Australian Retailers Need to Step Up and Put Their Money Where the Mobiles Are
With Australian online retail spend increasing 10% annually to $16.9 billion in April 2015, versus sales growth of 5.3% in bricks and mortar retail, there's no denying that Aussies are well and truly aboard the e-shopping band wagon.
Aussie businesses, on the other hand, have been slower to throw their dollars into online platforms. This has left the digital shopping experience offered by household names such as Myer and David Jones with a lot to be desired.
It's not news that many Australian industries have been battling market disruption from an increasing number of foreign entrants both on- and offline. Online, the threat is accelerated by the way in which the internet has removed many barriers to market entry, leaving no industry safe from international competition. Search for any product on Google.com.au and you will likely see a result from a foreign brand. In fact, the top four e-commerce sites in Australia ranked by number of visits as of January this year were all international brands.
Chart showing share of international and domestic online sales vs. USD/AUD exchange rate from NAB Online Retail Sales Index
Why and how did these international players manage to establish themselves down under? And where do Australian businesses need to focus their efforts in order to maintain and grow market share?
Invasion of the digitally mature
Britain is the world's most developed online retail market, followed by the US. The maturing of these two internet economies coupled with the global credit crunch, caused many UK & US ecommerce businesses, large and small, to look to overseas markets for growth. For many, Australia proved a viable choice due to shared language and culture and the less competitive environment. The initial low levels of local competition allowed entrants such as ASOS, boohoo.com, Etsy, plus the likes of Amazon and Ebay, to thrive and quickly dominate.
The UK's beloved online fashion retailer ASOS is a good case study for how this played out in the fashion industry. When ASOS first entered the Australian market, local customers hungry for fast, affordable fashion, quickly lapped up the slick online shopping experience, wide range of product and fast delivery.
A report by market research agency Roy Morgan details this rise to success. ASOS's well-oiled processes that allow them to get new products up on the site the same day that they arrive into the warehouse and the 48 hour delivery option was unrivalled by Aussie competitors. Australia became the fashion brands' largest market outside of the UK, with Aussies buying something from the site every six seconds.
Efficient internal processes and responsive web experience drives success
The lower cost of imported apparel, made possible by the strength of the Aussie dollar and GST exemptions, has always been attractive to Aussie shoppers. However, to focus just on price would be to miss the point.
Australians flocked to international ecommerce brands such as ASOS and boohoo.com due to the wide- ranging fashion-forward product offering, the simple cross device shopping experience, the fast delivery and easy returns. It wasn't about price, these brands were fulfilling a need that Australian businesses weren't successfully addressing.
Australian start-ups fight back
As the strength of the Australian dollar falls, buying local is becoming more competitive. Research carried out by NAB demonstrates the correlation between the falling dollar value, the acceleration of growth in domestic online retail and the slowing of growth in international online retail. The time is nigh for Australian businesses to step up their online capabilities. These fertile conditions have sparked green shoots in the form of start-up success stories that traditional retailers can learn from.
Aussie ASOS rival The Iconic has recorded impressive results over the past 12 months. Website visitors grew from 2.5 million in January 2014 to 4.3 million this year, nipping at the heels of ASOS which achieved 4.5 million visitors, up 14% year-on-year.
The Iconic homepage - www.theiconic.com.au
The Iconic seems to have achieved this success through finding its competitive advantage versus international retailers, like ASOS; namely in stocking Australian brands and offering even faster delivery (a three hour delivery option in Sydney and next day in Melbourne). In addition, the brand knows the importance of being accessible wherever their customers want to shop. It is digitally and technologically focused and it has put its money where the mobile phones are, launching iOS and Android apps in addition to a responsive website.
Home-grown online furniture retailer Brosa is putting up a similar fight against Swedish furniture giant Ikea and are generating sales volumes growth of 40-50% month-on-month.
The Brosa homepage - brosa.com.au
Again, the key focus of the entire business is the ecommerce customer experience. The Brosa team has implemented processes that allow for rapid launch of new designs online and follow a just-in-time manufacturing approach. These internal processes in addition to a beautiful, easy to navigate, and, most importantly, responsive website have contributed to their early success.
Find the point of differentiation, and focus on customer experience
These ‘digital first’ businesses that were born online are setting a great example that traditional Aussie retailers now need to follow. As the trend for shopping online and across devices grows, it's simply not an option for the ecommerce experience to be an afterthought.
Retailers that have yet to fully embrace a seamless cross-device online experience need not crawl back under the duvet in denial, however. Latecomers can actually benefit from last mover advantage and innovate based on what has worked well for competitors here and abroad.
The key insights we can take away from The Iconic and Brosa's successes are:
- Focus on the points of differentiation over all competitors, including both local and international
- Provide a frictionless ecommerce experience that spans a customer’s first interaction with your website right through to receipt of the product, and also its return, if necessary
- Someone will always be able to offer a product cheaper, that's not always what customers want
Aussies are digitally savvy and want to browse and shop across laptops, tablets, mobiles and everything in between. And they want it to be easy. This is what Australian retailers need to give them.
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