Does Online Retail Save a Traditional Retail Business? Yeah: NAH
There has been a lot of debate recently on the whole question of whether Online Retail Saves a Traditional Business. Simply meaning that traditional retail businesses need to start to engage in online retail to maintain and increase their customer base as well as potentially improve customer service and/or reduce costs. I feel the need to comment on this debate having worked globally in the on online retail sector since 1996.
The debate has arisen because of the recent restructuring of Shanton Clothing in New Zealand. A retailer with 37 stores that sells lower price clothing to the female market. See for example here at the NZ Herald. This article talks about the basics of the restructure.
As part of the debate we have also seen the call by commentators for online shopping. The simple argument is that Shanton would have avoided restructure if online they had had more of a strategic emphasis. In some respects this is correct and true of many of the main retailers in New Zealand. Despite the fact that online retail has been prevalent in New Zealand since 1996. We have been way ahead of the game with the pioneers such as BankDirect and the then Woolworths Online (now Countdown). Both are still a major competitive force in competitive global markets and industries. It is fair to say though that many of the high street retailers have lagged behind. For example, The Warehouse and other brands like Rebel Sports have only started to make online strategic in the last 5 years in my view.
Literally of the top of my head, online retail offers the following (but not limited to) benefits, particularly for the retailer who has a physical presence:
- It helps a company maximize the investment in the physical business. So, opening an online channel at a fraction of the cost compared to a physical store can literally fulfill a national and/or international market. This adds cream on the cake for sure.
- At the same time the investments in people can be more fully utilized. Lets face it. There is a lot of downtime in front line retail. In that time, staff resources can be redeployed into online service and/or fulfillment. Hence, productivity also improves. It also gives staff additional role opportunities and a chance to improve their capabilities, career and in general self-worth/improvement. The one thing I like to see is retail staff servicing their own companies social media strategy. Retail staff become part of the community.
- Online retail also kicks the butt of your IT resources and infrastructure. Starting with the data it simply asks and demands the following question? Do you have you own IT house in order. A major issue is data quality. For example, an adequate system that represents in real time actual product inventory vs. online product availability. Sounds simple but really, you would be surprised how many major retailers don’t have this in order.
- Lets not worry too much about the technical infrastructure. There are so many outsourced solutions now for small and large that we need not worry about this side of the business anymore. Hey, even accounting (e.g., Xero) and other business processes (e.g., GeoOp) are now in the cloud.
- Online retail also helps a business transform their brand. My recent work on social media branding is hot of the press in 2015 in the USA in hard-copy called: Social Media Branding For Small Businesses: The 5-Sources Model. This model talks about 5 key sources of value that should be leveraged to enhance the engagement of a brand in social media.
- As part of the reformation of strategy beginning with the brand, online retail sets a new strategic benchmark in service and process development. It simple says; you need to do better. You need to lead your customers and be lead by them. So, when retailers embark on the online journey, they start to see the problems and opportunities. Slowly they step onto a process of continual reformation. This creates a new strategic platform and competitive position.
- Online retail also allows a business to create and deliver different forms of value through different channels. I call this the LOOP model. For example, the physical store environment can place most emphasis on the enhancement of the brands hedonic experience and exploratory shopping behaviors. You can tantalize the tonsils by giving people that immediate gratification through the impulse purchase. However, online you may place more emphasis on goal directed utilitarian shopping experiences. The mobile channel could focus primarily on the APP and be oriented around the brand and enhanced service provision. For example, the MyFitness Apps for premium versions hook up to other devices to provide basic health services like heart monitoring.
- The final point for online retail, which is very relevant to the niche or specialty retailer, is it forces you to focus, focus and focus. I think that this was the major issue for Shanton. Lack of focus. The same probably for Postie Plus. They are not one or the other. They are so reliant on the physical customer and traditional communication channels. So many competitors. They simply just got stuck (in the middle of the road – brrrrooom; crash).
I am sure there are 100 other reasons more ending with the fact that online retail is just plain fun for an organisation.
But is it the magic bullet. The answer is no. It is a long journey and requires a lot of short term and long term investment in change. This investment is real as well as being intangible. Then once you start, you and your staff need to be in a continual learning mode. It gets worse when you start your social media strategy. Then the customer wants to just plain take over they love you so much.
But yeah. Online retail. Just Push Start!