THE AUSTRALIAN FINANCIAL REVIEW Marketing & Media column: August.
Just how slow are Australian companies to grab hold of opportunity? Despite being ahead of the United States and Britain in terms of broadband penetration, time spent online and frequency of both product research and purchasing online according to Forrester Research, most large Australian retailers are still yet to jump into ecommerce.
Why? That’s a question I ask constantly. The usual responses from retailers are “We tried it a few years back but failed miserably”, “It simply doesn’t work in Australia” or “It’ll cannabalise our bricks and mortar revenue and/or upset our franchisees”. These are lazy responses and poor excuses.
You only have to look at the adoption curve of broadband to see that a few years ago the mass market was not equipped or not confident enough to adopt e-commerce. But with the research firm The Nielsen Company recently reporting consumers in the Asia-Pacific region are the world’s most prolific online shoppers, the first excuse is no longer valid.
Some level of cannibalisation is likely when an “old” retailer moves into e-commerce, but not anywhere near as much as most fear. But local retailers need to realise the risks of not moving into e-commerce are greater than the risks of embracing it.
Consumers’ retail spending is increasingly moving offshore to a growing pool of credible international brands. Research by online auction giant eBay found the number of Australians buying goods online from offshore retailers surged 60 per cent in the year to April 2010. Research company Frost & Sullivan reported an estimated 40 per cent of Australians’ online retail spending is taking place on overseas sites.
With the lack of local e-commerce sites, this behaviour will only increase, particularly as international service quality is improved to address convenience and price concerns – for example, free international delivery and returns, which are already steadily increasing – and the number of overseas brands capitalising on our market opportunity increases.
While cannibalisation of revenue is likely to occur to some degree when a bricks and mortar retailer moves into e-commerce, there is also an opportunity to increase sales in the bricks and mortar stores. Although Australians are among the world’s most prolific online shoppers, the majority intend to use the internet and ecommerce sites for research only, that is, they check prices and products and complete their purchase in bricks
and mortar stores.
By having and maintaining an e-commerce site with detailed product information, a company increases the “find-ability” of the consumers’ considered products, increases awareness of its brand’s supply of these products, and – if done well – creates regular brand engagement through the facilitation of the consumers’ product research task. The latter strengthens brand relationships and leads to greater purchase consideration.
It really is a win-win situation, which is why so many overseas retailers are investing in the development of their e-commerce stores with an increased focus on user reviews. It also explains why some of Australia’s most successful digital entrepreneurs, such as RedBalloon, DStore and Booktopia, are looking to extend their pure online presence into bricks and mortar stores.
A “do nothing” approach is likely to lead to erosion of the Australian retail market as a whole. Local retailers need to get moving with this, before the opportunity takes a permanent overseas vacation.
Jennie Bewes is director of social media and new business at digital marketing agency Amnesia Razorfish.
As published in The Australian Financial Review, 25 Aug 2010