Retail has moved online and only two options remain: Sink or swim.
Experts at a recent retail summit held by the Australian Information Industry Association and Australian Retailers Association said retailers can either join the throng of businesses entering the online space, or get pushed aside by the tidal wave of customers, filling the pockets of eCommerce businesses.
Chairman of Red Design Group and advisory board member of yoghurt business FiveAM Life, Don Fraser, says when there is a seismic and rapid change taking place in the industry, those in the industry or market are usually divided into three groups:
“Those who make things happen, those who watch what happens and those that wonder what’s happened,” he says.
The retail industry is in the midst of such a change and so far research suggests the majority of Australian businesses are not keeping up. The latest Roy Morgan State of the Nation report found internet shopping has experience more than a decade of year-on-year growth and now over 50% of Australians shop online, with total spending equating to $24.3 billion online for the 12 months to March this year.
This figure was an increase of 11.9% from March 2012 and outstripped total retail sales growth for the same period by 8.5%.
Despite the continual increase in consumers shopping online, the latest Australian Bureau of Statistics figures show only 43% of Australian businesses have a web presence. The figures reflect particularly poorly upon small businesses, with only one-third of micro businesses online.
With eCommerce quickly becoming the favoured way of shopping for many consumers, Google’s retail industry leader Ross McDonald says Australian businesses are playing catch-up.
“Australian businesses are years behind Australian consumers. Measure your business from what your next-door neighbour, brother, mother, nieces and nephews expect of today’s retailer.
“There is the gap which has opened up and this gap increases in size as more and more technologies come on board,” he says.
McDonald says as retailers need to remember the fundamental consumer needs haven’t changed, people simply have more information and technology available to them to influence their purchasing decisions and methods.
“When thinking about technology it’s easy to be fixated upon a device. Amongst that noise it’s easy to forget the consumer still has a set of needs they want to fulfil. They’ve got kids and wives to buy presents for and they’ve still got to put food on the table.
“Fundamentally, people become aware of their needs, consider their options and then make a purchase decision,” he says.
The difference, McDonald says, is now technology has infiltrated everyday life and it’s starting to drive buyer choices.
“The path to purchase has traditionally been considered like a funnel where you’ll consider three options and then go and buy one, but what’s happened with online technology is the funnel is now fat in the middle. You might be aware of five things, but then you go online and find ten different options.
“All of a sudden, the consideration space has become much much bigger and this is a challenging world for retailers and brands as they now have to understand how to navigate this consideration space,” he says.
In the United States, research by the Interactive Advertising Bureau shows 53% of consumers have stopped an in-store purchase as a result of researching the product on their smartphone. Almost 40% of these customers didn’t make the purchase because they found a better price at another store and a further 30% found a better price online.
McDonald says consumers still predominately shop in-store, but the stores people go to are determined by information online.
“Our research says 80% to 90% of purchases still happen in-store, but the way consumers get to the store is very different and that’s because the lounge room of today looks a lot like this [he displays an image of a family sitting in front on the TV simultaneously using tablets, mobiles and laptops],” he says.
McDonald says the challenge for retailers is to close the gap between the household of today and the retailer.
“This is pretty much everybody’s home. Australia has one of the highest smartphone penetration rates in the world and we have the highest tablet penetration with one-in-five households having a tablet.
“We can’t wait to see what’s going to happen in the US or the UK, if we don’t sort it out right now for our consumers, then someone else from overseas will do it for us,” he says.
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