahead in online retailing, doing what they can to lead the field ahead of the retail behemoths.

Their lead appears to be increasing, but will it last? The next few years will tell if the giants continue to stumble in the dark or whether they see the light at long last.

Kim Wingerei sells mobile phones and telco services online. He works to live, is easily distracted and likes sailing.

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