With so many high-profile retailers going under in recent months, what can smaller businesses learn from these failures?
Early 2017 has continued the trend of high-profile retail collapses. In the last few months, groups that have entered into administration or disappeared entirely include Allphones, Pumpkin Patch, Herringbone, Payless Shoes, Eagle Boys Pizza, Marcs, David Lawrence and Rhodes & Beckett. That’s on the back of the collapses of Dick Smith Electronics and Masters during 2016.
With such intense pressure on Aussie retailers, and so many failures occurring in such a short window – even by experienced retail giants such as Woolworths – how can others avoid going the same way?
Katja Forbes, founder of research and experience design firm syfte, says there are a number of factors that have led to the demise of these retailers.
“According to administrators from Cor Cordis, who are representing Herringbone Pty Ltd and Rhodes & Beckett Pty Ltd, ‘high overheads, some unfavourable store leases, and other residual legacy issues’ are the key factors that lead to their appointment,” she says.
“If the pressures mentioned by Cor Cordis are indeed contributing factors to the demise of the other brands too, then it’s obvious that Australia’s retail sector may be losing the battle to survive because of online shopping.”
As everyone in business is coming to realise, the digital era is taking control away from companies and handing it to their customers. Those retailers that have failed to adequately embrace this change are the ones now suffering most acutely.
“Customers simply purchased what was available at the time, and typically had little say about their own specific preferences or actual needs. With little overall competition for similar products, companies had a good deal of time for preparation, development and quality control, before the gradual launch to market,” says Katja.
“The scenario businesses face today is very different. We all now operate in a truly connected, real-time, digital world, where business is expected to be more accessible and responsive to consumers.
“Trends and changes in the market occur very abruptly, almost entirely driven by customer demand. Companies are constantly racing their competitors to be the first to act on demand and to trend, creating new products and changing direction as many times as necessary.”
How to embrace online, even as a bricks-and-mortar retailer
Katja says it is possible – and critical – that retailers identify what makes online so appealing for their customers, and then look for ways to incorporate those features into their operating model.
Her tips include:
1. Launch your own online shopping destination
“The benefits of online shopping are apparent. The business can more quickly adapt their product range according to demand, as many operate on drop ship arrangements and typically have fewer lines of stock in storage to sell or return.
“Just because you are a physical store, it doesn’t mean you can’t also take part in the same playground as online stores. Take advantage of their clientele too, by starting an online store and social media presence, and reap the benefits of the digital era.”
2. Educate your customers about your product range
“Online stores tend to offer customers a useful library of information about each product listed for sale. Customers can view specific product details: where it was made, customer testimonials, popularity ratings, comparisons to other similar products and more.
“However, a retail store will be far less likely to offer such expansive breadth of information about each product to consumers, resulting in a less informative and educational shopping experience.”
3. Be different
“Senior management of retail stores need to ask themselves what they can offer that cannot be achieved during the online shopping experience.
“The first obvious answer is that the in-person experience has the potential to be vastly more rewarding than the online experience. In what ways can your retail staff make the shopping experience more meaningful and personal when they have the customer face-to-face, in your store?
“Depending on what it is you sell, it may be appropriate to offer refreshments, more practical displays of your products in action, and even a real-life comparison between two different brands or models to demonstrate the difference. Integrate social media interactions with the ‘trying on’ experience to encourage social shopping.”
4. Embrace new technologies
“Augmented reality could provide a shopping experience like no other – think Pokémon Go, with the hologram image instead appearing as a handbag the customer is interested in purchasing, or an outfit. They can take a selfie and send to their social media accounts for the opinion of their networks.
“Additional product information and comparisons provided in online stores could certainly be introduced into a ‘traditional’ store, such as on mounted iPads displayed at various tactical locations in the store.”
5. Keep the shopping experience social
“As long as traditional retail stores focus on offering that more social and human aspect to shopping, it’s unlikely that online shopping will take over completely.
“My advice is for the retail industry to identify and understand their unique points of difference when it comes to the customer experience and then capitalise on these.