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Digital Retail - Ride The Wave Or Crash Out?
By Felicity Nutter, Executive Manager Of Business Technology And Projects, Swisse Wellness
Whether your business is strictly retail or not, it is difficult to find the right word for the rate and complexity of change in the Australian retail landscape. Significant? Wicked? Fascinating? Retail is undergoing a rapid shift as buyers and sellers experiment, both seeking to optimize their cash. With unfavourable economic indicators, declining bricks and mortar sales, rising e-commerce ubiquity of technology, and Artificial Intelligence (AI), the strategic challenges for Australian retail business leaders and those in adjacent industries are just beginning. Ride the wave of change, or quit before the wave hits you?
Let’s consider Australian economic performance relative to two global powerhouses US and China, with vastly different retail models. While GDP for both has seen straight line upward growth since the GFC, Australian GDP per capita peaked in 2012. As economic stimuli ran their course, Australian GDP has declined to levels similar to pre-GFC. In the same period, China and US import rates have dropped while Australia imports increase and the IFC reports that Australian household debt levels are among the highest in the developed world. As the Aussie dream of home ownership prevails, higher personal debt, wage growth stagnation, and less disposable income is reflected in declining bricks and mortar retail sales.
Globally, Deloitte reports that the world’s top three retailers Walmart, Costco, and The Kroger Co revenues eclipse their next ranked competitors nearly fourfold. Amazon has recently entered the global top 10, while Aussie juggernauts Wesfarmers and Woolworths rank just inside the top 25. At only 10 percent of the revenue of their global counterparts, this is a mighty representation. However, it greatly skews the picture of local retail health amidst a continuing rush of global retailers setting up shop in Australia.
Amazon’s Australian story is unfolding, with the pure digital retailer predicted to offer between 15 – 30 percent discounted pricing. While Amazon only holds a maximum of five percent retail share in any existing global market, gross sales across all other retailers has declined by approximately the same amount. So is Amazon eating into existing sales or is it picking up the slack? And if bricks and mortar sales continue to decline, which way will the revenue flow?
Retailers Don’t Have To Compete With Their Wholesalers – They Can Exchange Data To Mutually Drive Insight, Action, And Sales
If the recent 11/11 sales on China’s Amazon equivalent platform Alibaba is any indicator, bonanza selling a variety of products at a discount with fast delivery, continues to grow year on year at rates far higher than overall retail industry expansion. You can’t compete with Amazon (or Alibaba) if you are attempting to win on variety, price, and delivery. Jeff Bezos (Amazon’s founder) also owns a host of online platforms, including Zappos, Washington Post, Twitter, and AirBnB. With this behemoth and diversity of online content, service, commerce capability, and experience, how can Aussie retailers compete?
The clue lies in what Amazon and Alibaba have done for themselves. The technology platforms and tools that they use are becoming ubiquitous. The Australian community of retailers, their wholesalers and distributors can use them too. Some are doing it already; some are still evolving. We are on the cusp of global widespread adoption, acceptance, and leverage of this technology ubiquity. The relative cost of adopting e-commerce software, services, and AI are coming down. Speed to market has accelerated to weeks or days, and being first in market counts (well, it always has, but with barriers of entry so low, your competitors can also get in quicker, so you have no choice). But only if you can do it with same or better quality and service.
Data is the new currency of integrated business
Digital consumer data is rich. Do you have it? Is it clean? Do you really know what sets you apart? Will you make great decisions on rich data or fail on a more epic scale from poor data that you trust. Data will become the new currency of integrated business, where it is sold and traded to augment understanding of how products and services are consumed. Retailers don’t have to compete with their wholesalers – they can exchange data to mutually drive insight, action, and sales.
Know your value proposition
If all players have the same technology options, how can you compete? Use the data to re-evaluate the essence of your brand or product. Look at extensions, adjacencies, partnerships. In other words, for what value (not price) will people choose your product, your services, compared to anyone else who is competing on price. And what experience will your consumers and business partners have? If the experience of getting your product is difficult, you’ll be substituted, because substitutes are easier to find.
Automate away inefficiencies
Apply the same rules to your own business. How much business do you do with yourself? Think password resets, manual forms, approvals, controls. Steps built in as the business grew to control productivity and investment of scarce resources, to ensure people didn’t go outside their boundaries. AI can already be cheaply applied to many of these administrative tasks, freeing up time from wasteful admin to higher productivity and throughput.
Significant? Wicked? Fascinating? Exciting! Get on the wave against economic signals and international brand retail threats, leverage the high availability, and affordability of technology to jump into the gap opening up between bricks and mortar and digital retail. Automate away admin, free up time to analyse data, and continuously grow and improve the value of your products or services to your consumers and business partners. Be prepared to back bets, crash on small waves, and ride out the big ones. Otherwise, you might as well go under.