What is the ‘new retail’ and is it finally here?

Has the ‘new retail’ arrived? Has e-commerce merged with bricks-and-mortar retail? It’s February 2014, and a wonderful time to be alive and relishing the collaborative technologies that have evolved from the internet and the world wide web.

Affordable cloud solutions level the playing field

Cloud technology and open source technology has enabled smaller business to compete with mammoth enterprises. These cloud and open source technologies have allowed smaller businesses with cash restraints to leverage more powerful technologies without the costs of development from the ground up. No need for internal virtual private networks (VPNs) and internal IT infrastructures including servers, modems, computer hardware.

Compare the landscape to February 2009, when InternetRetailing.com.au launched and things were very different. Magento, an online department store shopping cart platform that is available as a free open source solution via its community edition and options for paid enterprise support, was a fledgling start-up barely a year old. For those in the know, it was originally called Bento, and a clumsy beast in its early iteration, and virtually unknown.

There were other options such as OS Commerce; however, they were not feature rich. Integration of warehousing and inventory control was also a luxury of the privileged, who could afford the cost of Enterprise Resource Planning (ERP) systems and the added cost of cross-platform data integration.

Move forward to 2014 and Magento is a thriving platform enabling many of Australia’s smaller, as well as enterprise, websites. Costumes.com.au and Harvey Norman come to mind.

ERP systems have also become more affordable, with Australian developed systems such as Qdos offering accounting, full inventory control and warehousing fully hosted in Australia and integrated to Magento (and other web sites) via an application programming interface (API). At a slightly higher price, Netsuite provides a similar offering out of the USA.

As these cloud-based solutions are effectively service providers, they have dented business growth of the traditional server-based ERP systems by offering their product as a monthly subscription fee. Other less sophisticated accounting packages that offer basic inventory control such as Xero, Saasu and MYOB and cloud-based linking platforms such as Saaslink and Onesaas.com.au allow small business to link various cloud components together to patch together a kind of enterprise system at a budget unheard of in the past.

But, despite all these wonderful technological wonders, how are things in the world of retail faring at the moment?

Consumer good glut

In my work as an e-commerce optimisation, integration and change management consultant, I have noticed that commoditised businesses, i.e. businesses such as online department stores are finding it a lot tougher to stay relevant in a market where vicious price competition on appliances and mass produced consumer goods is resulting in a lot of excess unsold stock. Online retailers are unable to turn this stock over even at reduced prices; after all, how many juicers can each household own?

The glut of consumer goods available for sale is also partly related to the slowdown in first home buyers amongst other things. At the end of 2013, Euromonitor produced a research paper indicating that whitegoods brands Dishlex and Simpson, generally strong sellers to first home buyers, are struggling to find customers as the number of first time home buyers on a budget has dried up.

Interestingly, brands such as Bosch and Miele are seeing increases in sales of whitegoods as older, cheaper equipment in homes is starting to age and fail. Completely contra to this, higher quality European brand household appliances such as toasters, juicers, kettles are losing market share to cheaper no name brand or lower quality Chinese made and branded toasters, kettles, etc. Finished off in flashy stainless steel, there is a deluge of cheap imports online and in stores across the country.

Omni-channel makes its presence felt

In my opinion, things are changing in favour of established bricks-and-mortar businesses. The game has changed for those retailers that have invested in cross-channel technology and offer:

• online ordering and pick-up in store (click and collect);
• accept returns of online purchases in store;
• provide great customer service; and
• a full 360 degree marketing approach with the intent of achieving omni-channel or near omni-channel relevance.

In 2010 businesses such as DealsDirect.com.au, oo.com.au and catchoftheday.com.au began to disrupt retailing. They were the darlings of the investor community and the public loved the disruption.

Dealsdirect.com.au has recently listed on the ASX and I would assume is on an acquisition trail to add members to its database to keep investor confidence up. Oo.com.au was bought out by GraysOnline and although active has not made any noise. Catchoftheday.com.au has quietly bid farewell to its C level management team, and bought back some of its shares from the consortium of investors that originally ploughed $80 million into the Catch group.

Return of the big players, but niche still thrives

Are these subtle signs the halcyon days are over for these dynamic upstarts as the national giants get comfortable with the technology and take over dominance of the overall retail space?

Big W, Officeworks, and Dick Smith come to mind here. Converse to this, discussions recently with the owners of niche online businesses tinyme.com.au, adorebeauty.com.au and costumes.com.au at a dinner hosted by Reed Exhibitions recently pointed out that their niche businesses are faring very well at the moment.

It seems the old rule of thumb of niche focus is evident here.

Paul Greenberg, CEO of the National Online Retailers Association (NORA), has been vocal for some time that there is no such thing as online versus offline retail, rather a multitude of channels which have been enhanced by the introduction of online retail as just another channel. Greenberg refers to this as “the new retail”.

My comments are purely a collection of observations. Since 2005, every observation and prediction I have made relating to online retailing has come to fruition. Let’s see in 12 months’ time (almost 60 months in internet time) if I am still correct.

Mark Freidin is an experienced chief operating officer, e-commerce pioneer and consultant to fast-growing firms with his company internetretailing.com.au