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How Melbourne’s retail shutdown will impact e-commerce

All eyes are on e-commerce, following yesterday’s announcement of a near-total shutdown of bricks-and-mortar retail in Melbourne.

Under the new restrictions, set to take effect at 11:59pm on Wednesday, August 5, online delivery and click and collect will still be permitted, but most stores, depending on the retail category, will be forced to close.

Speculation of the coming shutdown sent Kogan’s share price up from $16.66 at close of trade on Friday, July 31, to a high of $19.21 on Tuesday, August 4, a more than 15 per cent increase.

Already, one bricks-and-mortar retailer has announced plans to convert some Melbourne stores to distribution centres, and a pureplay retailer is seeing an uptick in sales from Victoria.

The big question is whether logistics and last-mile delivery providers or back-end retail systems managing inventory will be able to keep up with the anticipated spike in demand.

Goodbye store, hello DC

Online-only book store Booktopia is already seeing increased orders from customers in Victoria, as people settle in to wait out the next six weeks in varying forms of isolation.

“With most of Melbourne in lockdown we will be getting significantly more orders from Victoria. We’re already seeing this,” Booktopia chief executive Tony Nash told Inside Retail

“The main thing we are monitoring is our supply chain – we’re still able to get access to stock and Australia Post is still fully operational. So, the Stage 4 lockdown in Melbourne will only result in an uplift in sales [for us].”

According to Nash, sales at Booktopia have been up since mid-March, and that this increased volume in sales is here for the future. 

“Online retail has carved out a greater slice of the overall retail pie,” said Nash. “There is no going back.”

Woolworths is preparing for the expected uptick in online shopping by turning some of its bricks-and-mortar stores into mini DCs.

On Monday, the supermarket said it would temporarily close three stores in Melbourne and convert them into online delivery hubs by Tuesday evening. This will allow it to dispatch tens of thousands more online orders per week.

“It’s an uncertain time for many in Melbourne and this will ensure we have the delivery capacity to support the essential grocery needs of many more customers online,” said Woolworths Victorian general manager Andrew Hall.

Delivery providers ramp up

It isn’t only Woolworths that needs to be preparing, according to CouriersPlease CCO Paul Roper, with delivery providers needing to up their deliveries in order to keep up with the increased workloads.

“Initial indications suggest that online B2C volumes will increase sharply,” Roper told Inside Retail

“We are fast-tracking our evening and weekend delivery services and are moving to a standard 6-day operation for the foreseeable future.

“In addition to our outsourced partnerships we are rapidly increasing the footprint of our core operation and are actively recruiting new franchisees to join the CouriersPlease group to ensure we are well positioned to capitalise on the quickly evolving change in retail patterns.”

Covid’s lasting impact on e-commerce

E-commerce has seen a significant increase in the past few months, with isolated customers leaning heavily on delivery options as a way to get goods while remaining safe at home. 

And that’s unlikely to change, Macquarie Business School’s Associate Professor Jana Bowden told Inside Retail

“Whereas pre-Covid only approximately 9 per cent of consumers shopping online, we are now seeing double that figure and that number is likely to continue to grow,” Bowden said.

“Online is the new normal, and in Melbourne during this period of lockdown it has become the only normal.”

Dr Jason Pallant of Swinburne University told Inside Retail that this change isn’t likely to be a short-term one but a change that permeates the retail industry from this moment forward.

“Research tells us consumer priorities have changed and are likely to continue changing… this will force even more consumers to trial new ways of shopping through online or click-and-collect,” Pallant said. 

“We know that when consumers trial these new ways of shopping, some will shift permanently, [and] we should expect more of that.”

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