The real threat to Australia’s retail sector (and it’s not Amazon)
Amazon is about to arrive to Australia’s shores and change the retail sector forever, but is that really what retailers should be worried about?
The rise of online retailer Amazon has seen founder Jeff Bezos, who owns around 17% of the company, become one of the richest people on the planet with a net worth of US$84 billion.
Investors in Amazon (NASDAQ: AMZN) have been rather jolly too, seeing the online disrupter’s share price rise over 1,000% in the past 10 years, despite the earnings of the company not reflecting the company’s over US$475 billion market cap.
In fact the only real profitable part of the Amazon business right now has nothing to do with online shopping but rather its cloud services.
Amazon’s quarterly revenue versus net income.
As can see seen in the chart above, Amazon, much like tech company Uber, has its value based solely on future potential earnings.
These future earnings are anticipated to come online at some point after Amazon swallows up much of the retail sector, just as it did with book stores, then flick the switch to a more profitable model once competition has been largely drowned out.
Investors are also looking into the future when it comes to the physical store retailers, despite most being profitable businesses at this present moment, their share prices are telling a different tale.
With companies like Myer (ASX: MYR) and Reject Shop (ASX: TRS) both down around 50% for the year, Harvey Norman (ASX: HVN) and JB Hifi (ASX: JBH) also on a downtrend.
Retailers such as Adairs, RCG Corp and Oroton have downgraded their earnings multiple times this year alone as the reality sets in of the shifting retail environment.
Now it must be said that many of these retailers have an online presence as well, however when it comes to online shopping the playing field is quite quickly levelled.
Often products simply becoming a commodity, in that twenty sites may be selling the same juicer a consumer is seeking to purchase. Online shoppers will often then search for the cheapest website to purchase from, provided it is a reliable site.
Broadly speaking, whether they buy the juicer from Myer online, AppliancesOnline.com.au or soon Amazon, makes no difference to them as long as they can save a few dollars in the process.
Australian retailers are bracing themselves for Amazon’s arrival to our shores with no real tangible strategy other than to lower prices and run sales promotions. It’s hardly a long-term winning formula.
Despite all this and the media hype of Amazon coming to Australia, retailers need to be looking elsewhere to salvage their businesses.
Customer experience and retail expert Amanda Stevens believes there is a danger that retailers in Australia should be focusing on that is looming on the horizon and needs to be addressed immediately if the bricks and mortar retail chains wish to remain competitive in an ever increasing digital shopping era.
Amanda has an extensive background in consumer research and advising brands such as Lend Lease, Priceline, Westfield and Microsoft, she now consults directly with businesses large and small on brand marketing and how to engage with consumers.
Consumer retail and marketing expert Amanda Stevens.
In a recent open letter to Australian retailers, Amanda outlines many key points on her recent shopping experience which I’m sure many of us can relate to.
Highlighting the real threat facing the retail sector: the lack of quality customer service.
Retailers of Australia, take note.
Amanda’s letter:
This is an open letter to the retailers of Australia – small independents, franchise formats and the big brands with hundreds of stores, head office management and venture capital ownership.
This long weekend I had 5 retail interactions that ranged from poor to appalling and despite this by no means being a statistically sound sample, these examples seem to increasingly be the rule, not the exception.
My string of consistently awful experiences kicked off on Friday when I popped into a bottle shop to pick up a birthday present for one of my best friends, who is affectionately known as ‘Bollinger Bill’ due to his penchant for fine champers. No guessing what I was planning to buy – an $80 bottle of French fizz.
As I approached the store, a staff member was locking a side door. ‘Are you open?’ I enquired.
She let out an annoyed sigh and responded ‘If you’re quick. Do you know what you want? I was just going to go wee.’
I’m not paraphrasing here, or embellishing. This was what she said – word for word.
I found myself pitching to her that I knew exactly what I wanted and would be literally one minute. She reluctantly re-opened the door and let me in.
