Online to offline

After years of struggling, online retail is finally starting to catch on in Australia, but some of the country’s most successful digital entrepreneurs have come up with an unusual expansion plan – bricks and mortar retailing.

While these online retailing gurus including Naomi Simson of RedBalloon, Andrew Cooper of DStore and Tony Nash of Booktopia remain staunch-defenders of everything digital, they have began developing hybrid online-offline strategy to take their brands into new markets.

This isn’t a desperate grab for more revenue. Instead, these multi-million dollar businesses are searching for ways to expand their reach, and are convinced moving offline is the best way to do it.

Cooper is planning to open a chain of shops in order to make the most of the masses of foot traffic passing through shopping centres every day.

Tony Nash will soon open vending machines in airports and rail stations in order to expand his company’s brand, while online “experience” retailer RedBalloon will soon offer packages with catalogues and gift cards in department stores.

Of course, not every online retailer is convinced of the strategy. DealsDirect chief executive Paul Greenberg and Catch of the Day chief Gabby Leibovich say moving offline would be a step in the wrong direction.

But that won’t deter the online-to-offline pioneers. Make no mistake, they’re coming to a shopping centre near you.

Who’s doing it?

Online retailing in Australia isn’t anywhere close to being the dominant force it is overseas. A range of recent reports indicate the majority of online visitors only use websites for product research – then they go offline to buy.

It’s something the bigger retailers, including Harvey Norman and JB Hi-Fi chiefs Gerry Harvey and Richard Uechtritz, have been saying for some time. Both companies are among the most popular online retailers, but the pair say they won’t pour too much money into the online offering because it isn’t providing a good enough return.

Brian Walker, chief executive of Retail Doctor, says online companies are realising that operating in the digital space isn’t providing them with everything they need, and a hybrid approach will deliver the best result.

“This is certainly a growing trend, without a doubt, because these companies are recognising the need to be what we call “multi-channel” retailers. They need to sell their product at all the various consumer touch points.”

Dstore founder and chief executive Andrew Cooper is planning the acquisition of a number of fashion-based stores, simply so he can expand the brand to as many people as possible.

“These stores will actually be fashion-based, but we are going to maintain that store’s brand and sometimes have a “Dstore Company” tag. Sometimes rebranding them altogether would be counterproductive.”

“This is really driven by the consumer. We think customers form relationships with brands, and at the moment we have customers who have a relationship with us but we aren’t servicing them to the best of our ability without having an offline channel.”

Online bookseller Booktopia, which is currently turning over about $7.5 million, intends to sell merchandise through vending machines placed in airports, shopping centres and train stations. Chief executive Tony Nash says the concept will popularise the digital offering.

“Vending machines are an interesting concept, but the more interesting question is, how do you move through being a $10 million online business to being an $80 million business without using things like Google AdWords and optimising your website? I’m enjoying that challenge.”

RedBalloon, headed up by Naomi Simson, is also expanding into shopping centres by offering gift cards and, most recently, with gift boxes containing a card and a catalogue of “experiences” to choose from. Marketing managing Kristie Buchanan says this move has been made to deliberately market the company to an entirely new audience.

“We know that the only way that we achieve our goals is to make sure we are wherever gift decisions are made. By answering the customer’s needs, it obviously gives us an opportunity to tap into an incremental revenue stream. It makes strategic and financial sense for us.”

“The offline world opens up new opportunities in terms of giving people a more tangible gift offering. Our research confirms how much tangibility of a gift is often important for gift givers.”

But the trend isn’t just constrained to Australian retailers. Just a few years ago computer manufacturer Dell was offering one of the most efficient and cleanly-designed online retail shopfronts in existence, with users able to customise and order laptops and computers.

Now, the company has branded kiosks in shopping centres and department stores, and customers are able to get a deal on a Dell in almost any major electronics shopping destination.