Reflections on 2010

A great article by Matthew Steven's in yesterday's The Australian newspaper precises the trading predicaments of Colorado and Rebel Sport and succinctly sums up the state of retail play here in Oz. I thought I"d kick start the New Blog Year by sharing part of the article with you in case you missed it.

"... What we have now, though, is something new, because even the biggest of the majors are being hurt by what seems to be a sustained shift in the way consumers are spending.

A number of factors seem to be at play, but the net result is that the consumer seems to have been empowered by the concert of post-crisis price deflation, the continuing embrace of the internet and e-commerce, and the step-changes in technology and fulfilment logistics that support online consumerism. We have moved suddenly into the era of the permanent sale. To lure customers shellshocked by the global crisis and the rising costs of the essentials of life (mortgage interest rates and utilities prices, for example, have stripped the average household budget of flexibility), retailers have been forced to compete vigorously on price. The result is that shoppers now expect the same for less.

... The most interesting aspect of the Colorado result is not that its margins were under pressure, so much as that it had been victim of "declining . . . market size". This observation flows through, I think, to the debate that began just before Christmas over the shift in spending patterns driven by the internet ... JPMorgan says Australian retailers continue to put their sales eggs in the bricks-and-mortar basket and lag their international contemporaries in their engagement with the online economy ... estimates the online share of retail sales in Australia in the 3-5 per cent range. E-commerce penetration in the US and Britain, on the other hand, is running at nearly 8 per cent ... online retail internationally is taking share from established retailers because the "shopping experience" has improved fundamentally. Increased broadband penetration has extended their reach and allowed use of better technology through which to market their wares, have people pay for them and then deliver them securely and quickly.

But, JPMorgan concludes: "The current response of major Australian retailers to the web is bricks-and-mortar centric, seeking to drive traffic in-store rather than being channel-agnostic." Via The Australian.

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