Satchelnomics: More retail store woes

While it seems has been around from the dawn of time,  it's only now, with America on the cusp of losing its economic power, we're seeing the widespread effects of the lure of retail on the internet. But in this Darwinian-like game of survival of the fittest, it's not just the little guy who's losing out, unless he or she is one of the minions of the retail giants currently under threat. 

Yesterday it was reported that Premier Investments, which owns Just Jeans, Jay Jays, Portmans, Dotti, Peter Alexander and Smiggle, and is headed by Mark McInnes, former CEO of David Jones, could close as many as 50 stores across the country despite efforts at discounting and the school holidays. "Prices are down 60 to 70 per cent and they're still not buying," McInnes said.

This follows David Jones' pallor downgrading of its financial earnings last week. Country Road has also reported its sales are down, on a comparable store basis, 10.9% on last year, though its first-half profits for fiscal 2010/11 were up 4.4%, while Harvey Norman, Myer, Noni B and Billabong have all taken a share price battering as their profits for the financial year just ended have been downgraded.

The Australian Retailers Association says new data shows that just under 65% of retailers are trading below where they were in 2010, while it has issued an 'Engage in E-Tail' fact sheet on its website and will host a seminar to that affect next month.

PrincewaterhouseCoopers and Frost & Sullivan revealed this week that Australians will spend more than $13.6 billion online in 2011, with a whopping 45% of that money going to offshore retailers, representing a 25% increase on the $4.8 billion Australians spent with overseas online retailers last year.

"Large and small retailers alike are facing stronger than ever competition from digital channels, both here and overseas," PwC global retail and consumer advisory leader Stuart Harker said. "Lower prices, convenience, greater product range and a growth in mobile devices are all factors fuelling online shopping."

However, there are some retailers who are bucking the trend by putting the personal into their business dealings and using the web to their advantage – to lure customers in-store while value adding their in-store proposition with an attractive community culture.

Sportsgirl, owned by the family-owned Sussan Group, is one such case: it reported a $28 million profit for the 2010 financial year (notably, figures are not yet known for this year) and has benefited greatly from its designer capsule collections, which foster young talent while giving buyers an added incentive to buy something more exclusive than mass. Its positive brand positioning is about giving something back (does corporate goodwill buffer a business?).

While we won't know until next year how the retailer has weathered the influx of Zara, and the growing dominance of ASOS may have curtailed earnings for the 2010/11 financial year, it's a telling case study about thinking local while employing best-practise global strategies.

This suggests that the big retail stores, and their many employees, really did and do have the capabilities to strategise their way out of the quagmire that the internet presents, further proven with Premier Investments' own intention to invest more money online while opening more stores for its more viable brands.

Along with the spread of the internet, and market forces beyond our control, it seems some consumers have lost a certain amount of empathy for the little man, the one who stands behind the counter in a shop, lovingly selecting, buying, displaying and selling their wares. Disenfranchised by the worldwide web, we have less reason to interact with retailers at the counter, and indeed online, with only the balance of the bank accounts on-screen and convenience in mind as we shop.

While we can't all very well ignore the lure of a bargain on the web, with our personal finances to think about, and the web supports many a small retailer, too, perhaps the Australian Retailer's Association should start something of a new campaign about putting the personal in purchasing? The print media, supported by retailers thereby with a vested interest in their success, should consider this, too.

See also:
Satchelnomics: Shopping in a new retail world

Girl With a Satchel


Anonymous said...

Being someone who actually works in retail, stores are near ghost-towns these days. Customers try and wiggle around on the price so much because they know how steep the competition is. If it's cheaper online, obviously that's where people will go. Having said that, I do like actually physically walking into a store and trying on things! It's a pain when something arrives at your door and it doesn't fit! I think I'm probably in the minority though...

Footprints Australia said...

According to the governor of the RBA, things really aren't that bad and consumers need to relax ... their purse strings!

Sorry Mr Governor, but with groceries, petrol, water, mortgages, electricity etc having gone up like a rocket in the past 12 months (but not my pay packet), and the fact that I know MANY people whose workplaces are resorting to redundancies, decreased work hours, or closing down altogether ... I don't think it'll be happening anytime soon.

Mrs Press said...

What I keep thinking, as a retailer & designer, is that if there really is this cultural shift against buying things, or at least buying them full price, it will actually be the regular person in the (empty) street who suffers in the end, because beautiful boutiques will disappear, local designers will disappear, and all that'll be left will be ridiculously expensive pesto. Why are people still happy to spend on bloody food? Drives me bananas.
Also, in terms of fashion, the point about "cheaper on line" is a moot one - it won't be available at all if consumers don't support it at the start of the season. If labels had to survive on sales alone, they simply would not survive. Which is really sad.