I visited a Canberra photography store in search of a particular item because I wanted to support a local retailer before venturing online. Being a specialist outlet and part of a large chain, I was certain they would have it.

She actually bought them online. Picture: Chris Pavlich

Quoting a hefty price and saying it would take several weeks to arrive, the salesperson sensed my interest waning. Realising they were losing a sale, he tried recommending a product on special in the corner instead. It was old stock covered in dust that they needed to clear, still very expensive and nothing like the product I had asked about.

I chose to order it online instead from a retailer in New York charging half the price and able to deliver in later he same week. Not only was the overseas retailer more competitive, their advice was invaluable; the staff member knowledgeable and attentive. This example is far from unique.

ED NOTE: Apologies, a technical hiccup meant the comments on this post were not open previously. You may now comment.

And it’s indicative of the changing environment Australian retailers face and why they now find themselves in trouble..
Many local retailers view their task in simple terms. Consumers are perceived as sheep to be led - not valued customers to serve and be attentive to. Is it any wonder then that in recent times, the flock has begun to wander?

People who have worked in retail a long while speak of a different time. A time when there was less competition, online trade was in its infancy, and the market wasn’t in a relentless race to the bottom.

From their perspective, retailers said jump and customers asked how high? Occasionally businesses felt the pressure of a downturn, but the balance of power in that relationship between consumer and retailer prevailed in the latter’s favour… Until now.

Retailers are realising that the paradigm that worked yesterday isn’t likely to be the paradigm that works tomorrow. That as consumers become more savvy, better informed and increasingly able to access alternatives, the practices that once sustained their businesses are sinking deeper into obsolescence.

Yet rather than reflect on new ways to innovate, to compete, to make a stronger proposition and attract customers back, major retailers and industry advocates have focused elsewhere, working hard to characterise the retail sector as a hapless victim of circumstance.

Ignored and left out in the cold by government, betrayed by consumers and unfairly usurped by a growing tide of overseas businesses who are unencumbered by Australian tax and regulation. Their solution has been to advocate protectionism and invoke the rhetoric of patriotism and a fair go, hoping to compel the flock back to familiar pastures.

Consumers and their advocates like Choice are right to label such tactics as absurd.

Not only does it distract from what retailers need to do to improve their circumstances, it ignores the hard truth that many of the challenges retailers now face are of their own creation.

The internet has democratised retailers for consumers. Transcending the barriers of time and distance they’re offered more choice and information than ever before.

Its effect though has been overstated, serving as a convenient scapegoat for the retail sector, yet accounting for less than 6 per cent of Australian retail turnover. 

It is only a small part of a much larger picture, one in which retailers must recognise their own role.

They must recognise that they have done little to remedy, and have often tried to profit from, the significant inequality in pricing between Australian and overseas markets. That’s undermining local business and alienating consumers.

They must realise that a relentless and narrow focus on price and market share expansion to secure customers, has been unsustainable and created increasingly unrealistic consumer expectations.

The massive discounting of products has forced businesses to rely on so called value adding high margin accessories and clever financing options to try and recover margin – tactics detrimental to and increasingly shunned by consumers growing wise to them.

Retailers must instead innovate and adapt to the changing environment, offering value and competitiveness, but also investing in the customer experience, investing in their product range, their stores, and above all the knowledge and expertise of their staff.

Retailers no longer exist in a small, comfortable marketplace. They exist in a global village, an environment in which the power s increasingly in consumers hands. Protectionism isn’t an answer. Only innovation, attentiveness and renewal will enable local retail to thrive in the long term.

Comments on this post close at 8pm AEST.

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23 comments

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    • Andrew says:

      01:53pm | 26/09/12

      I see a place for bricks and morter stores, but not as a store which is designed to sell goods directly, but rather a store to showcase goods to the public with the idea that the general public will then go online to one of the resellers of the product to make the purchase. Most of these stores will be owned by companies such as Apple and Sony rather than product resellers, and the emphasis will be on giving the customer a chance to try products rather than simply be sold products. An almost try before you buy.


      Of course in this not too distant future, the 18 year old who has no real product knowledge will be replaced by actual sales persons, who will have good product knowledge, as the aim of the store is to impart knowledge about products, not simply be a proxy between the customers wallet and the cash register, as the actual transaction will be done online, there is no need for someone there to simply “handle the money”.

    • andrew (another one) says:

      02:21pm | 26/09/12

      yes but this sort of store would only be feasible in a handful of large cities, due to the fact that it exists primarily for advertising purposes and not making actual sales. For how many products do you think people would actually travel any significant distance to see them in the flesh? Cars, motorbikes, caravans, boats, upmarket sporting goods - YES

      Everything else - NO

      ps i think the theory of consumers being willing to pay a premium for knowledgeable sales people is largely a myth. 99% of the time i go into a store i have already decided what i want to purchase, and all i want is a 16 year old kid in a uniform to hand the appropriate amount of currency to.

