The I-curve – from MHD magazine

The I-curve – from MHD magazine

The Amazon effect

Industry experts are still divided on the impact services like Amazon Prime will have on the retail sector. Many believe the behemoth doesn’t do enough to differentiate itself in Australia, and that consumers are unlikely to get on board – however Woolworths CEO, Brad Banducci, calls it out as a new benchmark in terms of consumer expectations of delivery.

“We think Amazon Prime is the key vehicle, we see them being successful with that in the US and we will simply need to be better at on-demand,” he said, in line with the news of Woolworths-owned Endeavour Drinks Group’s 4.5 percent sales increase. “F18 was the year of pick-up for us.”

In the US, more than 50% of shopping journeys start with Amazon – and there’s no reason to believe Aussies won’t follow suit.

Amazon’s logistics, product range and deep knowledge of its customers pose a significant threat to Australian retailers. The e-tailer knows everything about its customers, to the point where it can predict what they will buy based on past transactions, and what they might like to buy in the future.

“Unless you’re using data effectively, you’re fighting with one arm tied behind your back.” Jonathan Reeve.

According to speaker, author, e-commerce fulfilment consultant and General Manager of Eagle Eye ANZ, Jonathan Reeve, local businesses are too focused on selling. “What I’ve seen over the last 17 years is that 80% of everyone’s attention has been on the digital challenge of selling,” he says. “The physical challenge of actually getting the products to the consumer has been given 20% of their attention.”

This trend needs to be reversed, says Reeve, as customers are buying an experience. They want cheaper and more convenient delivery, and that is what Amazon is providing.

With the entrance of Amazon, the continued presence of eBay and local operations like Catch.com.au, e-commerce in Australia will continue to grow rapidly whether we like it or not. To survive this surge, retailers must enhance their ability to collect, analyse and store data, and collaborate with other businesses and consumers to offer better service and better delivery.

“Customers are buying an experience. They want cheaper and more convenient delivery, and that is what Amazon is providing.” Jonathan Reeve, General Manager, Eagle Eye ANZ.

The changing face of brand loyalty

According to Councillor Susan Riley, who is responsible for the City of Melbourne’s Small Business, Retail and Hospitality portfolio, “customers come back [to boutique stores] because they like you and they know they’re going to get the service they want. Online doesn’t provide that.

“Online is a real issue for Melbourne. So many customers come in to the store – look, feel, shake – and then go buy it online,” she says.

But brand loyalty looks very different than it used to. The in-store/online balance is key for small businesses – they must become more experiential, so that people will come in-store for the activities that surround the buying experience, as much as the buying itself.

Retail industry executive at Telstra Gareth Jude said: “Based on our studies, Australian retailers achieve up to 20% attachment rates on sales for click’n’collect. Customers buy online then come in-store – and because of the great service and experience they’ve received, they decide they need to purchase something else while they’re there.

“Boutique retailers can complement their physical, in-store experience with an online presence and function.”

While Councillor Riley may be concerned about the notion of a “city of empty shops”, e-commerce provides a significant value-add for physical retailers. As Localz’ CRO James Westlake explains, when you use Woolies’ click’n’collect, you go in to pick up your shopping – but you browse around and shop in-store first before picking it up. Or even if you don’t, by the time you get home, you’ve forgotten something you needed to include in your order.

“Brand heritage now is a reduced value compared to convenience,” he said. “When a retailer gives customers back the time they were going to lose [by enabling them to shop online], they reward the business by doing more shopping. Gifting customers this time is what creates brand loyalty.”

Mr Westlake refers to UK clothing company, River Island, as another example.

“River Island has repositioned itself as a tech company that sells clothes, so it can fulfil customer journeys. It realises clothes are its commodity – but its ability to form a relationship with its customers and help them with their lifestyle is what maintains brand relevance and loyalty.”

For High Street stores, brand is something that keeps their customers coming in the door. But now shoppers can come in the door, try something on, then go online to buy it – with next day delivery included and at a lower price than in-store.

Today’s retailers need to consider brand value versus convenience. If you’re relevant to your customers at this moment, they will like you. If you’re not relevant, the customer won’t be interested.

