Australian Retail and The 5 Stages of Grief

It’s taken longer than our US and UK counter parts, but in 2011 the Australian Retail Sector finally accepted the idea that “retail sales belong to bricks and mortar retailers”, is finally dead.  As we head into a new year, let’s reflect on 2011 and see how the Australian retail sector dealt with the 5 stages of grief.  Will acceptance allow Australian retail to finally start competing online?

Stage One (Denial)

“I feel fine.” “This can’t be happening, not to me.”

There is no doubt the retail sector has spent many years in this first stage.  It has been in denial about online shopping for a long time.  Amongst the many beliefs that underpin this view is the rather short-sighted assessment that internet shopping was a fad and/or that good old customer service would see consumers return to their favorite physical stores in due course.

Thankfully we appeared to have emerged from this stage by late 2010.

Stage Two (Anger)

“Why me? It’s not fair!” “How can this happen to me?”  ”Who is to blame?”

2011 started with Gerry Harvey suggesting; “for many retailers this is a case of life or death” (in reference to online competition). These comments kicked off fierce lobbying from the retail sector, where it claimed the government was to blame for not protecting Australian retailers and for not taking strong enough action in the past to prevent the situation.

These ‘discussions’ centered mostly on the GST exemption for international retailers on goods sold under $1000.  Despite research showing that online products were often 20-40% cheaper than retail prices, the sector claimed a change to this tax would allow them to compete (on price) with online retail.  Clearly, somebody needs to do their maths!

Myer’s chief executive Bernie Brooks went as far to publically claim that ‘up to 30,000 jobs could be cut from the Australian retail sector unless GST and import duty exemptions are removed from online purchases of less than $1000 made via foreign websites. It does raise the question, what supposed information is Bernie making this claim on the back of and why did not just the unions deny this figure but so did all credible economic journalists in the country.

Stage Three (Bargaining)

“I’ll do anything for a few more years.” “I will give my life savings if…”

January 2011 was not a good time for the retail sector.  It was left with little sympathy from either the government or even the buying public. By mid January, in what appeared to be quite a backflip on behalf of a coalition of retailers, (which included David Jones, Myer, Target, House, Borders and Angus & Robertson) Gerry Harvey admitted that the campaign against online retail was “bad timing” and the “message had been poorly communicated”.

Having recognized this, and no doubt prompted by the negative perception created by a billionaire spokesman arguing for changes to allow his and other companies become more competitive, Gerry Harvey told the press that his involvement in the issue was “suicidal”.

From there, quieter, less public and less emotional negotiations began between retailers and government. In February of 2011 the Online Retail Forum meet for the first time, supported by its tag line: An industry dialogue to discuss the benefits, challenges and solutions for online retail in Australia.

Stage Four (Depression)

“I’m so sad, why bother with anything?”  ”I’m going to die soon so what’s the point… What’s the point?”

By July 2011 the tax debate had fallen off then agenda and it had generally been accepted that the government had no intention of changing the GST exemption on international goods under $1000.  In recognition of the lost battle, Mark McInnes expressed a feeling a hopeless for the Australian Retail Sector:

“…it’s a small cost to offer free shipping into Australia compared with employing people, spending capital opening stores or paying rent. I’d much rather be in that business. And by the way, we can’t do that to other countries. We can’t export from this country into the UK and the US and have that type of tax free regime because it just doesn’t exist in any other Western country. It’s an arbitrage. It’s a classic arbitrage.”

Stage Five (Acceptance)

“It’s going to be okay.”  ”I can’t fight it, I may as well prepare for it.”

By the time August 2011 rolled around, the major complainants had turned into advocates.  Harvey Norman had officially announced that within a month it would be offering around 80% of its product range via its website.  Not to be left out, Myer had launched its online offering through www.myfind.com however, that initiative doesn’t look to be any more successful than David Jones’ first attempt online – which reportedly lost around $28 million dollars before being switched off in 2003.

5 Stages Down. What Now?

Interestingly, the lead-time to go online (particularly given the size and nature of these established brands) means many of the very companies fighting for greater protection of bricks and mortar retailers earlier in the year, must have already been working behind the scenes to go online.

So was it all a charade to distract the competition?  I doubt it: each major player would have been well aware of the others’ plans. Instead, I believe their public actions and complaints actually stemmed from the realisation they didn’t know how to win in this space, before they even launched.  So while their development teams were gearing up to go live, the management teams were preparing to justify to shareholders why it wouldn’t (or didn’t) work.  Maybe it’s a cynical view, but it certainly matches the evidence.

The two key lessons here for business is (1) Online Retail is not going away and (2) The Australian government and public won’t support protective measures for the offline retail sector and the disproportionately higher prices for consumers

My prediction is that in 2012, Australian retail sector (and indeed business more broadly) will finally stop debating how to protect offline retailers or whether retailers who haven’t already gone online should do so.  Instead, 2012 will be about building on the acceptance that the internet is now a major part of the retail landscape and begin developing strategies to ensure the digital space is part of their business model.

DC Strategy is your business growth specialist. For more information on taking your business online contact DC Strategy:

Tim McDougall
Online Strategy Manager
tim.mcdougall@dcstrategy.com
03 8615 7205

This story was originally published on www.dcstrategy.com.au