The plethora of retail statistics available in 2019 regarding retailing paint a similar, and largely distressing picture – especially if you are a bricks and mortar retailer. While there are still some retail stars like JB HI FI that are doing very well in 2019, the majority of retailers and in particular bricks and mortar retailers are feeling a lot of pain – and will continue to feel pain for some time to come.
My prediction is that bricks and mortar retailing in Australia will never recover fully from the current slump. There are thousands of retailers today that will not be in business in 12 months and many more who will not be in business in 24 months. While great retailers like those owned by Premier Investments will continue to generate profits, those that don’t get the changing world will die.
My prediction is that Myer will be among those that go by the wayside.
Like any business there are two factors impacting on the profitability of retailers. Expenses and revenues. Expenses are currently too high for the revenues being generated. But while retailers have developed ever improving skills in terms of developing and implementing strategies to drive costs down, they are struggling with driving revenues up, in a very tough market.
Making the bricks and mortar retail market tough, in my view, are the following:
Wages in Australia have been stagnant for some time and are likely to remain so for some time to come. As the Reserve Bank reduces interest rates – as it has been doing for 5 years now – we should see an increase in consumers spending – but instead we are seeing people paying off debt – reflecting a high level of uncertainty. When consumers are uncertain, they don’t spend.
This in turn has put pressure:
There are so many bad retailers out there, all of which, even if only for a short period of time, are taking a small share of the market, making it just that much harder for good retailers. In addition to taking a share of the market, at least for a while, these poorer retailers also help to prop up rents making it more expensive for better retailers to survive.
Poor retailers include those who:
The changing habits of consumers are numerous and the changes taking place will continue to impact negatively on any retailer that does not understand changes like:
There is growing evidence that the X and Y generations are increasingly preferring to buy experiences over goods. In 2019 younger people want to eat great food, travel the world, shock their system with a great ride or embark on a unique adventure. They are much less interested in a new watch, anew phone or a new car. Indeed, many Y and Z generation have no interest in owning a car.
When a consumer wants to buy in 2019, they do not want to wait. They want what they want now. This has two aspects to it. Firstly, they want exactly what they want – and do not want to compromise. If they have to buy online to do this – so be it – in part explaining why 40% of all online shopping in Australia is from an overseas website. Secondly, they want it now – not when a shop is open, but now – and increasingly, they do not give a dam about trying it on. They can always send it back. This is encouraging shopping online – and killing retailers without a retail option.
E-commerce is part of the answer to addressing these issues as it offers access to a wider range, 24- hour access and absolute convenience – in addition to keener pricing in many, but not all instances. Consider the following statistics:
No main-stream retailer in Australia in 2019 can afford not to have an online store and by the end of 2020 there will be an expectation that all retail businesses offer an omni-channel experience – another step up from simply having an online shop. There are two very important reasons for this:
The major barriers for most retailers wanting to get online are:
It is the knowledge that online retaining is essential and these tree legitimate concerns that have, in the last 12 months, driven the number of online marketplaces up by 74%. Online marketplaces are increasingly becoming for online retailers what shopping centres are for offline retailers – but without the outrageous costs. Indeed, many shopping centres are now establishing an online marketplace for their retailers.
With the first quarter of the New Year about to get over, it makes sense for each one of us to consider what our priorities should be for the remainder of 2020. The value of online retailing in Australia is...READ MORE