Stunning attack on the big retailers from Emma Aberici of the ABC The Business on their seeming lack of judgment about the market and what customers want. Is it poor judgment or something else?
Emma Alberici makes all kinds of important points in this article. How many can you spot?
That the large retailers have bungled their trade online - or perhaps more to the point, completely failed to understand the relationship that changing consumer habits have on sales, is telling.
The same also goes for small retailers who have continued to pretend that things the internet is not a game changer and calls for a complete revision of how business serves customers in this age. But the opportunity for smaller retailers is huge. They are not stuck with corporate bosses who are slow to react and more remote from their customers. Local retailers have the ability to be selling online as an additional sales channel and making sales to customers who they would once have had no chance at all of serving.
The only thing holding back sales ... is the business owner who continues to refuse to come to terms with this new way that customers expect to be able to buy. And buy they will.
Australian retailers are losing the online race By ABC's Emma Alberici Jun 17, 2013
Dear Bernie Brookes (Myer CEO) and Paul Zahra (David Jones CEO),
When are you going to admit that you misread the market?
According to Roy Morgan Research's State of the Nation report, after a decade of consistent year-on-year growth, internet shopping finally reached mainstream status in the first quarter of 2013. According to the report:
For the first time, Australians who don't buy something online in an average three month period are in the minority.
"
If you continue with your false assumptions about what consumers want, shareholders might begin asking difficult questions: Are you luddites or do you honestly believe that e-commerce is a fad?
Mr Brookes, why did you say online shopping would only account for 10 per cent of retail sales at department stores in the UK and the US over the next five years when John Lewis is already selling 25 per cent of its goods through the internet and is actively pursuing a strategy that will push that figure to 40 per cent by 2020?
Of Mr Zahra, one might query what on earth he was thinking when he recently trumpeted the introduction of free wi-fi in his stores. Do you really want people visiting DJs online right now when the children's section is promoting Christmas themed clothing in June? And Mr Zahra, there is no point encouraging people online only to disappoint them when they arrive. While the world's biggest department stores are luring people with web exclusives, their Australian counterparts are turning customers away when they venture into cyberspace with alerts warning that certain stock is only available at the shop. Remarkably, DJs advises people to pick up the telephone and inquire about that product’s availability, fit and style instead. Mr Zahra, do you not recognise the fury such a message is likely to illicit from someone who has presumably logged on to your site to speed up the whole shopping experience?
Unlike their international counterparts, Myer and David Jones have never taken online shopping seriously. In Australia, where we have enjoyed the highest economic growth in the developed world, low unemployment and record low interest rates, the major department stores have been blaming the "worst trading environment in 30 years" for their poor sales.
In the US and the UK where recession has brought double digit unemployment, the big department stores that have embraced the virtual world are going gangbusters. Macy's (which counts the upmarket department store Bloomingdale's in its stable) recently reported a 20 per cent surge in profits. The company revealed that 89 per cent of its growth came from online sales. Their website is tipped to become such a big component of the business that Macy's has been investing heavily in its technology and other strategies that make them able to respond to customer needs fast.
Management is aiming to have the highest possible number of suburban stores capable of fulfilling online orders. In 2011, it trialled 23 "online fulfilment centres". By the end of 2013, Macy's will have 500 such outlets well equipped to process and dispatch orders.
Celebrated John Lewis CEO Andy Street understands that getting products to people and returned as promptly as possible will make them more loyal to the brand. Click and collect is a vital part of his business too. John Lewis online purchases can now be picked up at any John Lewis site plus any of the UK's Waitrose stores (the supermarket chain sits under the same corporate umbrella).
At Myer in Australia, you can have your purchases delivered within four to seven working days unless you live in Western Australia in which case you will wait 10 days (never mind this is the state where people have the highest disposable income in the country). Click and collect is only available at four specific Myer stores in the entire country (sorry Hobart, Adelaide, Darwin and Canberra). Did I mention that John Lewis will soon offer a freight service that delivers straight to the customer's closest petrol station?