‘Erm, great, thanks,’ I said as I completed my rushed transaction and left her to her trip to the toilet, feeling strangely grateful that I got her on the way there and not on the way back.
On Saturday morning, inspired by my new personal trainer’s advice and to help balance the slight headache from the champagne I helped Bill drink the night before, I took a trip to my local shopping centre – specifically the athletic shoe store – a brand that has over 130 stores across the country. I’ve recently set a goal to run 10km by the end of the year and just a few months after having a baby, I know I need new running shoes with good support – my knees and ankles are carrying a tad more weight than the last 10km run I did.
I walked into the store and approached the wall of shoes, overwhelmed by choice, category and colour but relieved to be in an environment where I could get some expert advice, complete with the fancy computerised sensor mat and kiosk that enables the staff to film your running style and recommend options customised to you and your needs.
Two staff members were assisting another customer so I patiently waited. And waited. After a few minutes and with no acknowledgement of my existence, I stepped a little closer to the two staff one customer get-together, holding a shoe in an effort to communicate that I was, in fact, a serious shopper, wanting to spend money. One of the staff members came closer and, devoid of any enthusiasm, said ‘Can I help you?’
‘I was hoping to try these on,’ I offered.
‘I’ll be with you in a moment, I just have to put these boxes away.’
What? I’m a customer, in your store, ready to drop over $200 on new kicks, and your priority is putting some freaking boxes away? Are you kidding me?
I persevered; keen to learn what type of shoe was going to take me from my current cross training and walking to a decent running distance.
After going through the impressive heat mapping process that enables the staff member to determine what kind of shoe is needed, she then explained the diagnosis to me, using jargon that made me feel like I had been propelled into a sports science or physiotherapy lecture. My headache suddenly worsened.
She then went out the back and got me four pairs of shoes to try on, none of which I liked. Yes, I realise it sounds shallow but if I’m going to spend the equivalent of three bottles of Bollinger on a pair of runners, I want to like the look of them as much as my ankles like the feel of them.
After feeling like we were going around in circles on the array of ugly shoes, I gave up and headed straight for the juice bar. If I couldn’t get my health fix from new runners, I could at least drown my sorrows in a healthy smoothie.
‘Sorry, we’re out of Kale,’ said the juice bar staff member cheerily when I ordered my large green juice.
I wasn’t really in the frame of mind to think through a replacement option from the extensive menu so I quickly settled for a berry booster and wandered 10 steps into Woolworths to pick up some things for dinner.
Guess what was on sale right near the entrance? Kale. Pails of Kale. On special. Surely, if you ran a busy juice bar, and you ran out of Kale, you could take 20 seconds to pop next door to Woolies and buy some?
Feeling kale-deprived and annoyed from my failed running shoe expedition, I went back to the car via the newsagency. Knowing I’d have a few baby-free hours later that afternoon, I wanted a magazine to flick through so I could lie in a hot bath and reminisce about the time in my life when I had time for baths and reading magazines.
The excitement over my mini make-believe session was soon soured as my $8.50 magazine purchase was hijacked by a ‘$10 minimum transaction’ sign scrawled on felt pen near the cash register.
I don’t know if it was the heat from the bath or my sore knees from running in my old shoes, but later that evening I vowed to never again shop in a store that dictated a minimum spend to me.
Sunday was a new day so after a pleasant lunch with my girlfriends (who had to hear all about my champagne calamity, Nike neglect, magazine mistreatment and Kale catastrophe), I popped into a furniture retailer that had been advertising a half price bed sale all week. In fact, I’d seen the ads on television, newspaper and a mailbox catalogue. It was 3:36pm and knowing the store shut at 4pm on a Sunday, I knew I had time to have a quick look and maybe even try a couple of beds. I’m a speedy shopper when I have a purposeful purchase like a new bed so I knew there was every chance I’d be leaving the store at 3:59 the proud owner of a new queen ensemble.
