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Another fatal blow for bricks and mortar?

AIMIA bricksAn extremely successful wholesaler told me recently that if he were able to put the clock back 15 years, he would not be supplying bricks and mortar (B&M) retailers.

Reason? It is much easier and more profitable to supply online retailers (OLR).

And more than that. The OLR are becoming increasingly sophisticated, some having teams of software engineers on their payroll. The B&M retailers are therefore unable to compete and are falling further and further behind. In fact the systems and processes that the OLR are developing is the intellectual property that gives them the edge on competitors. They don’t want to own inventory. They don’t want a warehouse. They don’t want to worry about freight. They want to leave all that and more to their suppliers who must ship direct to the customer. The OLR can effectively sit in a high rise building in Sydney, Melbourne or on the moon. They don’t need to ever buy or see merchandise. They are merchandise brokers.  They negotiate the deal which invariably means they have no risk. The suppliers are falling over themselves to get a product accepted by the OLR and if they are partnering with a good OLR, they know that the stock they will need to purchase, will fly out. Sure they need to take a tight margin but volume is what it is all about. And the suppliers better get the logistics right starting with the packaging and including the freight charges and service.

So what can B&M retailers do about it?  Well the likes of Gerry Harvey simply dismiss the threat as he did on TV last night talking about Amazon. A message for Gerry who dismissed OLR for years before accepting and belatedly getting on the bandwagon. Gerry – you have had a wonderful career. It is time to hang up your gloves and focus on your horse racing and hemp farming.

Dick Smith is more realistic and takes Amazon seriously.

But back to the question. What can B&M retailers do to fight OLR?

The only strategy is to take the OLR head on.

Rather than treating the online division within your B&M company as a necessary evil with a handful of staff running the department, there needs to be a paradigm shift in attitude. B&M need to develop their on line capabilities by investing (a lot of) money. And if they don’t they will rue the day. Gerry, any hot tips?

Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702

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