    • Sara Somewhere says:

      04:29pm | 26/09/12

      Dell already do, they have kiosks in shopping centers to play with the computers but they tell you to make your order yourself on their website.

      I’d really like to see this with clothes and shoes. Just one of each item in each size to try on, then you order what you want from the warehouse. I’m not a standard enough size to just order by number and know it will fit, but I’ve lost count of how many times I’ve found something I liked only to find that that store doesn’t have my size, but that other stores have plenty, and they don’t do transfers.

    • nihonin says:

      02:12pm | 26/09/12

      I was out shopping and didn’t notice the comments for this opinion piece weren’t open.  wink

    • sami says:

      02:50pm | 26/09/12

      There’s other factors that influence it too. Here in Perth we’ve only just implemented Sunday trading. Prior to that if Sunday was your only free day then you were stuffed. We are now also able to shop at Coles/Kmart and Woolies/Big W until 9pm weeknights. Which is convenient and about bloody time. But again, if they don’t have what you want you’re stuffed. Specialist stores are Not Allowed.

      Transport is an issue. I was without a car for months on end over the summer time. Guess how much xmas shopping would have sucked if I did ALL of it in brick and mortar stores and lugged everything home on the bus in 40 degree heat? I only did a fraction of it that way and after one trip I wanted to murder people in the face.

      I’d assume that shopping online is also easier for those with kids, disabled and injured people and the elderly.

      And some of us just don’t like shopping. What’s the appeal of navigating carparks, narrow aisles, pushy sales people and idiots who can’t drive trolleys when I can just sit at home in pyjamas, click the thing I want and have it turn up in my mailbox?

    • antman says:

      05:27pm | 26/09/12

      Sami, WRONG, in part: all shops AREallowed to open until 9pm on weeknights, not just the big supermarkets and discount chains. In fact, if you qualify as a small retail business, your trading hours are completely deregulated - you can open 24 hours a day, 365/366 days a year, if you want to. The reason that most specialty stores do not stay open after around 5:30pm on week days is that it’s just not economically feasible.

    • Jason says:

      02:53pm | 26/09/12

      I found a pair of mens shoes I wanted to buy online.  So I went to David Jones in Carindale to compare prices and try them on, fully intending to buy them there as long as the price wasn’t too over the top.  The largest size they was was 9.  I asked if they made the shoes in mens and left.

    • Troy Flynn says:

      03:45pm | 26/09/12

      As the article stated iansand, It wasn’t designed as a strict “Best to Worst” list, but I’ll admit, it was amusing to see that HN didn’t have any comments in the positives column smile
      As far as a change of mind policy is concerned, I don’t blame the stores for refusing to take returns that aren’t damaged. In the case of DVD’s or CD’s, if you turn up a couple of days after purchase to return them, I would say there is a high probabillity that the purchaser has ripped a copy to their HDD on the PC.

    • AdamC says:

      03:44pm | 26/09/12

      Price deflation and a terrible consumer economy are retail’s real problems in this country, not the internet. As I understand it, even your 6% online turnover figure is inflated, due to it including bills, etc, paid online, rather than only retail purchases. 

      To my mind, only a few categories really lend themselves to being sold online. Sadly, those categories make up the vast bulk of Harvey Norman’s revenues. I am yet to be convinced that selling clothes and footwear will really take off online. Stuff like cameras, electronics and appliances, however, seem made for internet sales.

    • St. Michael says:

      04:19pm | 26/09/12

      Probably because cameras, electronics, and appliances can all be judged against the same criteria.  A Canon IXUS is a Canon IXUS is a Canon IXUS whether you’re buying from Amazon or Hardly Normal.

      As we’ve seen, fashion and footwear are utterly subjective.  You can literally get the same dress down the street from Witchery for $200 less, but morons still think the big glowing sign above where you bought the damn thing means something nonetheless.  We’re not quite at the point where we consider clothes and footwear commodity items where price is the only determining factor in sale.

    • Ironside says:

      03:45pm | 26/09/12

      It is the Australian Government (both current Labor and previous Liberal) who are killing retail in Australia.
      With the rise of the ability to purchase items overseas at the fraction of the cost locally most will purchase overseas if they can. $199 for a new iphone5 from the states? Yes please! The government however refuses to enforce comparative pricing for retail. We have to pay the same cost in fuel as Singapore but try to get software or a TV for the cost it can be had overseas and god help you. Don’t even get me started on books.

      While the government is about fixing retail comparative pricing issues (why should the US pay 199 for an Iphone shipped from China and we have to pay 600) they also need to legislate to remove retail coding on DVD’s, parallel importing of books and price discrimination in digital distribution.

