Who’s winning: bricks and mortar or online only?

Mark Freidin

3rd Mar 2016

Online and off, the competitive landscape has shifted for all retailers, writes Internet Retailing founder, Mark Freidin.

In 2014 I wrote an opinion piece hypothesizing that 2014 would be the year retailers would gain back ground from the rush of tech savvy online retailers that were making headline news weekly in the press.

It’s two years since that article, and in reviewing the landscape much has changed. Websites are actually now pushing people back to stores with the emergence of click and collect. Click and collect was an almost unheard of term to many two years ago, so much so that a web dev team and an ERP implementer I was working with at the time, had to be briefed by me on these terms. The term now is as synonymous as bread and butter. Click and collect is visible almost everywhere. Retailers are offering it, eBay even offers click and collect at certain Woolworths and Big W locations for consumers’ shopping convenience, and Woolworths is trialling a click and collect option for time wary shoppers at Bondi Junction Station in Sydney to allow these shoppers to collect chilled grocery parcels on their way home.

The myth that online retailers have lower overheads to traditional retailers may not quite appear to always be true. Online retailers may not have multiple store rents yet they have to rent large warehouse/distribution centres, and have to employ warehouse staff, customer service teams, call centre staff, graphic designers, photographers, copywriters, content managers and web developers. Staffing requirements alien to most retailers up until recently.

Deals Direct and oo.com.au, once darlings of the online retailing era, would have had to contend with these internal costs and at the same time struggle to find relevance in competing with the fast rising retail value juggernauts such as Big W, Target and Kmart.

In late 2014 Deals Direct, owner of Topbuy.com.au, merged with GraysOnline who had just a year earlier acquired oo.com.au. It’s safe to assume now this merger was an attempt to rescue the two businesses from the rising competition of the major retailers amongst other things. The sale of the Deals Direct, oo.com.au and Topbuy brands at the end of 2015 to the Mysale group owners of flash site, Ozsale, for $5 million was an absolute bargain for the Mysale group, bolstering their short term future growth. The Dealsdirect and oo.com.au websites have been tidied up and integrated into Ozsales backend providing many category options to more customers across these channels. A win for the Mysale group and a sign of the continuing consolidation of the online space.

Smart niche players such as The Catch Group and Aussie Commerce group are still making inroads albeit things have changed, and the competitive landscape is showing. Catch of The Day used to proudly espouse that it never spent a penny on advertising to acquire its member database. Those days are gone as full page adverts appeared regularly in the Herald Sun in December 2015. The Aussie Commerce Group has appointed Alexandra Mills as its new chief executive – product businesses as sales in that group climb above $100 million.

In December 2015 Kogan, the king of media spin ate his words and opened a pop up store in Melbourne’s trend-setting grungy Chapel street to capture pre-Christmas sales especially after December 15 online sales drop as pre-Christmas none delivery risks soars.

But things aren’t simple and we cannot generalise that trading is good for everyone. BRW noted in August 2015 that retailers with physical stores having an advantage over online only retailers, wasn’t enough to save 50 ABC Shops from closure. Dick Smith is another retailer that despite a strong e-commerce presence, mismanagement, poor stock procurement and other issues led the business to massively discount stock prior to Christmas to generate much needed cash, leading the business into administration.

My predictions for the future are that the ongoing success of these businesses will become more and more dependent on marketplaces and 2016 onward will be the rise of the marketplace. In the meantime, as retailers invest more in technology and knowledge, the water has risen for all ships and online and offline are truly blurring into omnichannel retail as online retailing becomes just another channel for all retailers to promote and sell their wares across channels.

Michael Porter, the outspoken Harvard business professor, was adamant that internet selling was just another channel. In 2001 he wrote “the internet does not represent a break from the past; rather, it is the latest stage in the ongoing evolution of information technology”. The combination of offline and online is truly the “New Retail” and competition is fierce.