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45 responses to “The future of retailing”

  1. Moz

    There are also interesting effects on housing (location of) and goods transport over the last mile. Is it more or less efficient to deliver small quantities to each house every day or so, or for residents to drive to their local mall? How robust will these systems be in the event of disaster (a supermarket is also a local storage site for food reserves)?

    For a while we were shopping online for most of our groceries because there was an organic delivery service with a good range and good prices, but only worked while we had 6 adults participating. For a small household getting perishables locally makes more sense, even though “locally” means bulk deliveries to the corner shop from the same market that the “online” shop uses.

    Bike shops are interesting. The real money for the shop comes from people buying new bikes, which is used to subsidise bike repairs (usually as “sales pay the rent and overheads”). Transfer that to online shops and the cost of having a mechanic work on your bike will go up (I used to work for one of the more expensive bike shops, and they were expensive largely because they focused more on fixing bikes than upselling customers to new ones. Interestingly we now have an “online” bike shop in Melbourne selling out of an industrial estate, the way many PC shops have done for the last 5-10 years. Camera sales have been going the same way (I saved ~15% buying my last camera that way).

  2. dave

    Robert, I think “whether there will be alternative employment available on similar or better terms for those workers” is an issue beyond the retail sector as the economy loses its consumption based momentum. The prospects of meagre economic growth figures on top of some sizeable job losses courtesy of GFC1 in other parts of the globe raise the prospect of double digit unemployment rates in the west. If these jobs aren’t replaced (by what?) then London might be a prelude to a new world order.

    Frankly I think it’s mistake by policy makers to allow the consumer economy to drive our future prosperity, one which has many down sides and very few ups. But any readjustment wont be pretty.

    Mind you, the Frank Lowys and Gerry Harveys of the world will be ok.

  3. akn

    That was educative. Thanks. Didn’t know about the ‘dead mall’ concept. They have always been graveyards of human sociality so far as I’m concerned – too big and full of nasty psychological manipulation to be pleasant places. I approached mall shopping with paramilitary efficiency: know your target, get in, achieve the goal, get out fast. I’m enjoying the irony of capitalism eating one of its own children, again, as online retailing takes down the mall.

  4. Sam

    Have you been to Frankston lately? If you have, you should know that we already have at least one dead mall. Eastwood Shopping Centre in Sydney is not far off being one.

    The PC’s recommendations to free up planning laws would seem to be a good solution to avoiding dead malls etc.

  5. akn

    Very probably Robert. Although, growing up in Newcastle, I observed the death of Hunter Street as a shopping precinct due to competition from suburban malls. Perhaps the end of malls, with their vicious rents, might allow opportunities for the renewal of strip shops?

  6. Chris

    I can’t help concluding that there’s gross inefficiencies and feather-bedding somewhere in the supply chain, even if it’s not the local retailers.

    There’s a decent amount of competition of retailers in Australia (especially online) and there’s still a huge gap between australian online prices and overseas ones. So I suspect that manufacturers’ wholesale prices are responsible for a large part of the price gap. And perhaps they simply don’t care as either way they sell via say US or Asia where they have much bigger volumes or via retailers in Australia with big (for them) profit margins but low and decreasing volumes.

  7. Moz

    I dunno if you noticed a recent furore in NZ over the pricing on the Adidas All Black jumpers? $220 RRP in NZ, $NZ90 RRP in the US. Reason? Adidas decided they could make more money that way. When people started buying them online, they asked the online retailers not to ship to NZ. When questioned they tried the “don’t you support the All Blacks?” line.

    So yes, often it’s “local” pricing by the manufacturer. With other stuff it seems to be volume pricing or somesuch nonsense, where bigger markets get dramatically better price per unit. Which amounts to “we have a poor dispatch department, so you pay”.

    There’s also the miracle of “retail packaging”, where the cheaper product doesn’t come with 200 pages of manual in 12 languages, and is not individually plastic-wrapped.

