I’m talking at a conference for the Australian Retailers Association on online retailing, and prior to doing so, I was asked for comments on the state-of-the-nation when it comes to buying and selling online in Australia.
How would you describe the state of online retailing in Australia?
The state of online retailing in Australia has never been better, though we remain a generation behind the States and underserved due to our limited size.
On hugely positive notes, we're past the tipping point in relation to consumer trust and use of online retailing; overall, the standard of websites and the quality of the user experience through payment, support and fulfillment is hugely improved over even 12 months ago.
Less encouragingly, we are still a long way away from where we could or should be and there are plenty of obstacles to getting there; despite world-best Internet penetration rates, the Internet is not as pervasive in our everyday lives (say shopping) as say in the States or UK, and this in turn provides less incentive for innovation in Australia.
The whole situation is compounded by retailers such as Gerry Harvey rubbishing eCommerce, and dragging down the overall prospects of online retailing. Do you think retailers in the States have such distain for selling online?
Finally, the banks remain an anchor on the industry and despite innovative, third-party players such as eWay, banks remain a tremendous roadblock to taking payments online; you can open a traditional-store bank account in seconds, and yet doing the same thing online is staggeringly difficult; the banks do not even offer fraud protection to sellers as yet!
How has that changed in the last few years?
The most notable catalyst for the overall improvement has been the sustainable and increasing uptake of eCommerce, right across the spectrum.
The criticism has always been the numbers (or lack thereof) of users using eCommerce and today, we are certainly past the point of sustainability. This has been driven by a range of factors including bandwidth, a vastly improved perception of security, new payment options (such as PayPal) and the overall increased prominence and selection of online shops and retailers. The fact that BigPond have billboards in train stations promoting online music downloads for 99c not only tells you where we are, it is driving it.
Another key change has been the improvement of the fulfillment aspect; there are still plenty of forums full of customers complaining of delayed and incorrect orders, though it is nothing like it was. We are more and more surprised if a product is not delivered when promised and most of us would be stunned if a product didn’t materialise at all. If you think back to eStore days, it was the total reverse of today: you were damn lucky even to get the right product!
There are plenty of other factors that have driven the overall improvement in eCommerce though these have generally been in-line with the overall maturity and growth of the web and can be assumed therefore to be the same.
What are some of the key trends impacting the online retail market?
There are some interested trends influencing online retailing, and of note, it is one space where every participant knows and follows the movements of every other. If somebody offers something or does something, everyone knows about it. To some extent, it is an industry driving itself and creating its own trends.
The general trend is that of overall improvement in all facets of online retailing, and it is pleasing to see the wide range of experimentation – especially in marketing and product display – going on.
As it is, no doubt, recommendation systems, behavioural targeting and funnel optimisation (reducing churn at the checkout) will be increasing prevalent over the next few years. Nine times out of ten, price will remain king though this is understood by most online retailers and bolt-ons such as targeting and optimisation will only support this reality.
Affiliate (performance) marketing is an obvious trend for online retailers and it is unexpected that we are so far behind given the very obvious revenue benefits. Currently, it is players such as Dell that are making the most of this form of marketing, though I’d be surprised if it didn’t extend to the larger, pureplay eCommerce sites in a reasonable period.
There are a few other trends that will impact online retailing in Australia, some of which have already started.
Certainly, we are likely to see more and more traditional retailers engaging in eCommerce, much more than the sort of David Jones/thespot.com.au mashup we saw a few years ago. The revenues are still comparatively small enough that Mr Harvey can poke fun at them, though shareholders of these retailers will increasingly want to see a strategy that’s more than just Lasoo; even Harveys have been rumoured to be building an eCommerce offering for the past 18 months. C’mon Freedom Furniture, where’s the love….?
We are likely to see further fragmentation in certain sectors of eCommerce – especially electronics – with eBay-style, Chinese-electronics stores run from rumpus rooms. This might not come as a surprise, though it will continue to challenge the larger, department-store retailers and I’d be very surprised if leaders (dStore, OO, Deals Direct etc) in this space had not experimented with eBay/one-product style stores already.
Hitwise and Nielson suggest that price-comparison sites are significant traffic generators to online retailers, and these will no doubt continue to evolve and grow in importance. Ironically, in many dynamic spaces, aggregators are the enemies of those they aggregate and so it will be interesting to see where it goes.
Which sites would you consider best practice examples of online retailing (pureplay and/or multichannel), and why?
There are some great eCommerce websites to learn from in Australia.
We don’t have a king-hit website such as Amazon, though there are plenty of websites which have nailed it in certain areas and ways.
CatchoftheDay is a great concept. It loves it customers, and they love it back; it shows that simplicity and differentiation are a great combination.
Kogan is an interested case study of how to by-pass the Main Street retailers to sell containers of Chinese flat-screens at two-thirds the price. It has used PR very effectively, its website is clean and professional and it presents a very clear proposition to customers.
Big Brown Box (a website I have been associated with) has nailed one of the usual roadblocks to online purchasing, by offering blanket, free delivery. It was the first to do this – matched by quite extraordinary pricing – and it has established a clear reputation in an otherwise crowded market.
Peters of Kensington (a website I have also been associated with) is a very impressive case-study of how eCommerce can be integrated with an offline environment; they really are a benchmark to parts of the industry, supported by effective offline advertising and superb retailing knowledge.
It would be impossible to cite the list – it’s big and there are some great sites out there. It would be great to have an Amazon of our own (despite that we all buy from there!) though we’re slowing getting there across the board.
Note: after writing this piece, a colleague commented that it would be interesting to discuss why Gerry Harvey is so dismissive of eCommerce.
My friend stated: the answer is probably somewhere in between it causing difficulties with their franchise model and him believing that selling on the internet reduces profitability due to increased focus on price and decreased importance of other factors).
My friend is completely right, though I’d make the addition points:
Gerry Harvey will smash his franchisees into shape the second he wants to, and he’s a smart guy and would know the theoretical benefits to everyone of eCommerce.
It’s just that he has plenty of time to think about it – his stores are going nowhere, enter successfully whenever he wants (think of how he entered photo printing!) and of course, by dismissing eCommerce as a real threat, his competitors that look to him as a barometer will be less likely to invest, save that they look too silly.
It’s right that eCommerce erodes profit margin, though there will come a point where the revenue and froth cannot be ignored; at that stage, Gerry Harvey will enter and probably double the size of eCommerce in Australia, merely by the ripples he’ll cause. He’s no fool, and we’re all waiting for baited breath.