Mr Bookes, Mr Zahra, I'm surprised that you continue to blame the "trading environment", "consumer sentiment", and the fact that Australians are saving more and spending less. Perhaps a little more introspection is required.
Pardon my impertinence Bernie Brookes but how did you manage to negotiate a 4.4 per cent pay rise last year after your sales fell 1.3 per cent? Do you, Mr Zahra, honestly expect the public to believe that much of your companies' woes can be attributed to your predecessor, Mark McInnes? You have been in charge for three years now and before that you were group general manager of stores and operations at DJs. Didn't you notice what was happening in international retailing in your 12 years at DJs before you became CEO? When you were at Myer and Officeworks before that, weren't you trained to keep an eye on trends overseas?
Mr Brookes, Mr Zahra, I find your claim about the impact of the high Australian dollar the most outrageous of all. It presupposes that shoppers are motivated almost entirely by price and it exposes just how out of touch you are.
When I logged in just now I found the DJs front page emblazoned with a 50 per cent off banner. Myer is currently advertising its "biggest" stocktake sale. It seems like the country's two biggest department stores are engaged in a cycle of continuous heavy discounting.
But there is no point chasing the volume game when what you really want is value. Price is important but it's not the reason shoppers are drawn to the internet for the latest fashions.
Mr Brookes, Mr Zahra, I want to let you in on an open secret; the women whose wallets you covet no longer have the luxury of time to spend aimlessly walking around your multi-level department stores. In the time it takes to reach level two, they can click a mouse or touch a screen and buy something from every one of your departments.
Your traditional customers (mostly women) now have jobs and if they don't also have families then they certainly have a lot more other demands on their time than they once did. Technology also means they are much more aware of their entertainment options and shopping is falling further down the list.
Shopping has become the thing women do at night, with a glass of wine, after the kids are in bed or at work during a meal break. Couples have less time to spend with each other than they ever have and it shouldn't come as a surprise that men aren't enamoured with the department store "experience".
John Lewis CEO Andy Street last month told The Times in London that the John Lewis champagne bar at Bluewater is now the busiest part of the foodhall. "People want a day out and they want to be sociable. And that's part of what we're providing: a meeting place."
Far from putting up the white flag, Australia's biggest retailers are getting together to fight back ... not with a clever strategy to win back customers that are shopping with their international rivals, rather, they want politicians on both sides to intervene. Frustrated by their own lack of ideas and innovation, they want Canberra to tax imported goods under $1,000. Remember, Australians are currently paying up to $50 for the luxury of having things shipped to them from overseas. That cost is often not too far off what they might have paid if the GST applied. If Australia's shopkeepers took a global approach, they too could benefit by selling their wares to the world GST free. People want something new, something other people don't have. Couldn't an Australian retailer offer shoppers in the US, the UK something different?
Both the online and the in-store experience have to change for our big department stores to stay competitive. If foreign retailers like Macy's and John Lewis (not to mention the hundreds of smaller department stores and stand-alone outlets) can manage to distribute to Australia and express prices in Australian dollars online, why can't DJs and Myer send Australian brands overseas?
Surely they could be effective aggregators and yet their websites don’t even countenance the possibility that someone sitting in a living room in London or New York might want to purchase Sass & Bide jeans or Bonds underwear? Neither store’s site contains any information whatsoever about international delivery. John Lewis boasts international shipping to 30 countries. The first time I logged in to Macy's they let me know I could have any of their products shipped to Australia. Mr Brookes, Mr Zahra, please explain why you can't imagine doing what your competitors have been doing for years.
When "pure play" e-tailers entered the market, John Lewis recognised that it had the advantage of retail incumbency. Shoppers recognised and respected the brand. All John Lewis had to do was freshen it up and convince people it was nimble enough to respond to its customers' needs and desires.