      For those retailers who complain that purchases online are not attracting GST you need to realise, that the 10% sales tax isn’t going to make a difference with the product is 50% cheaper to purchase and ship.

    • antman says:

      05:32pm | 26/09/12

      You can’t buy an iPhone outright in the US for $199 That price is when buying it at part of a plan, which is not too different to the cost here. In general, your argument is a good one but this is a bad example.

    • Some guy in Adelaide says:

      03:50pm | 26/09/12

      Wow, no mention of Australia’s higher wages, lack of scale in sales, and geographical isolation! This guy has done his research.

    • Troy Flynn says:

      04:20pm | 26/09/12

      True. When you have a potential customer base in the U.S. of a couple of hundred million people vs a country with a total population count of around 22-23 million total, then it’s hard to see a justification for parallel pricing.
      Although I still want the ability to pay the same price as a U.S. consumer does. As Ironside said, the iphone still comes out of taiwan (Not China ) and is closer to us than it is to the U.S. is it not?

    • marley says:

      06:37pm | 26/09/12

      Why is a store clerk who doesn’t know his product worth twice as much in wages here as one who does know his product in the US?

    • Rossco says:

      03:59pm | 26/09/12

      Went into a Kitchen Specialty Store in my local Westfield shopping centre to look at knife sets. Found a really nice Scanpan Danish Knife set for $299. Decided to hold off to see what the online prices were like for the same set. Found it for $181 bucks from an Australian online outlet. No competition really.

    • colroe says:

      04:03pm | 26/09/12

      I often consider that the Government really dislikes people getting a fair deal, or heaven forbid, something really cheap.  They are determined to force prices up on most things, and if this is not easily accomplished, tax it!!!  Just wait, the Federal Government of any persuasion will eventually make overseas Internet shopping uneconomical by use of Customs laws and Taxation.

    • Dig a little deeper says:

      04:22pm | 26/09/12

      Let me get this right. “Customers” want maximum variety, always in stock, lots of staff to assist (but only if asked otherwise they are hassling the customer), maximum wages and benefits, 7 day trading and minimum price? Are we seeing a problem here?

    • Paleoflatus says:

      04:41pm | 26/09/12

      Excellent assessment of the sick state of Australian retailing. After living overseas for 16 years, we noticed several serious problems with Australian retailing, that should have been obvious to blind Freddie. First, there were far too many shops, all expensive to set up, but working for only a fraction of the available shopping hours. Fewer shops, staffed for longer hours, would be an obvious solution - as well as reducing the traffic and parking problem. It’s sad that monopolistic Unions and Churches wouldn’t allow this. Second, shopping transactions are too often archaic, inefficient and tedious. I’m not sure whether this is due to poor management, or poorly trained (educated?) staff, but it’s probably both. Third, I had the strong impression that I was here to serve the shop and was prepared to endure poor service and wait forever at the check-out. I quickly found that I could get cheaper products from overseas faster than a local retailer could obtain them. It’s amazing that orders from Asia are often delivered as quickly and reliably to the Gold Coast as they are from Sydney or Melbourne.
      An example is a new gear-box made in Italy for my yacht. A Sydney quote was over $2100 plus freight with a week for delivery, but I paid $950, including air-freight, for one to be delivered from England in 4 days! How do you explain that? I never buy small electronic items locally, as the local prices are often over 3 or 4 times overseas prices, even after adding freight costs. By the way, in this context, GST is irrelevant. I was recently told emphatically by a sales girl in a Harvey Norman store that there was no such thing as an HDMI-to-DVI-D adaptor, as HDMI is digital and the DIGITAL Video Interface is analogue! I went home and ordered on from China.

    • Troy Flynn says:

      05:01pm | 26/09/12

      Wow!, DVI isn’t digital. Wow! I don’t blame you for ordering from China. Wow! Is there no vetting of employee knowledge anymore? (I’m truly Gobsmacked! )

    • azzure says:

      04:51pm | 26/09/12

      The cost of doing business in Australia is simply too high.

      One can start an online store from home for as little as $49 a month, including a website and method to take payments and use their garage to stock goods or have them shipped direct to the consumer via a dropshipper.

      Compare this to traditional retail..

      Rent - $1k + a week, minimum 12 month commitment.
      2 - 3 employees - $1,800 per week assuming low wage / casual.
      Stock to have sitting on the shelf - $10,000 +

      Thats an awfully different operating base.

    • St. Michael says:

      07:23pm | 26/09/12

      On the other hand, the online store is just as doomed an operating base as the bricks-and-mortar store was.  Mostly because you’re still acting as a middleman.  Eventually, people will start going direct to the manufacturers of the goods they want, and online middleman thieves like Amazon will cease to exist just as the bricks-and-mortat ones did.

 

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