  8. Tom Davies

    I’m enjoying the irony of capitalism eating one of its own children, again

    No irony involved — that’s exactly what a market economy is meant to do, unless rent seekers convince governments to stop it working.

  9. Chris

    Moz – didn’t hear about that, but not surprising. That sort of pricing has been obvious for high volume software for a long time where local pricing is based on what people are willing to pay rather than cost of manufacture + profit margin. So it ends up being very cheap in low income countries and expensive in high income countries.

    For physical goods even geo restrictions don’t work once people discover remailing services.

  10. Moz

    Chris, one interesting example is Lego. The Lego Group use regional pricing with periodic currency adjustments but there have been arbitrage services online since the early 90’s. AucZilla and Lugnet started a trend that has grown into BrickLink and a few other services, plus forums where the best remailers are discussed (in case you’re interested, Amazon.fr has low prices, cheap shipping and will ship to Australia, while amazon.com and amazon.uk don’t). Summary: if you pay more than half Australian retail you’re donating the extra to whoever you buy from.

    I am really curious about how malls will react to online shopping, especially once Hardly Normal and other anchor tenants can’t afford the rent. I can see a place for the “pedestrian mall” style setup like Pitt St in Sydney, or a smaller scale version where the focus is on making it a pleasant place to be. But the aggressive, industrial-scale retail experience doesn’t seem to appeal to their target demographic as much as it does. The bogan types I know are becoming much more aware of online shopping and use Facebook and SMS to share details of where it’s worth shopping (and yes, bogan retailers are using those things to target their markets), so I suspect those malls are losing even their “hobby shopper” dollars.

    (I’m hoping to use bogan descriptively rather than pejoratively here)

  11. Sam

    Just for the record, Sam #5 is not me, the regular Sam on this blog.

  12. Mindy

    Regular Sam you could consider a gravatar. Wouldn’t want to be mistaking just any old Sam for you.

  13. Down and Out of Sài Gòn

    I was over in Chermside shopping centre on Saturday. It seems to be one of the Westfields that’s doing healthy business. But if it ever dies, it’d make a good place for a car chase.

  14. Tyro Rex

    Down & Out: Chermside is a nightmare for parking. Apart from the Apple store I can see no reason to go there. Indooroopilly centre seems to do pretty well … and Indro has no lack of other potential spaces for social interaction either. However the main reason we tend to go there however is to eat at the Vietnamese place outside of the Pig’n’Whistle.

  15. jane

    I have to say online purchasing will never be my preferred mode of shopping. I like to wander around shops checking out the products at close range, actually picking them up and assessing whether they are the right size, shape, price etc. Online shopping never gives you that benefit.

    I would never, ever, ever buy clothes, shoes or fruit, vegetables and meat online. You have to try on clothes and shoes and I like to pick my own fruit, veg and meat, thanks.

    I don’t find shopping malls manipulative, rather a convenient one-stop shop where I can compare prices without having to career for miles between retailers, buy groceries and fruit & veg, get a reasonably decent meal and go to the movies.

    And people watch, if I feel like it. I don’t want to talk to the buggers, but I do enjoy the movement and colour of milling shoppers.

    Having said all that I do buy CDs online, however, I should qualify that by saying that I can’t buy the ones I want in Australia.

  16. via collins

    Amen to that view, Robert at # 17.

    Our family is almost exclusively clothed through some unbelievably canny internet purchases. Nasty when the item doesn’t fit, but that’s about a 3% chance.

    Part of my business has relied on retail for its distribution since inception. The terms demanded by big-box retailers are breath-taking. They can all burn in hell, I’ll dance on the fire. Our internet sales are increasing month on month, and we’re looking after independent retailers with cash discounts.

