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The New Zealand retail industry is experiencing an unparalleled period of change and flux. For the very first time, sales growth online is now outstripping growth from stores. Sales conducted via online channels equated to approximately 10 per cent of the overall industry’s annual $75 billion sales in 2014. By Jonathan Elms.
While this is a sizable figure, it does need to be put into some perspective. For example, the New Zealand online retail market is a little more developed than our Australian neighbours, who have about 7 per cent of their overall sales conducted online, but the Australian retail industry is significantly bigger in scale and value. In the United Kingdom, nearly a quarter of all retail sales are done over the internet.
Worryingly for established New Zealand retailers, Kiwi consumers are increasingly using the internet to shop for products from overseas rather than local providers. This, combined with consumers accessing products via multiple channels including smartphones, apps, laptops, tablets and catalogues – the so-called omni-channel retail environment – is serving to destabilise traditional methods of retailing.
One question that I am frequently asked is, “Will stores completely disappear in the future?” My answer to this is simple: no. Stores will continue to occupy a place in the high street but the role, function, and characteristics of stores are likely change over time.
So, why is this the case? Well, Kiwis like shopping, hanging out in shopping malls, or meandering around shops browsing and buying. In-store customer service, and valued interactions between staff and consumers, cannot be emulated online. Some product categories are not entirely amenable to online purchasee because they are non-standardised, either across retailers or countries, or because they are perishable or seasonal (such as fruit and vegetables). Consumers also want to touch, feel or smell particular products before purchasing them.
Evidence from overseas does suggest that online retailers are slowly changing consumers’ perceptions towards these product categories, resulting in online sales for these items rising significantly over the last few years. Nearly one-quarter of all British families shop online for food on a regular basis.
Long-term projections are that approximately one-third of all retail sales will occur online, with the remaining two-thirds conducted in stores. Retailers may need to reconsider how stores fit in their property portfolios, and how they are managed.
For example, studies conducted in the United Kingdom and the United States suggest that some consumers are becoming increasingly disillusioned with large, out-of-town, big-box retail stores and are preferring to shop locally in smaller stores instead, or shop using the internet. The findings of these studies conclude that this is more likely the case when large stores are not run well, not looked after or are dated, when staff are not trained well and the store space is not fully utilised.
The message is here that store-based retailers need to up their game. Being good isn’t good enough anymore; retailers have to excel in what they do. Retailers who offer their products via multiple channels must manage and coordinate each of their channel offerings in order to provide consumers with a seamless overall shopping experience. All retailers should clearly identify and articulate their brand’s unique position relative to their competition.
For retailers with stores, this will involve a consideration of the locations of their stores and the selection of products they sell in-store, how their products are sold, as well as providing a pleasant and distinctive store environment. The latter will increasingly involve using good design and architecturual principles to appeal to consumers’ desire for aesthetics, creativity, play, and style in their buying decisions.
To bridge the physical and virtual worlds of retailing, retailers will need to consider increasingly integrating technologies within their in-store operations. This could include robot and hologram shop assistants, trackers and beacons, geo-locational devices, body temperature sensors and retina scanners.
Whatever the case, the best New Zealand retailers appreciate that they must rise to the challenges of this environment by offering something better, newer, and unique. The very best understand that to survive and thrive in the contemporary and ‘connected’ retail landscape they must constantly innovate, and cannot rest upon their past successes or longstanding reputations.
Associate Professor Jonathan Elms holds the Sir Stephen Tindall Chair in Retail Management at Massey University
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Created: 29/11/2015 | Last updated: 26/01/2016
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