Thursday, January 26, 2012

This Goes With That in Retail

Business has been pretty tough for Australian retailers over the last year with nominal annual retail sales growth (2% to 3%) well below the 6% per annum average over the last decade. The Australian consumer has tightened spending since the GFC and although consumer spending is increasing, would-be shoppers are still cautious, opting to save more of their disposable income. The savings rate for in Australia is currently around 10%, a significant increase from 4% in the 1990’s. This cautious consumer sentiment has been intensified by the dawn of online retailing and combined with the strong dollar has essentially turned the global marketplace into one ‘Big Store’.
I had the pleasure of speaking with Brooke Gillham, Business Manager (QLD) at the Sussan Corporation early this month, to discuss her thoughts on the current retail environment and what she believes are the opportunities and threats for her business. Brooke has been in the retail industry for 10 years and has worked in both the shop front as well as State offices. Sussan currently operates over 180 stores nationwide and has a long history as a clothing retail giant in Australia. Her insights proved to be very valuable in understanding what retailers are facing in this current environment.

Retail is currently experiencing the toughest market we have seen in recent times. With a number of big retailers closing their doors, there is a feeling of instability both for team members and customers. It has become a buyer’s market as retailers have conditioned customers to no longer expect to pay full price for goods and in fact should wait for the inevitable further percentage off. As retailers continue to slash prices, consumers are sitting back and waiting it out until they can obtain the goods at a significant discount.

While this all sounds quite negative, it is certainly not all doom and gloom. Retailers have an excellent opportunity to really focus on what it is that makes them stand out in the market, and that is service. When retailers are fighting for every dollar the customer has every right to expect a higher level of service, and if retailers intend to make sales they need to be able to provide it. Customer service, exceptional product knowledge, and good value are 3 of the key things that retailers must provide to remain competitive in an increasingly tough environment.
There has been a lot of talk about online retailing affecting physical stores and further damaging retailers, however it is important to remember that while online trading will definitely have some impact, the key to success is the ability to effectively manage both online and stand alone stores.

Customers want the convenience of online shopping, however nothing can replace the in store "experience"; getting tactile with the product and interacting with the sales team. Now, more than ever, creating the experience, and taking the customer on a journey from the moment they enter the store is essential to not only making the sale but in obtaining customer loyalty.
There are still plenty of opportunities that exist for retailers and as the market becomes tougher before it becomes easier. Retailers have 2 choices: they can either close their doors or they can react to what the customer is saying they want. The step forward is to create an in store experience that drives irrational buying and encourages loyalty, provides good value, makes shopping easy by providing a variety of shopping options, and most importantly, shifts the benchmark of service levels.

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