So, what is the answer for small and medium-sized retailers who can’t count on brand loyalty to get customers through the door (or clicking online?) According to Localz’ Louise Robertson, they need to become more experiential.

“Where you used to find a coffee shop on the high street, today you’d find a coffee shop in the back of a hairdresser’s, or with art on the wall,” she said. “Businesses are merging and becoming more experiential, which is critical for them to reinvent themselves. It’s not good enough to do what they did 20 years ago.”

 “We think Amazon Prime is the key vehicle, we see them being successful with that in the US, and we will simply need to be better at on-demand. Brad Banducci, CEO, Woolworths.

Data is knowledge is power

Consumers want complete control over their experience – and to provide this, businesses must know their customers intimately.

The key to getting e-commerce right comes down to data – and lots of it – about your customers and their habits, likes and preferences.

“As a retailer, you can always serve your customer better if you know more about them than the next guy,” said Telstra’s Gareth Jude.

Major e-tailers are continuing to turn data on its head, in stark contrast to the early periods of e-commerce when companies gathered plenty of information about their customers but didn’t know what to do with it. Businesses implemented complex CRM systems – only to have the data lay dormant.

“There’s a competitive imperative to get data right,” continued Mr Jude. “If you’re not doing anything with your data, Amazon, Alibaba and all the rest of them certainly are. And they’re going to eat your lunch.”

Jonathan Reeve concurred: “Unless you’re using data effectively, you’re fighting with one arm tied behind your back.”

Computing power and analysis are readily available as services – so there’s no excuse for Australian businesses not to be leveraging them. “Many technologies are converging, and there’s a lot more processing power available,” said Charles Edwards, Manager of supply chain management consultancy GRA. “This enables us to drive more insights from data with more data collection points, and we have the technology and computer power available to analyse it.

“It’s all about driving insights from consumer behaviour.”

“Boutique retailers can complement their physical, in-store experience with an online presence and function.” Gareth Jude, Retail Industry Executive, Telstra.

Over the horizon: the inevitable consumer mindset shift

The irrational, emotional, uneconomic Australian consumer is coming – and local businesses need to be ready. Although we might be reluctant now to share our data, the mindset shift is just over the horizon. It’s a journey that will organically happen.

Mr Edwards: “The first time I used an Uber, I thought – ‘I’d never get in to a stranger’s car!’” But his mindset changed as soon as he used the service and was amazed at its accuracy and cost-effectiveness.

Furthermore, there’s already a cognitive dissonance around how consumers share their data, and who they share it with. NBN Co’s Megan Park exclaimed: “Everyone’s opting out of MyHealthRecord – but they’re sharing their whole lives on Facebook!”

Pressure from consumers is also now being felt in the field services arena, with everyone wanting to know who, when and where their service will be delivered. The increased criticism and regulation of the European utilities is sector is driving a flow-on impact, and confidence in the Australian utilities sector is at an all-time low.

“Expectations of service delivery and parcel delivery are becoming converged,” said Localz’ regional sales director for A/NZ, Gareth Phillips. “Customers want more control and visibility of what they experience when they have their internet connected or their solar panels fitted. The Iconomy conversation is an important one for utilities and service companies to be involved in, as much as retailers.”

“Customers want more control and visibility of what they experience when they have their internet connected or their solar panels fitted. The Iconomy conversation is an important one for utilities and service companies to be involved in, as much as retailers.” Gareth Phillips Reg, Sales Director, Localz.

Online retail is only going to grow, and it remains an opportunity to be lost for local brands if they don’t take control of their own destinies and make the most of the data and the delivery services they have.

Australian businesses need to get their data analysis and deep learning right to give irrational, emotional and uneconomic consumers command of their delivery experience.

Localz’ Louise Robertson concluded: “It’s all about the human. Whatever technology we put around them, it’s all about emotions and data.”

Part 1. of this article appeared in the January-February issue of MHD Supply Chain Solutions magazine, which you can read here: https://bit.ly/2TZ3qnB. For more information visit www.localz.com.

 

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