It’s the best of times and the worst of times. The state of Australia’s retail sector in 2019 brings to mind the famous opening line of Charles Dickens’ classic A Tale of Two Cities.
One the one hand, we’ve seen the decline and demise of a string of once strong brands in recent years. The RIP roll call includes the likes of Dick Smith Electronics, David Lawrence, Payless Shoes, Pumpkin Patch and, most recently, Roger David; all one-time stalwarts of Australia’s suburban shopping malls. Soberingly, industry watchers believe they’ll be joined by a swag of other also-rans in the next little while. According to analysis published by insolvency accounting firm SV Partners in 2018, around 1500 local retail businesses were teetering on the brink. They included a significant minority of sizeable concerns, including 260 companies with turnover in excess of $10 million a year and 18 whose turnovers were north of $50 million.
But, on the other hand, there’s a clutch of local brands riding a wave of demand, expanding their physical presence and range and growing turnover, in the face of the challenging conditions to which the sector’s woes are frequently attributed – stagnant wages growth, stiff online competition, high rents and changing consumer tastes. Digitally driven chains such as Cotton On Group, Zimmermann, Camilla, Spell and the Gypsy Collective, and Smiggle aren’t struggling. They’re smiling, as their wares continue to hit a sweet spot with customers, in Australia and further afield and they build international reputations for quality, style and service.
So, what’s fuelling these local success stories and what lessons can other retailers borrow from their playbooks? Here are a few.
Adaptable business models
Doing things the way they’ve always been done… perhaps that worked in the twentieth century and early noughties but the times have been a-changing – and quickly too. Sticking stubbornly to old school ways of doing business has become a recipe for failure. Successful Digital first retailers understand this and have responded accordingly, by embracing the concept of constant evolution and implementing flexible business models which allow them to adapt and pivot at speed.
First shop on the block to roll out a virtual reality experience, or happy to be hot on the heels of the earliest movers? Digital first retailers know the importance of timing, when it comes to embracing innovation. They’re happy to sidestep the high costs and headaches associated with blazing a trail but swift to implement new technologies once their stability and cost effectiveness has been demonstrated.
All channels open
The online shopping shift has powered the rise of digital behemoths whose service is scarily slick. Amazon founder Jeff Bezos is regularly quoted as saying that the best customer service is ‘if the customer doesn’t need to call you, doesn’t need to talk to you. It just works.’
While Amazon has set the bar sky high over the past two decades, Bezos makes it plain there is no room for complacency. In a letter to shareholders in 2018 he noted that high standards were necessary across every area of operations, if rising customer expectations were to be met.
While they may not be Amazonian in size or budget, Australia’s leading digital first retailers are just as focused as Bezos on keeping the customer satisfied.
They understand that running a successful operation in 2019 isn’t just about operating smartly presented bricks and mortar shops, maintaining an exciting and easy-to-access online presence or running multiple communication channels, all delivering a consistent and compelling message to customers – successful operators must do all three, all the time.
Doing more with data
Data has been described as the new oil and businesses of all stripes are scrambling to exploit the insights contained within the mountains of the raw stuff in their possession.
Innovative Australian retailers are among their number. Their ongoing investment in data analytics technology means they don’t have to waste time and money trying to guess their most popular add-on purchase or the best time to target customers with an EDM. They already know and they’re maximising their marketing dollars by responding accordingly.
Infrastructure that supports innovation and growth
ICT infrastructure can make or break retailers’ efforts to adapt, expand, pivot quickly and deliver the seamless customer experiences that keep today’s discerning and demanding Australian shoppers coming back for more.
Digital first retailers have realised the advantages of swapping their inhouse platforms and customised software for subscription-based applications. Hosted in the cloud, these third-party solutions don’t incur the steep upfront and ongoing costs associated with installing and managing servers and software inhouse. They can be rolled out and augmented quickly and easily, according to demand.
Joining the winners’ circle
There’s no denying the past few years have been tough ones for the Australian retail sector. Rapid change and challenging conditions have driven many once-successful ventures to the wall and doom mongers and ‘expert’ advice givers are not in short supply.
But for digital first players with a clear vision for the future, the outlook is less bleak.
Setting goals for profitability and growth, embracing technologies that can help to achieve them and being prepared to experiment, fail fast and pivot when necessary will see these innovators well placed to survive and thrive into 2020 and beyond.
About the author
Laura Doonin, Partner and Director at Moustache Republic