Clever marketing went a long way to inspiring loyalty. In 2010, the "She's Always a Woman" advertising campaign went viral on YouTube with more than 850,000 hits. The clip traversed the various stages of a woman's life from birth to pension age and prompted the Daily Mail to claim the department store had touched the nation's hearts and reduced even the most hardened television viewers to tears. The Fyfe Dangerfield cover of the Billy Joel song commissioned especially for the ad became a hit, rocketing up the British charts. As it continued to "keep pushing at the boundaries" John Lewis this year introduced Johnny Harrington - a former kitchen fitter with a ginger beard and unkempt mane who became the unlikely new "hobo chic" face of John Lewis menswear. Sales jumped. The John Lewis YouTube channel boasts dozens of videos, featuring everything from fashion bloggers talking about designer headphones to a guide to troubleshooting your washing machine.
While Myer has now exited the business of selling whitegoods, John Lewis has made a name for itself by introducing retro fridges. David Jones is struggling to make money out of its technology division; meanwhile, sales of technology, iPads in particular, have been a huge driver of growth at JL.
DJs and Myer need to innovate and reinvent themselves but their CEOs appear reluctant to change. They moved online only grudgingly and are now promising shareholders cost-cutting as a solution to its problems. There has been a lot of talk of improving the online offering but it's yet to materialise in any meaningful way. Macy's and John Lewis online flash up their feedback form on a regular basis. Both stores are desperate to know why people visit their site and what they could do better (Macy's formally asks "what can we do better"). Bernie Brookes and Paul Zahra, prominently ask your customers what they want. It might surprise you.
Australian retailers are going the way of the newspapers that realised too late that the banks of the rivers of gold had broken and the money had spilled into the pockets of the online "pure plays". It was the classifieds that once made Fairfax one of Australia's most profitable businesses. That all changed when Realestate.com became more popular than Domain.com.
Mr Zahra, Mr Brookes you need to match the investments of your overseas counterparts if you're going to survive this Triassic-like period you've decided to keep Myer and DJs in. Mr Zahra, you are celebrating DJs 175th anniversary but this is no time for hubris. You recently boasted that DJs is still standing after two world wars and the Great Depression and it will "stand the test of time".
This is not a "test of time". It is a test of nerves. People have deserted your stores and unless you act decisively and aggressively to make them come back, you'll be wishing you had a time machine to take you back to the 1930s. I note that Myer expects online sales will reach $50 million in 12 months which is less than 2 per cent of overall sales.
DJs is coming from a lower base so both will need more people to use their feet not their fingers to do the walking. Unfortunately gentlemen, Australians have come to expect shopping to be fun, fast, full of choice and open 24/7. They don't mind paying a little bit extra for international shipping if it ticks all their other boxes. At the moment, when it comes to ignoring what customers want, there is no other store like David Jones. As for "Myer, My store" - Whose store?
Emma Alberici is a host for ABC's Lateline program. View her full profile here.
In summary:
Australian retailers have wasted a good decade in adapting to online purchasing as a channel for acquiring new business and growth in sales.
Overseas retailers are planning for online sales to attract up to 40% of their sales
Excuses about the high dollar, GST on overseas internet sales are simply that and not at all credible reason for why customers are not buying more from Australian retailers.
Retailers working together to promote these excuses are failing customers once again, because they are not looking for ways to help consumers.
One effect of this recalcitrance is that retailers have ignored the opportunities available to access the sales they could be making from overseas customers and domestic customers who don't live proximate to stores, as well as existing customers who don't have the time or interest in visiting the store every time they want to buy.
Retailers have failed to provide the choice that consumers are craving and using outdated thinking to promote their goods in ways that are not valued by customers.
Old methods of pushing seasonal purchasing in out of season times means that customers can see clearly that the retailer has no interest in what's important to them, and renders the retailer irrelevant.
Innovation and being attuned to a more sophisticated buyer is what retailers need to pursue.
The 'old days' are not coming back. Time for retailers to wake up to what is happening and develop a plan to really understand the new market and respond accordingly.
Are there challenges for retailers? Of course. Strategies to move forward are vitally important for a successful transition. We are in a time of massive change and retailers large and small need to equip themselves for this changed environment.
What can you do for your local business?
- Start with a review of your own business.
- Start researching the market and your position within that space.
- Like the old days, you then need to put into place a well constructed, well thought-out plan to go forward.
- Be willing to adapt.
- Make steps to continually review, reflect and revise what you do.
