In Australia, there is a clear trend towards the e-Commerce and traditional retail channels merging, but not replacing, one another. Traditional bricks and mortar retailers are finding they need an online presence and many pure play online retailers are now venturing into the physical world.
Whereas consumers used to only browse online and purchase in store, now there is an increasing trend towards purchasing online. However, the cost of freight in Australia has meant that a robust click-and-collect market accounts for more than 50 per cent of many retailers online sales. By offering click-and-collect as a checkout option, and remembering that this is still quite a new purchasing option, retailers are starting to see their total share of the consumer wallet increase as consumers have a propensity to spend even more when they visit the physical store.
In Australia, more than most of the other markets out there, that popular argument that retailers should maintain both a physical presence and have a well-rounded online shopping experience is well founded. We estimate that by 2020 retailers without robust e-Commerce enabled websites will experience declining sales year-on-year until they go out of business. With relatively few businesses currently operating on an e-Commerce platform, there will be urgent need through this year to work on resolving this… especially if the rumours bear true, and Amazon formally enters the Australian market. Such an event will significantly accelerate the need for other retailers to have a visible position online.
As more businesses realise the need to develop an e-Commerce solution, the flip side to this will be the demand for e-Commerce providers will increase exponentially. Currently there are a glut of choices, though finding the right one can be a challenge. With a lot of e-Commerce providers, there are core functions that are delivered through third party integrators, which are more expensive for the retailer and prone to breaking down more frequently. Neither of those scenarios are sustainable as solutions for the retailer.
For smaller Australian retailers this poses an especially sharp challenge. Lacking access to technical expertise, or the time to work on an online presence themselves, the smaller retailers in Australia are finding it surprisingly challenging to sift through the provider options to find one that can handle the bulk of these challenges. They want a plug-and-play solution that they can populate with their inventory quickly, and start selling immediately without having to worry about customer security and other sensitive, potentially risk-filled operational elements when selling online.
We are also observing that there is a significant shift away from incumbent e-Commerce providers in Australia as retailers look to find solutions that will prepare them for developments in the online retail space. Retailers are shopping around, are proving to be more willing to invest in a more integrated and ultimately more efficient solution, and, importantly a solution that can work across both physical and online e-Commerce space.
The trend for Australians to mix their physical and online retail purchases up is one that won’t go away in a hurry. But this poses challenges. Retailers are struggling to manage inventory and accounts, as most POS and e-Commerce solutions only offer limited integration between the systems, if at all. When the ultimate goal of all retailers needs to be to keep inventory levels on razor-thin margins, any inefficiencies in this area will leave them uncompetitive as global retail brands enter the market, and local large corporate retailers develop their own online systems to match.
Finally, with international trade opportunities opening up, Australian retailers that miss out on the chance to take their business into overseas markets are risking their long term financial health. The local market is so saturated and pitches to such a relatively low population that overseas sales, even for the smallest retailers, are an essential target. However, the challenges that we in Australia face in terms of fulfilment and logistics will be compounded further unless we can find ways of making the process less expensive and more efficient.
In short, it’s going to be a dynamic, exciting year for online retail and e-Commerce in Australia. Managed well, it will be a time of opportunity for even the smallest retailer, but we should all be expecting an even more competitive environment to really consolidate out of the market those retailers that are slow to change.
About the author
Jason Titman – COO and Director, Neto