SPECIAL FEATURE STORY: E-commerce changing the retail landscape

In this special feature story, Drew Doolan explains why getting a retail business online is a good thing on so many levels.

In this special feature story, Drew Doolan explains why getting a retail business online is a good thing on so many levels.

Bridge Road is one of the larger retail areas outside of central Melbourne’s iconic shopping malls; and when I walk down there, as I do every day, I see failing small businesses. Most of these retailers are having major non-seasonal sales, and many of them are discounting 70, 80, 90 per cent off their stock. I walked past one particular store that, only three months earlier was selling high-fashion products for $200 a piece. Now it is advertising “nothing over $10” in what looks like a liquidation sale. Many other shops are just empty, devoid of furnishing and awaiting lease. 

This is typical of how it goes, all the way along Bridge Road. The only shops that appear exempt are the major retailing franchises, the iconic sort that you we’d all recognise and that have the capital to weather almost any bad sales season. But despite these failures being in the open for everyone to see, the ongoing cycle of move in, set up shop, open stores, then slowly and steadily decline repeats itself, and there is always someone next in line, waiting to have their turn at making the same mistake.

It’s possible that Bridge Road is an outlier, but I see this trend in retail streets all around Australia. I often ask myself the cause and whether businesses like my own, which offer online alternatives, are exacerbating the problem. I think they are. But I think street-side retailers themselves have a lot to answer for as well.

Let me give you an example – and not a hypothetical one. There is a cluster of shops on Bridge Road that happen to all sell men’s formalwear. They all look like carbon copies of their neighbour and there is nothing to distinguish them. Someone who walks into Business A may as well be walking into B, C or D. Not only are they competing with each other with the same types of products, they are not standing out from each other or building a brand in any meaningful way.

Several factors come into play here: there is a cluster of businesses all competing with similar merchandise. The building is on lease, so it is difficult for retailers to make dramatic changes to their shop’s look and make it distinguished. What’s more, it’s expensive to do – new signs, wallpaper, fixings – it all adds up, especially when business is scarce.

WHERE TO TURN?
So what is the answer here? Go online. Eliminate the geographic element. Make it so that it doesn’t matter whether the business is standing shoulder-to-shoulder next to three others that also sell the same brand of shoes and ties. By going online these businesses can immediately display their differences.

Online businesses can compete on the most important thing: brand and identity. That means making a website that is custom-designed, presenting the message of the business and what it stands for. That is what makes it memorable and motivates people to shop there.

In the bricks-and-mortar space, competition is growing fiercer and larger corporations with more money to invest are pushing out small business owners who cannot compete for rent in prime foot-traffic areas. This can be seen with the influx of high-brand stores spilling into the CBD, and the end result can be seen on the ailing Bridge Road strip.

Aussie small businesses can compete on equal footing with these titans of retail by going online, where the market is more democratic and businesses with large capital power can’t just push out the little guys. The picture I’m painting for street-level small retailers isn’t exactly daubed with bright colours, I know, but I feel that it’s an accurate portrayal of the real market. Is offline retail is dying? No. Not even close. It is as big as it ever has been. And I’m not saying that online retail is the inevitable future for all successful retailers either, but the environment has changed and it will continue to change for many retailers. If retailers want to prosper in the long term, they will have to look at how the online world can, at the very least, complement their offline practices.

WHY GO ONLINE?
With the benefits that the online world offers and the decreased risk, beginning online first and incrementally moving into the physical retail space second could be the more profitable strategy. But for those who haven’t made the move, it’s probably time to think again. It’s not that the above-listed barriers to entry are easy to overcome, it’s just that the benefits, outlined below, almost always outweigh them. 

  • Convenience: Customers can not only place orders from their own home, but can do so outside of any regular shopping hours, without having to fight for a parking space, fight the traffic and fight with the kids to behave. It is delivered right to the door. And customers love that.
  • Customisation: So much of what makes a business attractive to customers is its personality, its brand and its story. The online realm is the most effective way to get these concepts across, through video, pictures, images, shape and the aesthetic quality that come to define a business.
  • Better Prices & Good: Customers are able to shop around for the most competitive prices and review each individual product ensuring their quality and the authenticity of what is advertised.
  • Customer Recordkeeping: For marketing and keeping track of loyal customers – especially those who spend more – online retail is the perfect tool. It’s a great way to pinpoint your marketing message, too.
  • Inventory Efficiency: By only shipping stock as orders come through, risk, investment and inventory costs can be greatly minimised by selling online.
  • Global marketplace: Local retailers go global when they go online. They can also take advantage of the low exchange rates with the US dollar.
  • Reduced Risk: Retailers, before they even sign up for a lease, pay for thousands of dollars’ worth of stock, renovations and advertising. By going online the initial investment is far less and the return and margins can be far better.

These are just some of the current benefits of getting your retail business into e-commerce. The decline in bricks and mortar retail is, at least in some part, owing to the rampant rise of online shopping. So what does this say for Bridge Road? It’s time to think carefully about your retail strategy. It’s time to reconsider going online.

Drew Doolan runs leading marketing agency Approved By Drew.

This feature was originally published in the December 2014 print issue of My Business. To read more in-depth features for SME business owners immediately upon publication, subscribe to My Business magazine now. 

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