  17. Shingle

    I’ve only bought a few small things over the net – the teens in our house have led the charge . Now the oldest has a job, he has begun to fancy himself in the odd groovy shirt etc. He has even bought 2nd hand ‘retro’ shoes (against my advice) online . We have discussed it in terms of consumer awareness, but also, the lad’s job is in a shop so the topic of possible disappearance of retail jobs did come up. My own thoughts have been that for a while, retailers did not exactly make kids welcome in their spaces (remember the teen repellent music?), the potential for ‘hanging out’ with friends was pretty limited unless they had buckets of money. So now, the kids are ‘hanging out’ online, and have less and less need of the bricks and mortar retailers. They are much happier buying online. There’s no loyalty, no sense of community space. The exception with my daughter is that she likes going to vintage and op shops as they are value for money and more her thing. I think malls have turned people off – I remember as a kid my mum taking us to ‘myers cafeteria’ which was a treat for us as we weren’t well off. But then it was a quiet and comfortable albeit old fashioned space. Now myers seems designed deliberately to make you get confused so you can’t find your way out , a stupid strategy that only makes me more determined not to go in there (and if there is anywhere to have a cup of tea it is plonked in a perfunctory way amongst merchandise). They have trashed any sense of nostalgia I might have had for those trips with Mum. So yeah, I think retail environments were designed with the assumption that consumers could be herded in and milked, but the sense of no community, the anonymity, the repetition of the same retail chains everywhere, and few individual shops with their own character, the lack of service, the feeling that this was not real public space but sham public space, and the overwhelming preponderence of things made from plastic or synthetics… well… they may have damned themselves with this approach. I hope we get back more small local shopkeepers and community spaces. Anybody watch the show on abc about the high street in the uk? It re-enacted the experience of running small shops in different eras, e.g the war years, the 50s and 60s – until finally supermarkets took over.

  18. Occam's Blunt Razor

    @1 – Moz – I worked in my LBS part-time last year and they made money on the servicing and we pushed that as part of our overall strategy. Profit on new bikes was always getting squeezed by other retailers. They were very aware of the competiton form the on-line market. In order to compete the personal advice and service needed to be top notch. At least one LBS went under last year despite the high sales of new bikes and plenty were on credit management with suppliers.

  19. moz

    OBR: yes, sorry, I was a little broad-brush there. Mostly from seeing shops really struggling when they realise that the money from new bikes is not what it was (friends have lost jobs in those shops). Where I worked definitely made money on servicing, but we also had a flow of customers who would buy a new bike elsewhere then bring it in when the seller couldn’t or wouldn’t maintain it. And we’re not talking about KMart here, we’re talking $3000+ bikes. I assume there was a contra-flow of potential customers who we never saw again because of our high pricing.

    Interestingly, we also had a market of people who bought from us because we said “yes, it’s $50 more expensive than down the road. We have proper bike mechanics and we pay them a decent wage to put our bikes together”. Also the high-value customers who came because the workshop was accessible and the mechanics approachable.

  20. John D

    Moz @1: I read somewhere that the average city has enough food for 3 days. I know the local Kenmore Coles supermarket started to run out of fresh food very quickly after floods stopped the trucks. Governments should start asking some hard questions re where essential goods are stored and just how long we can last if there is a widespread crisis.

  21. Chris

    jane @ 16 – I recently started buying clothes online because the price difference is so big now – less than half the cost (even after shipping) so I can afford the occasional dud. And the online grocers are much better at picking fruit and veg than I am, and the higher prices are at least partially offset by time saved and lower travel costs.

    John D – would most people have a fair stash of food at home though? I think I’d last at least a couple of weeks, most likely more but I may have picked up some pantry stocking habits from my parents who lived through civil unrest.

  22. Craig Mc

    A friend in a low-margin retail outfit (a very slick and successful one at that) tells me that Oz Post is losing money on every parcel it delivers. The service’s pricing was built around gobs of letters with the occasional parcel and now the ratios are being reversed.

    If they raise parcel prices, they find themselves squeezed by couriers who don’t have to deal with universal obligation.

    The last leg of on-line fulfilment has been taken for granted in this debate. Effectively on-line retailers are being subsidised by national postal services. Eventually they’ll come cap in hand to the taxpayer, as the US service is continually.

    I sometimes wonder if the UK government has taken this a step further and is intentionally doing this as a sly way of subsidising exports. I can’t explain BookDepository (and now Amazon.co.uk) any other way.

