Large businesses should start communicating more openly about what they are doing in the eCommerce space and ought to even start thinking about acquiring smaller retailers in order to get their foot in the door, one industry expert has urged in a new report.
The warning comes as a separate report from PayPal released earlier this week predicted the eCommerce market is set to grow by 12% each year until 2013, reaching turnover of $37.7 billion a year.
Deloitte partner Damien Tampling has written a new report, Move Quickly to Capitalise On Online Retail, and argues there is a growing disconnect between the younger, faster players in the Australian online retail space, and the larger department stores which are struggling to get online and are slower to react to industry trends.
“You’ve got Coles and Woolworths which have made quite a few in-roads into groceries in some areas, but en masse, looking at the sector is that you’ve got guys like OzSale and BrandsExclusive, and making good money and are acting much faster.”
Tampling points out it is incredibly hard for any incumbent player, such as David Jones or Myer, to drive completely new innovation in an existing space, “because they have established models and markets”.
Criticism has also been levelled at larger players including JB Hi-Fi and Harvey Norman for failing to innovate online, although both have said they are working on improving their digital channels.
But at the same time, Tampling says there are new Australian entrepreneurs who are getting picked up “very quickly” by outside venture capitalists. Some companies, such as OzSale, have attracted investment from some prominent international investors.
Others such as Catch of the Day and DealsDirect have received significant investment form inside Australian borders.
“The larger players are just moving too slowly, or viewing that they will go about this in their own time. But many other retailers have already had a crack at that, and are speeding ahead,” he says.
“Companies need to act now if they want to enjoy a long-term future in online retail,” the report warns.
While Tampling says it isn’t necessarily viable for larger players to innovate on their own, he says they need to start being more open about their behaviour in the online space, and should even start thinking about acquisitions.
The report itself points out that all retailers should be focused on the internet for two key reasons – “growth and superior margins”.
“Online retailers tend to have higher margins than those with bricks and mortar stores because they don’t need to invest as much in infrastructure,” the report notes, but Tampling laments there hasn’t been much public action from the bigger players.
“I really haven’t seen a solid view of any online strategy. When they give updates to the markets, they’re not talking about this as much as they need to be.”
“They need to be a little more transparent about what they are doing, so analysts can look and say they either agree, or disagree, and determine whether the market agrees or not with whatever they are doing.”
Tampling also warns they shouldn’t let investors get the best of what’s available in the market right now.
“I’m not saying all the online retail outlets right now are perfect models. But there is a lot out there, and perhaps they should be asking the question of whether they should be acquiring a DealsDirect, or an OzSale.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
