Retailers’ hopes and fears in the Amazon era
Selling is about getting the mix right, which means e-tailers and retailers using an omni-channel approach
The retail environment in SA is in a state of flux. Edcon Holdings’ financial problems paint a grim picture of a local retail environment that is struggling amid poor economic circumstances. They are not the only company suffering: Mr Price and Woolworths reported lower-than-expected Black Friday and festive-season trading, while internationally the changing retail environment has left Toys R Us, Gap, Sears and Debenhams either bankrupt or slashing expenses.
While a tough economic environment and higher living costs are giving retailers a hammering in store, consumers’ shift to online shopping also cannot be ignored. Mr Price reported poor festive-season figures — retail sales grew by just 1.9% — but noted that online sales “were growing fast”. Woolies mirrored this pattern with its online sales recording an impressive 46.1% growth, which it now contributes 7.7% of total sales.
For many consumers, shopping online has become a more convenient option. Attracted by constant specials and the ability to quickly price compare, customers are, indeed, now voting with their mouse.
Online shopping in SA growing — but the experience needs to improve
According to the 2019 Online Retail Report by World Wide Worx, online retail in SA passed the R14bn mark last year. This equates to 1.4% of the total SA retail spend (up from 1%) and, more notably, a 25% growth rate over the previous year. This is faster than expected and shows that e-tailers, or e-tail offerings of traditional retailers, are gaining customers where bricks-and-mortar stores seem to struggle.
Despite the benefits of having an online shopping presence, not all e-tailers are doing it well. They have access to a goldmine of data, which can be harnessed to sell one-to-one to their customers, offering them exceptional value and a positive, almost personal, customer experience.
Product recommendations based on browsing or buying behaviour is an obvious example, but the truth is, even armed with insights into their customers’ every like and need, very few join the dots between the products customers are looking at, the videos they’re watching or the recipes they’re reading, and the increase in sales.
E-tail or retail, one thing is for sure: consumers will shop where they please.
This is implausible, especially since Amazon does it so effectively: in 2016, 29% of its sales was related to its recommendation engine, an artificial intelligence (AI)-driven, revenue-generating machine. That’s $12.8bn!
Google, Microsoft and IBM are all creating similar software, and with Software as a Service the dominant model, it will become affordable for everyone — including traditional retailers that have an online offering.
Not a silver bullet
Despite its clear commercial opportunities, e-tail is no means a silver bullet. Just look at Yuppiechef. The e-tailer took a bold step in October 2017 to move from the online world into the real world, opening four stores in Cape Town.
The company’s co-founder, Andrew Smith noted at a recent event that it took the company more than two years to reach R1m in turnover when they started online. It took less than 50 days for their physical store in the V&A Waterfront to reach the same amount.
Is this omni-channel approach, then, in which e-tail mixes with retail, the way to go? Look again at Amazon: it now gives shoppers a cashier-free experience via Amazon Go, and through its acquisition of retailer Whole Foods, conveniently provides Amazon with 460 stores worldwide. Retailers such as Foot Locker, Abercrombie & Fitch and JC Penney are highlighting an omni-channel approach, with things such as in-store pickups for online purchases, shared loyalty programmes, and buying through Instagram.
An uncertain future
E-tail or retail, one thing is for sure: consumers will shop where they please. During peak trading periods, such as the festive season or Black Friday weekend, it’s not surprising that more shoppers bought online — more products are cheaper for starters. But these same shoppers still enjoy a browse around the bricks-and-mortar stores at the weekend, and so retail becomes a form of entertainment.
The immediate answer for struggling retailers is a bit of both: bricks-and-mortar brands need a robust e-tail offering that intelligently uses its customers’ data to engage them directly with relevant products and promotions. E-tailers need a real-world presence where customers can touch and feel a product — and still have the option of buying online.
A new era
We are indeed living in an Amazon era, one that a 90-year old department store doesn’t quite fit into. It’s unclear what will become of Edcon now that it’s appealed to the Public Investment Corporation (PIC) for a R3bn rescue package. If it does get back on its feet it’ll be wise to follow in the footsteps of its peers and re-invent its traditional retail model into one that is omni-channel, available to customers wherever they want to be and promotes products to them that they want to see.
• Stewart is CEO of Rogerwilco digital marketing agency.