Is going multichannel the way to winning the battle with competitors – whether bricks and mortar or online?

Retail consultant Stuart Bennie* doesn’t believe so…

Online selling or eCommerce was mooted as far back as 1992 in a revolutionary book by J.H. Snider and Terra Ziporyn namely; Future Shop: How New Technologies Will Change the Way We Shop and What We Buy.

By the mid 90’s shopping online had begun with Amazon selling many things on the internet.

Now some 15 years later there is virtual hysteria about online sales and how these are affecting retail bricks and mortar sales in Australia.

This hysteria started in earnest about six months ago with the attack on the non collection of GST on off shore orders under AU$1000 and although this has now died down, as retail sales decline the attacks on online as a threat are intensifying.

This phenomena seems to be largely Australia-centric. Try Googling “online sales threat” on www.google.com (not www.google.com.au) and see how many “dot au” articles there are. Why are Australian retailers whinging more than others ?

Some pundits are attempting to find solutions. The term “multi channel” is being bandied about as part of the solution. Whereas the exact opposite may be the solution!

Let’s get to the crux of the matter. Online sales are affecting retailers for two main reasons. Service and Price.

Over coffee a few weeks ago, the CEO of a large retailer cited the following example of service. He purchased a pair of Herring Shoes from the UK online on a Friday. He received them on Monday with free shipping.

Are there any Australian retailers that offer that service right here in Australia? Maybe there are, but the vast majority don’t. So “Online Selling 101” tells us that we have to raise our game on service.

But that’s the easy part. What about price ?

We know that 30c in every retailer dollar goes towards paying the landlord and the staff. Therefore online retailers start with about a 30 per cent advantage. Then there are other overheads that are lower plus of course the GST if purchasing from overseas. Add to this the prices that some Australian retailers have to pay local or overseas suppliers which they know are higher than their overseas counterparts are paying. All seems rather gloomy, doesn’t it ?

Undoubtedly Australian retailers were (and some still are) slow to embrace online selling. They have been playing catch up ever since. The question is “When will they stop whinging and start facing up to countering online selling ?”

Well, if you can’t beat them, join them.

All very well but how can the bricks and mortar retailer offer really good prices online when the identical article is selling for 30 per cent or 40 per cent more in their stores ? The answer is not simple but there are a few strategies, some of which follow.

Firstly don’t go multi channel. Rather create your own competition.

The moment retailers go multi channel their pricing model needs to be similar across all channels. Divorce your online store from your retail stores. Call it something else. Set up a separate entity. Will it cannibalise your bricks and mortar sales? To some extent, yes. But the alternative is to let others eat your breakfast.

Secondly, if it is possible, try tagging on slightly different styles compared to those being bought for the bricks and mortar stores. Even if this is only a change in detail it will mean that a direct comparison is not possible.

Thirdly, get innovative with online promotions and online marketing. There are a raft of ideas that can provide adequate reasons for your online prices being more competitive.

Lastly, don’t be ashamed of selling at lower prices online. It is becoming the norm. In fact some goods and services actively promote that the customer will receive a better deal online. So what, if bricks and mortar shrinks as long as you are making an equal or better profit online?

Of course the landlords have seen this threat coming and there is a flurry of activity to join the online race at a shopping centre level. Difficult to imagine that they will stave off the online juggernaut.

*Stuart Bennie is a retail consultant and can be contacted at bennie@bigpond.net.au or 0414 631 702