Traditional Retail Fights Back

Since 2015, the Australian Bureau of Statistics (ABS) has reported on the percentage of retail sales which are delivered online. It is no surprise that the percentage has been rising steadily.

In January 2015, for example, total online sales accounted for 2.8 percent of all Australian retail sales for that month. This has doubled to 5.6 percent in the most recent data for January 2019.

What is more interesting in the data is that the ABS segments online sales into what it calls “pure play” online retail and “multi-channel” sales.

Of the two, it is multi-channel online sales which is the biggest and has grown the fastest, now accounting for 3.7 percent of all sales in January. The percentage had also peaked at 4.0 percent in November 2018.

Using Digital to Fight Digital

With the rapid development of augmented reality retail applications, this push is only going to gain momentum.

Even if the current pace is maintained, by 2023 around 12 percent of all Australian retail sales will be executed online. Eight percent of which will be in the “multi-channel” category identified by the ABS, which is equivalent to around AUD 2 billion of sales per month.

A look at Australian retail shows how many old bricks and mortar retailers who have been challenged by the online world have responded by adopting digital tools to drive a business model based around omnichannel.

The duopoly of Coles and Woolworths dominates Australia's grocery sector. After a slow start, both companies are now selling around AUD 1 billion of produce each year online.

The Myer department store group is an Australian retail icon but, like the broader department store sector, has been hard hit by the online sales revolution. The ABS also keeps data on department store sales, which are down more than 10 percent since January 2015.

In the most recent profit results, which saw Myer rebound from a sobering AUD 476 million half-year loss to a profit of AUD 38 million, it was the company’s belated move into online retailing which was its saving grace.

While overall sales were down 2.8 percent for the half year, the company boosted its online and omnichannel sales by 18.6 percent to AUD 151 million on the back of the launch of a new and much more functional website.

Amazon Fear

Some of the omnichannel push in Australia has come from the arrival of global giant Amazon, which launched in Australia last year. It was a wake-up call for many traditional retailers who had underinvested in digital over the last decade.

The Super Retail Group (SRG), which has separate brands selling auto accessories, sporting and camping goods, was considered vulnerable to Amazon, with analysts forecasting its earnings falling by as much as one third.

The group invested heavily in online, with commitments to physical delivery of the items inside as little as 30 minutes. The results have been significant.

According to the 2017-18 results, the auto parts operation has grown online sales by 85 percent, sports – which sells 157,000 items – increased by 152 percent, while camping improved by 76 percent.

Old Foes, New Digital Tactics

The Toys R Us brand disappeared from Australia after the global company went into liquidation last year. Under new owners Tru Kids, the company has announced new plans to re-enter the Australian market with an omnichannel strategy.

Richard Barry, the president and chief executive of Tru Kids, said the new strategy in Australia would be an "omnichannel approach that is tech immersive and experiential."

"We have a once-in-a-lifetime opportunity to write the next chapter of Toys 'R' Us by launching a newly imagined omnichannel retail experience for our beloved brands," Barry said. 

The statement was light on specifics, but it can be anticipated that AR will be a big part of what Barry means when he talks about “tech immersive and experiential.”

Learning from Foes

Gartner predicted that by 2020, 100 million consumers would do their shopping in AR, a technology that is breaking down the barriers between old fashioned retailing and the online world.

At an operational level, new digital tools are entering the market to support omnichannel.  Retail solution vendors are now offering products which integrate all sales channels into demand forecasting, inventory planning and replenishment.

Another U.S. brand which initially struggled in Australia is donut maker Krispy Kreme.

Online business spiked 136 percent over two years after the Australian operation rolled out a cross-channel payments solution from Braintree. This did not come at the expense of the physical locations, with the company increasing its physical network by 30 percent in less than a year.

Homeware and kitchenware group, Global Retail Brands, announced last month they were implementing a replenishment suite from Mi9 Retail which will enable planning aggregated across the group’s 170 Australian stores and a global online homewares business.

Data Integration Gets Physical

To get full value from these implementations requires data integration across channels.

The channels continue as routes to customers, but an integration layer above takes a holistic view across the entire operation. It points to a way forward for the retail sector and the vendors that service it.

Meanwhile, at the consumer end, AR will increasingly break down the barriers between the physical and online, delivering experience as a driver for purchases.