The decision by insurance giant AAMI to close its retail branches is evidence businesses are beginning to respond to an increasing consumer preference for online transactions, experts say.
The decision by AAMI comes amidst a huge debate over the future of physical retail stores and customer service staff, with companies such as Qantas looking at reducing the number of customer-facing staff in favour of self-service solutions.
AAMI plans to close its 24 branches in the next couple of months, with a spokesman saying “these days the vast majority of business is now transacted over the phone or over the internet”. It also pointed to other entities such as Australia Post which have introduced insurance products only on the internet.
Insurance bought online is nothing new, with companies such as iSelect making significant inroads into the market by allowing consumers to compare and contrast insurance deals and utility providers.
Aggregators are now some of the most popular sites in the country.
Forrester Research analyst Steven Noble says this trend isn’t new, but that we should expect to see a lot more of it as insurance companies – among others – begin seeing online transactions as more lucrative.
“We will see insurance companies adopt multi-channel strategies, and most of the online companies were new companies built around that online-only mentality. But it wouldn’t surprise me to see more go from multi-channel to online only, or other forms.”
“There are still mail services, and there are still phone services, there is just the absence of those physical stores. I think with the web growing quickly, people value human contact but for many that can be just over the phone.”
Telsyte senior research manager Sam Yip says the change is evidence of a growing consumer base which is biased towards online rather than physical stores for products like insurance.
“What can’t you do online? What is the differentiator? Most people spend their time online already, and if you can research online it makes sense to close the retail branches and move to an online-only model.”
“It’s not an experience; you don’t have to touch the product. They sell the best information they can give and provide it in the richest way possible.”
Noble also says there is a “correlation here with age”.
“So I think most people in transactions favour convenience, and that’s not necessarily new. But that’s why we’ve seen people move from paying their bills in person to paying by mail.”
“It’s why these options have arisen and it’s natural for the generation that has grown up using only the web that you would expect to see an ever-increasing amount of services go online.”
These comments fit with new research from CommSec chief economist Craig James. James says the new Australian consumer is “more likely to save than spend” with a bias towards online – and he is worried some businesses are too slow to recognise this.
“Internet shopping is still only a niche activity, but it can be expected to grow over time. Department stores must quickly re-invent themselves to meet the new challenges and we are concerned they are moving too slowly.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
