A Gloomy Outlook for Aussie Retailers ? This Is How to Avoid

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  • In the realm of the Internet, in-stores have to compete with online stores and very often than not e-commerce wins. 
  • If you don't want to be the next retailer to close your business then. it's time for you to consider opening an online store and marketing it with your current one. 
  • There is a difference between "shopping" and "buying." In order to be a successful retailer, you need to distinguish the terms and make various offers to each group. 

It’s no surprise that the retail sector is really struggling. It feels like 2018 has just started, and we’ve already seen several homegrown brands fall into insolvency or announce significant store closures. From Retail Food Group and Aussie Farmers Direct to Oroton, Maggie T and Zachary the Label - they all have one thing in common. They have failed to find the balance in their operational structure in a quickly evolving marketplace.

The latest insolvency statistics from ASIC show that retail continues to be one of the industries hardest hit by insolvencies.

For many retailers that become insolvent, the reasons are similar - high leasing and staff costs. However other key reasons include a lack of stock purchasing power, obsolete stock issues, poor accounting or record-keeping practices, “no-interest” competitors and low margins. But perhaps most importantly, many of these recent collapses are fuelled by the growth in online retail and the failure of companies to innovate and advance their e-commerce capabilities.

In fact, new research from Commonwealth Bank (CBA) shows that Aussie retailers have fallen behind the average business when it comes to innovation capabilities. Alarmingly, less than 20 % of retailers are innovating in direct response to customer feedback (17%), or observed changes in customer needs (15%).

E-commerce is a necessity now, not a point of difference - especially with savvy competitors like Amazon entering the market. Unfortunately, some retailers are being left behind or have not sufficiently invested in their e-commerce platforms - and they’re finding that the fixed costs of having a bricks-and-mortar presence alone are too high. Retailers need to understand that the increased prevalence of online shopping has expanded their competitor base. Geographical barriers to entry are being eroded, and if retailers are unable to find ways to explore new markets for their products, then they are likely to see their sales base continue to decline as their competitor’s pitch to their historical customers.

Recently at Jirsch Sutherland, we were appointed to handle the liquidation of a women’s clothing business, which experienced a range of issues that we describe as ‘the perfect storm’. The company had 4 bricks-and-mortar stores across Sydney and had attempted an e-commerce platform. However, their online strategy didn’t work for them and due to difficulty finding the right staff, the performance of the stores became inconsistent. In order to control costs, the company was forced to rationalise its operation to the point of having just one store and a warehouse. Unfortunately, the failure of its e-commerce and the seasonal nature of clothing meant the company ended up with a large amount of obsolete stock in its warehouse that it couldn’t clear.

Technology continues to evolve and drive rapid change to the way consumers and businesses interact with each other.

Customer expectations for immediacy have created an environment where consumers want to make payment and receive goods without delay.

Today’s retailers have the added complexity of managing the logistics of stock acquisition and distribution in an ever increasingly time-sensitive environment.  

Successful retailers are combating the changing shape of the retail environment by understanding that their in-store customers have expectations of a “shopping” experience, whereas their online customers are more attuned to a “buying” experience. The shopping experience includes the social, emotional and physical impact that the purchase has on the customer and is the key advantage to the traditional bricks and mortar structure. The buying experience is about speed, price and the immediate satisfaction of a perceived need, more suited to an online offering.  If implemented successfully, retailers have an opportunity, through a balanced operational structure, to build a culture and present values that appeal to their customers notwithstanding their desired experience, thereby protecting and growing their businesses.

5 tips for retailers to not only survive but thrive:   

  1. Invest in e-commerce capabilities - the fixed cost of having a bricks-and-mortar presence alone is too high and limiting your customer reach.
  2. Understand that your competitor base has expanded.
  3. Take steps to understand your customers’ behaviour and their expectations - are you delivering to this?
  4. Think about how you can cater to the “shopping” and “buying” experience for your customers - invest in technology where it counts, but remember that your customers are individuals and not data.
  5. Build strong supply and distribution relationships and have a plan to maximize stock turn and minimize inventory levels.

The retail landscape and customer expectations are constantly changing. Unfortunately, we will most likely see many more local brands come into trouble this year - and we probably haven’t seen the worst of it. But the brands that will survive are the ones that tackle the changing landscape head on, and continue to evolve.


Andrew Spring

Andrew Spring

Partner at Jirsch Sutherland

Andrew Spring has more than 17 years’ experience in corporate recovery and insolvency, gained through work in the UK, Europe and Australia. He has a wealth of experience in all facets of domestic and international business restructuring and insolvency. His specialist skills include independent business reviews, reconstruction and turnaround consulting, business sales and asset divestment, profitability reviews, cross-border insolvency, and all forms of corporate insolvency appointments.

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