26 May 2017   

10 min read
Fashion is above all an art of change – John Galliano

Change is inevitable in the retail industry and right now major changes such as technology, rising costs, and new retail disruptors are all rapidly transforming the sector. 

While there’s a lot of talk about the challenges ahead for retailers, there are also many untapped opportunities. 

For one, many commentators are welcoming the entry of disruptors such as Amazon because they believe Australian retailers are agile enough to adapt and reinvent how they do business. No one understands better what Australian customers wants than Australian retailers. 

Dr Sean Sands, director of Monash University’s Australian Centre for Retail Studies believes the conversation around Amazon’s potential impact has been somewhat “overinflated” and that it’s a good thing for the market “because it will drive innovation”. 

The reality is that Amazon is already here with around 20% of online traffic from Australian shoppers. 

He believes that the Australian retail landscape is still firmly rooted in bricks-and-mortar sales, and that established retailers have the agility to change course and adapt, which might make it more difficult for Amazon to capture the market than it expects. 

“Australia has a very strong shopping centre model and a clear proposition around what centres offer as a destination and a gathering place for people. Australians love to shop and they love shopping centres so that is a real strength for Australian retailers. There is a huge opportunity around shopping centres to offer more than the transaction,” he says. 

Australians love to shop and they love shopping centres so that is a real strength for Australian retailers. - Dr Sean Sands, Director of Monash's Australian Centre for Retail Studies

He believes there is still plenty of space between what Amazon does and doesn’t do for Australian retailers to compete successfully. 

“The days are gone for competing on price with Amazon because they have price tied up but Amazon’s arrival will motivate Australian retailers to bed down the customer experience, the personal connection, rather than compete on price. 

“There is a real opportunity for retailers to build relationships with customers, make them part of a community, and offer service above and beyond customer experience such as offering information, advice and education - that’s something Amazon can’t do. 

While big retailers are probably in a better position to make this happen and to get to know their customers, there are opportunities for small retailers to play to their strengths too,” says Sands. 

It’s all about the experience 

Innovation in technology and customer-driven retailing is changing the way retailers do business. The good news is that people still really enjoy going into stores to shop. Experts agree that it’s the retail experience that is driving foot traffic and sales. 

The retail experience first started to change when international fast fashion brands such as H & M, Zara and Uniqlo landed on our shores, which forced many local retailers to build an innovation culture and to invest in store design, concept and flagship stores to attract and retain customers. 

Today, a good example of a flagship store making a strong brand statement is the House of Hoops Foot Locker store on George Street, Sydney, which is a go-to-destination for basketball and sneaker fans. 

When it comes to store size, less will be more in 2017. We’ve already seen that happen with David Jones, Target and Kmart investing in smaller-format stores to provide more curated selections for customers. 

The connected customer, who is more informed and constantly exposed to new things, is also driving the pace of retail change. They are looking to shopping centres and retail outlets as an experience. 

While local retail sales have not gone online as quickly as in some other markets, most Australians have a technology-led lifestyle, which is why retailers must provide the best shopping experience – easier and more convenient – at every touch point. Digital technology is an integral part of the shopping journey with customers researching, finding and comparing products before, during and after shopping. With the NAB Online Retail Sales Index showing Australian total online retail spending reached $21.7 billion in 2016, close to 7.1% of total retail sales, innovative retailers will blur the lines between the physical and digital retail environment and concentrate on curating the experience for customers. 

Dr Sands says that retailers who challenge themselves to find new ways to reimagine the store experience to improve the customer journey will influence how their customers interact with their brand. 

“Retailers need to play to their strengths. Customers want to see and feel, they have questions they want answered, preferably by product experts who know their stuff and can guide them to make confident purchases. It’s about making deep and meaningful connections,” said Sands. 

Think Apple and its product experts called ‘genuises.’ The lesson is that retailers should be looking to create an experiential store environment that is innovative in design, with great people to tell a story about the brand, that shoppers look forward to experiencing and want to come back to. 

Creating opportunities 

Other changes in the marketplace this year that will impact retailers include changes to the 457 visa system and penalty rates. 

Most experts say that the axing of the 457 visa system and its replacement by a two-year and a four-year Temporary Skill Shortage visa, which will come into force in March 2018, will help to rebuild confidence in the system, more effectively address the skill shortages in the country, and create an opportunity for skilled labour to become a part of the Australian retail workforce. 

The visa demands a higher standard of English language, a criminal check, a two-year work experience requirement and mandatory labour market testing, which should better align with skills needed in the marketplace. 

Likewise, the changes to penalty rates have been widely welcomed by retailers who say that reducing Sunday rates from double time to time and a half will reduce wages, which they will be able to reinvest in employing more staff. 

For now, Australian retailers should concentrate on the long-standing appeal of bricks-and-mortar and the social experience of shopping. Retailers that are finding new ways to make the shopping experience more engaging, exciting and entertaining are winning. And the brands that are delivering seamless, multi-dimensional experiences to customers are leading the way in the retail space.

Five ways to innovate for retail success

1. Make it about the experience 

T2 and Aesop have created intimate and creative retail spaces that deliver customer-centric experiences. More and more customers are seeking exceptional, authentic, interactive, unexpected and memorable in-store experiences. 

2. Make it about data 

Accurate and up-to-date data is the key to understanding customer behaviours and needs and predicting what they want. SHEIKE is harnessing customer profiles and shopping habits to deliver better products and service. 

3. Make it convenient 

David Jones and Target have launched customer-first services such as ‘click-and-collect’ to cater to on-demand shopping and fulfilment. 

4. Make it different 

Mon Purse has tapped into the trend for curated, customisable and personalised products and product experts with superior knowledge to guide customers through their purchase. The luxury handbag and leather goods company lets customers customise and design their purchases. 

5. Make it seamless 

Ethical beauty brand Lush has a clear brand promise that it articulates online and in-store. Lush’s storytelling about its handmade, ethical products and its knowledgeable staff provide a seamless, rich and easy shopping experience at every touchpoint.