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E-tailing and the end of bricks and mortar

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 Are the days of the traditional bricks and mortar store numbered?

 

Probably not. What we do know is that the internet and online shopping has meant that consumers have access to more information, which is a good thing. At least for the near future (probably until we get flying cars and jetpacks), there will be people who will go to the bricks and mortar shops.

 

One way to look at it is to look at the banks, who introduced online banking about 25 years ago. Initially, everyone thought it would be the demise of bank branches, and for a while there, the banks withdrew their services at the branch. But as time has gone on, people have realised that the online bank provides some services, while the branch provides other services. It's also a matter of customer segments. Different segments shop in different ways. But there will always people who like the social aspect of shopping - whether they're shopping with their friends, or whether they like the interaction with attractive people in clothing shops who tell them how great they look in that pirate shirt.

 

What retailers have to do is adjust their business model. There's no turning back. The online shopping world is here to stay.

 

So retailers have to decide whether they want to simply resist, shrivel, and die, or whether they come up with innovative ways to use the online world.

 

The big brands need to stop whingeing and get with the program. They have to recognise that they need to have both an online and bricks and mortar presence, and use the different service environments to their advantage.

 

The big issue is that they shouldn't be asking the government to protect them, but should be innovating.

 

At the moment, only about 3 - 5 per cent of purchases are being made online. Access Economics figures showed Australians spent $19-24 billion buying goods online in 2009, representing about three per cent of total sales. The report showed at least 50 per cent and up to 80 per cent of that amount was spent with Australian online retail outlets.

 

So, we're a long way off the entire population purchasing online, at least for the moment. And what we are seeing is that the small and flexible organisations are the ones who are best placed to be online. The reality is that consumers simply have access to more information, so are demanding more from their retailers.

 

As I said before, this is just the way it is, so the big stores have to adapt. For a long time there, the big music companies resisted online digital downloads. But now, it is just commonplace. Once something becomes the norm, the market for it just grows, and we will see this in retail and in grocery shopping.

 

I think that any retailer that says to the government, "Please help us" is not approaching the issue with the right attitude. It's pretty much their fault that they are not competing. As Amanda Gome says in her column on SmartCompany, "About a year ago retail billionaire Gerry Harvey told SmartCompany that online retail sales were a dead end, prompting a huge number of our readers to write in telling Gerry that his website was so bad, they purchase their electronic equipment elsewhere."

 

What we can see is that much of that online purchasing is cannabilising in-store purchasing AND that in general, retail purchasing is lower than in the past couple of years. This is what is bothering Gerry, Solomon and the big brands.

 

I am sure that the big stores are working away coming up with business models, but what we might see in the short term is that the smaller retailers will do better for a time. The thing is that most consumers are, what consumer psychologists refer to as risk-averse, we actually would prefer to shop with the big brands, it is just that at the moment many are stuck in an old-fashioned retail model.

 

And I don't think that a GST on products bought overseas less than $1000 is the solution. As I said, the numbers at the moment are small. And we are in a weird situation. When a US online store sells the same computer, jeans, or books for significantly less than an Australian retailer, even taking into account shipping costs, then I am not sure why the retailers want us to become advocates for them. We are simply responding to the environment that we live in. So, I think the bureaucracy involved in charging GST on goods below $1000 is likely to cancel out the income to the government.

 

So, I think that this is unlikely... in the short term.

 

Who knows, those big retailers have friends in high places, and it is not always the most sensible outcomes that governments end up with.

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