Retailworld CEO, John Caldwell gives his opinion on the online retail space.
The National Australia Bank (NAB) released its annual Retail Sales Index results this week looking into the trends in online shopping.
Overall, Australia’s retail sales only rose by 0.3% in January following a 0.1% fall in December. Any growth is promising, especially as this is the largest seen in the last 4 months - but it’s still meek for the sector.
A large portion of this increase was experienced through online sales which jumped a significant 29%. A trend not to be ignored, consumers are clearly looking for a multi-channel shopping experience.
Although bricks and mortar stores still account for 95% of Australian’s retail spending the online space is becoming an integral part of a customer’s experience, whether for research and information collecting or physically making a purchase.
The $10.5 billion spent online is shifting. With a 40% growth in offshore sales, money spent on overseas sites now accounts for 25% of all online spend. Are Australian retailers doing enough to stop consumers looking abroad to make their purchases? Standing still is moving backwards in today’s ever changing market. Particularly for more traditional retailers, it’s time they looked at their online presence and engaging visitors.
Well above the growth rates for traditional stores, if spending continues at this pace, in 5 years time online spending could be equivalent to at least 10% of all sales. But with the ease of the internet and the light speed growth on line, these numbers could be significantly greater and this poses significant problems for those retailers that don’t have strong e-tailing strategy and on line presence.
We are already seeing a number of businesses develop their on line presence and in our business we are seeing a significant growth in IT professionals and E-marketing managers and E-store managers.
This has the potential of changing the retail landscape forever. It won’t be long before retailers start to focus on their online presence and look to pop-up stores and concessions to compliment a largely online strategy experience and this has implications for all of the countries property managers. Just look at what’s happened to the video store business and their store footprint with the increase in convenience and on line access to product, these store sizes have reduced by over 200% and so have their sales.
Some will argue that there will always be a need for the traditional Bricks & Mortar retail business because customers like to touch and feel and engage all of their senses and although this is true, with internet shopping becoming safer, more competitive and easier to source exactly what you want, it is critical for businesses to react to this growing trend and reinvigorate their business model.
There is risk for everyone, sure shopping may become easier and cheaper but if property trusts start to struggle because retailers can’t afford rents then everyone’s superannuation is at risk as a significant proportion of Australia’s superannuation is tied up in these property trusts. If retail starts to struggle then staff are the next casualty and if people don’t have jobs that affects spending and the problem is only further exacerbated.
The Government needs to look at it’s current policies and look at what legislation they need to address and what assistance they can offer to the retail sector. The on line business particularly the international retailers have a significant advantage because of their tax benefits, as a good case in point just look at what’s happened in the book sector, the parallel importation laws make it prohibitive for Australian and Bricks & Mortar retailers to compete with the on-line giants like Amazon. We have already seen the impact of this legislation on Borders globally and closer to home with the demise of Borders and Angus & Robertson bookstores.
Retail heavyweights Westfield may have been slow to get on board (on-line) but now have a strong on-line site that is accounting for as much sales as one of it’s super regional shopping centres (e.g Fountaingate) with none of the development costs associated with acquiring land and building these behemoths. After recognizing the general malaise in retail spending particularly in the fashion sector and the tightening on discretionary spending post the GFC, Property management companies like Westfield have been under pressure from retailers with escalating occupancy costs resulting in lower margins and as we’ve seen, significantly higher retail businesses failures.
Watch this space!
- John Caldwell