Be Ready for Dramatic Changes in Australian Retail Business
Jun 25 2013
There have been seismic shifts in the global retailing landscape that will have a profound and dramatic impact on the extended supply chain. Until now, Australian retailers have not been fast to adjust to this new landscape, but the change is inevitable and rapidly approaching. This lag in adoption however, has its upside, as it puts Australian supply chain businesses in a position to take advantage of the lessons learnt globally, avoid costly mistakes and hit the ground running.
The Key Global Trends – It’s All About the Customer
The key in retail is that the centre of gravity has strongly shifted to the final customer and their individual purchasing journey. While e-commerce has established itself as a key part of the retail landscape, the physical store has re-asserted its vital role in successful retail. The seismic shift in retailing involves a sophisticated merging of the online and “bricks-and-mortar” experience that puts the customer at the epicentre of the retail universe. This compels supply chains to change their focus to respond to final-end customers and their demand signals.
Same information no matter what channel – service offering must have the same message and feel the same – whether its online, mobile or bricks mortar.
Omni-channelling – this key concept takes retailers beyond the multi-channel concept of ‘store-and-a-website’. It’s not just ‘bricks-and-clicks’ any more. Successful omni-channel retailer offers a rich shopping journey which blends online and offline. They understand that shoppers are much more discerning and informed, and have done their research online, and will frequently be interacting using their mobile to research a product while in-store. They give the shopper the opportunity to purchase both online (often using the store as an optional pick-up or try-on point) AND in-store. They use intelligence from social technology to enhance the shopping journey – offering options via a range of channels (in-store staff, online or even via mobile as people enter the store) based not only on their own purchasing history, but their friends’ histories and choices. The key goal is to to leverage customer management technology and supporting enterprise systems to offer a seamless interaction across all shopping channels, whether it is online/mobile or even in-store, giving the customer personalised, consistent treatment.
The Impact of Mobile – 2012 was the year that mobile became embedded into the lives of consumers. Consumers use their mobile devices continuously, and frequently while actually in-store, to research and compare. In 2013, smart phone shipments are expected to soar to one billion globally with 172 million tablets being shipped internationally. Global retailers are responding in a range of ways. Examples include free apps for scanning a barcode to get instant quotes for home delivery, and “Shopping walls”, where consumers can scan products from billboards to be delivered to their homes.
Mobile developers agree that retail business is changing. According to a survey by Appcelorator and IDC, 93% of mainly American and European mobile developers predict that it is “likely to very likely” that in 2013 most retail companies will have enabled mobile commerce. They also found that most developers thought that consumers would make more purchases via their mobile devices than credit card in 2013.
The Role of Social Media – Social media is also proving to play a pivotal role in the retail business. While not a source of direct sales, it plays an integral “awareness” role in the shopper’s experience.
The Changing In-Store Experience –Retail businesses with strong physical channels are fighting back against the pure E-commerce threat of “show-rooming” where customers use the store to try-on, before going to an exclusively online retailer to purchase. The most successful businesses are fighting fire-with-fire by offering multiple shopping channels, as well as greatly enhanced and personalised in-store experiences which facilitate purchasing, and incorporate value-adding services not available at the click of a mouse. Customers like to be able to go into a store to get advice about products, and compare alternatives. The touch-and-feel aspect of purchasing hasn’t gone away – but now customers might initially go online to identify and “reserve” an item to be held in their nearest store, where they then look at it closely, talk to someone about it, or try it before deciding to purchase. Consumer behaviour being what it is, there is evidence that when customers who order online and elect to “pick up” in-store, they spend on average three times as much, and are twenty times more likely to actually purchase in store. This all provides a strong imperative for businesses to encourage this behaviour. Additionally,brand loyalty programs, which are critical and expected in many markets, are greatly facilitated via the in-store experience.
What does this mean for Australian Retail Business?
In Australia in particular, where e-commerce has flourished, with more than 10 million people (almost half the population) buying online in 2012, there has been vigorous debate regarding the demise of bricks and mortar.
However, there are a few reasons that traditional retail channels in Australia should not only survive but actually thrive.
Australians are ready for change– Australia is in a unique position at the moment. Increased globalisation and the strong Australian dollar during the past few years has meant that Australians have been spending internationally in great numbers. Through increased travel and exposure to international online purchasing practices, the purchasing population has been exposed to global retail trends.
International Brands are Expanding into Australia – During the global financial crisis, the strong Australian dollar and positive economic outlook fuelled strong online activity among Australian consumers, bringing the country to the attention of international retail businesses based in Europe and the US. Experiencing tough times in their own economies during this time, European and American retailers noted this consumer activity and identified that significant business growth opportunities exist in the previously untapped, and potentially lucrative Australian market. Geographically, it also helps that Australia is intrinsically linked to the Asia, and specifically China, therefore potentially providing another gateway into that lucrative market.
All of this has resulted in accelerated international physical expansion into Australia by major global retailers. As these brands penetrate the market, bringing highly-evolved retail strategies with them, Australian businesses will be forced to adopt the now standard global practices.
The Opportunity for Australian Retailers – Smart Australian retail businesses will take the opportunity to leap-frog into a leading position by leveraging the hard-fought-for business and technology intelligence that has already been garnered in other international markets.
Impact on the Supply Chain
Connecting multiple channels and obtaining a holistic view of customer behaviour while responding to their demands in a much faster retail cycle, as well as providing an unprecedented retail experience, requires a highly-aligned, fast-paced, and highly-responsive extended supply chain.
- The shift from an inside-out to an outside-in demand model; and a move to real-time data will require a greater collaborative alignment with upstream and downstream partners to drive value for the shopper at the shelf.
- Retailers will need to ensure that they are utilizing highly responsive inventory optimization techniques, and ensuring that they have the capability to model and optimize the entire value chain.
- Serving the customer in-store will require high-quality order management systems that are fully integrated with mobile and social technology, coupled with other enterprise systems that serve the supply chain.
Successful Australian retail businesses will be the ones who recognise the new importance of the customer in the supply chain, and cater for the shopper’s requirements by offering a holistic, personalised and flexible shopping journey which seamlessly integrates on-line/mobile and the physical retail experiences.
Forbes: Three Important Retail Trends for 2013
Sydney Morning Herald: Online Sales reach a trillion
Appclerator IDC Report Q4 2012
Supply Chain Insight – Supply Chain Metrics That Matter: Focus on Retail