While I won’t name the store, all I’ve got to say is ‘Gerry Harvey, if you put as much effort into training your staff as you do mouthing off to the media about Amazon and other online competitors, your profits wouldn’t be tanking and you’d have money to buy a truckload of Amazon shares.’
Despite walking past two staff members busy wheeling display stock inside as I approached the front doors, I wasn’t deterred. I was barely through the front door when a staff member approached me and said ‘Hi, I just wanted to let you know that we close in 15 minutes.’
Needless to say, I felt anything but welcomed. But half price is half price so I strode confidently to the bedding section and started enquiring about sale stock. After a few short and impatient answers, it became apparent to me that knocking off early was far more important than a potential sale so I aborted the mission and said I’d return tomorrow. The staff member actually followed closely behind me and just when I thought he was being polite and opening the door for me, I then realised that it was so he could lock it behind me. Clunk. At 3:47pm.
As I walked to the car, I wondered how much all that advertising cost and what the investment was to get me to walk through the door, only to be repelled and leave minutes after arriving.
I didn’t go back the next day. I went home and bought a bed online. It was delivered 48 hours later.
Retailers of Australia, I get that times are tough. I understand that competition is fierce and that consumers are fussy and increasingly price sensitive. I also know that Amazon launching in Australia presents a very scary new retail reality.
But when 40% of consumers already say they currently get a better experience online than they do in store, it’s not what Amazon is doing that you should be worried about, it’s what you’re not doing.
You’re not engaging your customers. You’re not putting them at the heart of everything you do and you’re not investing in your staff and empowering them to treat your customers like the key to your brand’s survival that they literally are.
Jim Rohn put it best when he said ‘One customer well taken care of could be worth more than $10,000 in advertising.’ It might be an old and simplistic adage but it stands the test of time. The ripple effect of a delighted customer, who is inspired to share their experience through word of mouth and word of mouse could be the Amazon antidote you’re all desperately searching for.
Amazon will have a mind-boggling array of products and services at very competitive prices. But it’s not just their offering that will be impressive. Amazon have mapped out their customer experience in microscopic detail and their sole objective will be exceeding expectations at every touch point.
Amazon will be completely focused on their customers, not watching the clock or prioritising putting stock away before they make it possible for you to complete an online transaction. Customers will feel like they are the priority. Despite the non-human, highly automated nature of the channel, the Amazon experience will be friendly, personalised and efficient.
So, retailers of Australia, I implore you. Invest in your staff. Train them. Not just on product knowledge, but in the fundamentals of customer service. Teach them how to connect with your customers, love on them and make it easy to buy from you.
If you’re currently looking at how to cut overheads by employing less staff — or heaven forbid, slightly cheaper staff — stop it. Your focus should be on how to further invest in your staff, not how to save a buck here and there. Why on earth would you compromise the sum total of your business investment by placing your customers in the hands of disinterested, untrained, unmotivated and barely present staff who ultimately couldn’t care less whether customers buy or not?
Your team, the people who deliver on your customer experience, are your most powerful defence when it comes to the mighty power of Amazon. Or any competitive threat for that matter. Their ability to meet the changing needs of your customers — to exceed their expectations and give them an experience worthy of a positive review or a proactive recommendation to friends at Sunday lunch — will directly dictate your immediate financial future.
It could be the difference between you barely surviving the next 12 months and breaking out the Bollie to celebrate your best year yet.
A powerful letter that offers valuable insight into what is truly costing the bricks and mortar businesses in the retail space and some actionable solutions.
The question that needs to be asked though, is whether this lack of customer service is a larger symptom of a society that’s losing touch with the importance of human interaction, as we bury our heads into our phones all day or go to the supermarket only to not interact with anyone as we scan our own groceries on the way out.
Or is it simply a case of retail staff not receiving the adequate training and motivation as Amanda suggests.
If it is a case of the later, then retailers who focus on improving their staff’s skills and the customer experience, will likely stand out and outperform their peers to give themselves the best chance of weathering the stormy seas ahead as the likes of Amazon continue to wrap their tentacles around the globe.