Australian retailers are facing ever-increasing threats from the global market. For the first time, significant numbers of overseas retailers are either entering the Australian market or are well progressed in their plans to do so. At the same time, the “global village” nature of online retail means Australian consumers can access overseas markets simply and easily.
In the Supermarkets category, discount chain Aldi has now built a significant (6%)share of the Australian market and continues to grow rapidly. Newer entrant Costco is also making an impact, and rumours of the entry of Lidl into the Australian market keep appearing. In their November 2014 analysis of Australian Supermarkets, UBS moved their recommendation for Australia’s largest Supermarket from “Buy” to “Sell” on the back of the increased competition from the discounters.
Apparel retailers are also facing an invasion from overseas retailers. H&M, Zara and TopShop are the most famous of a number of brands appearing in Australian cities and shopping malls. These brands have a large online presence and are heavy users of social media advertising.
In other categories, competition from online retailers such as Amazon is impacting on sales from traditional Australian retailers. Harvey Norman, Myer, David Jones and Target have all cited overseas online retail as damaging to their business. The potential arrival of Amazon into Australia would be disastrous for these retailers.
Australian retailers must respond to these threats, or risk their profitability and even their existence. So how can digital technology help?
A report last year by the University of Sydney and Cap Gemini analysed the state of digital commerce in Australia. Its conclusion was that while Australian retailers have successfully used digital technologies to inform their customers (product range, store locations and hours) and to transact with them (accepting and fulfilling customer orders online), they have in general failed to build 1:1 relationships with customers or to effectively exploit social media platforms to engage with their customer base.
So the to-do list for Australian retailers should contain items such as
- Develop a sophisticated recommendations engine.
Retailers know their products and they know their customers. Putting these together into “People like you also bought…” or “Recommended for you..” should be a mandatory part of the customer’s digital experience. - Allow websites and mobile apps to be personalised.
Put the customer in control by allowing them to tailor the experience. A food retailer may allow the customer to specify allergies; products with these allergens will then never be listed. A customer may have a hobby; products relevant to that hobby will be brought to their attention. - Listen and respond to feed back through suggestions, surveys and competitions.
A suggestion box is a great way to engage with the customer – as long as the retailer responds in a timely manner. Competitions are a great way to get the customer not only to engage and participate, but also to provide more information about themselves to allow further tailoring of their experience. - Provide history and status information on orders and purchases.
Customers know retailers have lots of data. Make that data available to them. Give them access to the status of orders from central ERP systems, provide them a history of what they have purchased, make available analyses of their data such as spend by category.
Australian retailers should have the advantage. They should know their customer, they should understand Australian supply chain idiosyncrasies and they should be able to connect with local suppliers better than their international or online rivals. If they properly exploit digital technologies, they can use these advantages to sustain and grow their business despite an increasingly global market.