New retail: Great expectations require focus on loyalty
There is a worldwide recession-like cool off taking place in retail sales, with large e-commerce companies pushing their way to the fore. Here’s how Australia is reacting and what SMEs can do to protect themselves, writes Benjamin Kluwgant.
Technology has changed the face and pace of countless industries and their associated consumer trends. None more so than the retail sector, which has been rendered unrecognisable in comparison to the way it used to operate.
The economic rules of supply and demand have always been the driving force behind consumer behaviour in retail. Now, with the turnaround time on delivery and shipment being as quick, reliable and precise as it is, the concept of demand may have intensified while customer service expectations have gone through the roof.
If a merchant wants to satisfy the needs of today’s consumers, they need to find ways to get their wares into the customers’ hands quicker than ever before.
Because of this, fast turnaround times, e-commerce alternatives and online marketplace options have all caused an undeniable change in the popularity and success of store-front retail spaces.
Three examples of how Australia is being impacted
The changing of the tides of retail isn’t just a theory. In fact, there have been a number of clear examples within the Australian retail and delivery sectors that have proven the extent of this major change of pace.
1. David Jones
More and more large-scale retailers around the world are moving out of their physical retail spaces and are pushing online sales and quick deliveries more than ever.
For example, the South African parent company of Australia’s popular department store chain, David Jones, wrote down the company’s value by $347 million, due to the significant slowdown of foot traffic in its stores across the country.
This slowdown has seen the closure of many of the less popular stores, and a much heavier push for online sales.
2. Australia Post
Ever since the demand began increasing for fast parcel deliveries as a result of online retail, major delivery service providers around the world were forced to lift their game and start meeting the rapidly growing needs of consumers.
In early August, Australia Post, one of Australia’s leading delivery and freight services, made a move that responds to impending changes in the current retail landscape.
The partially government-owned postal service signed a $1 billion deal with Qantas, which will now be giving them more space on their commercial planes to allow for delivery times of as little as three hours door-to-door for a large number of Australian shoppers.
Unfortunately, Australia Post has also recently acknowledged significantly increased costs in their operations causing a 70 percent fall in profits, and have therefore announced a large increase in their pricing for both parcel and letter deliveries is on the way.
As one of the global leaders in technology, Google also develops solutions that can meet the growing need for delivery alternatives.
After conducting plenty of research and development, Google piloted its first autonomous drone delivery service, Project Wing, in Canberra earlier this year. The trial enabled people to order lunch and have it delivered quickly and seamlessly by drone.
This pilot made it clear that the age of digital sales and autonomous delivery is upon us, and these trends won’t be slowing down any time soon.
JB Hifi still manage to crush it
Every rule has an exception, and when it comes to the trajectory of retail sales in Australia, that exception is electronics retailer JB Hifi.
JB Hifi, which was acquired by The Good Guys in 2016, announced in August that the company had managed to grow profits by 12.3 percent, becoming the world’s seventh largest consumer electronics and appliances retailer.
Given the current retail climate and the challenges other niche retailers have been facing, this result left economists around the world scratching their heads.
While it’s difficult to understand how this 45-year-old electronics retailer is still managing to crush it, analysing their results can act as guidance to would-be retailers looking to navigate their way through the very real change that is taking place.
Want to survive? Stay loyal to your customers
More specifically, there is one area that JB Hifi have truly excelled in, and that’s ‘customer retention’.
When announcing the company’s double-digit growth figures, JB Hifi’s CEO Richard Murray said that in order to keep a strong grip on the Australian retail industry, the company has opted to lower profit margins and in certain instances even sell products at a loss.
But Murray called it the “best customer retention tool” that his company had.
If you’re a small business owner in the retail space, the biggest form of loyalty you can show your customers is to keep your products affordable and to avoid greed.
Of course, a business needs to have a core offering that makes a profit. But, if you show that your business is ready to take a hit in certain areas in order to keep your customers happy, that hit will eventually be paid back to your business in spades.
Taking this approach may not solve all the challenges that the retail industry faces, but it will most certainly help your business protect itself as industry trends continue to evolve.