  23. jane

    Robert, I don’t dispute that online retailers are doing well, but they don’t appeal to me in the least. My daughter buys clothes online, but a lot of them don’t fit all that well and I reckon that if she’d tried them on, she wouldn’t have bought them.

    I also want to see the quality of the fabric, the stitching, what the colour choices are and if they suit me. And with sizes so inconsistent, I would still rather pay the extra for something that fits and that I’ll wear, than something I’ll immediately chuck out. Even more important with shoes when you’ve got temperamental feet.

    And I like to choose my fruit and veg myself-there’s nothing so good as smelling the fruit, seeing greengrocery displays and loading up your choices.

    For me it’s the difference between seeing a reproduction of a work of art and seeing the real thing. You can’t beat it. I guess I just like the shopping experience.

  24. Joe

    We buy fresh fruit and vegetables directly from the producers, who have an online shop. Books, clothes etc are also bought online. That leaves us with a weekly trip to the supermarket for dairy products, grains, etc. Sometimes, we go to the local market for apples and stuff. The library draws us into the center of town fairly regularly, as does swimming, music etc. I don’t miss shopping at all. If I could get a decent haircut over the net, I would!

    (Trying the shoes on in the shop and then finding the cheapest on-line is a way to avoid having to send clothes back and forth to get the right fit, jane!)

  25. Chris

    Craig @ 24 – I wonder if China is doing something similar. I don’t understand how they can afford to sell stuff on eBay for $1-$2 including reasonably fast shipping

  26. Salient Green

    @26, “(Trying the shoes on in the shop and then finding the cheapest on-line is a way to avoid having to send clothes back and forth to get the right fit, jane!)”

    I couldn’t do this in good conscience. If most people did this, how long would shops exist? Where would you try on your clothes, shoes, inspect your tools, open the oven door, make warranty claims? Where would your kids, or other people’s kids work?

    I think that at the very least, online sellers should have to collect the GST, at THEIR expense, as Australian retailers have to. If there are still some major closures of Australian retailers then at least there will be a few more jobs going in Customs and Ozpost.

  27. andyc

    salient green @28“I think that at the very least, online sellers should have to collect the GST, at THEIR expense, as Australian retailers have to.”

    Slight confusion there. Some online sellers are Australian, and can offer discounts/diversified inventory through not having the overheads associated with a physical shop. They do collect GST, already, because they have to, as Australian businesses.

    Similarly, overseas vendors collect sales taxes from buyers in their local jurisdictions. For sales by them to Australia, it is up to Australian Customs, whether they think it is worth the expense of charging GST on entry. For low-value items, it really is not worth the paperwork. Some sales tax revenue is lost, but the amount is minor relative to the cumulative markups involved along the normal supply chain.

    If prices are low overseas, and the internet and mail services work, then retailers here can only compete by lowering prices. Many are already underemploying, underpaying and undertraining staff. Moving to lower-rent premises may be feasible for some. But their best hopes are probably excision of parasitic middlemen (“exclusive agents/distributors”, etc) in the supply chain, and dealing with crazy differential pricing issues like that of Moz’s jumpers @8 above. There is no reason on Earth why a given item’s RRP in Oz or NZ should be 2-3 times its RRP in the UK or US (ever compared the various RRP’s on the back of a typical paperback?). That’s just an outdated attempt to exploit an erstwhile isolated captive market, which is now connected and free.

  28. alfred venison

    dear anyone
    there is also some growing buzz, in the folkways, about computer applications that can measure you at your place, for shoes or a suit, say, and then transmit the details to another site which “fits you up” before mailing the suit or shoes to you at your place. i’ve been hanging out for something like this for ages & at the risk of sounding like grandpa simpson, here, i’ll say i remember, like it was yesterday, reading about something like this in a book by buckminster-fuller. i can’t recall the name of book now, and he probably called it the “dymaxion fitting room”, but i reckon bucky was there first. i do recall he claimed it would save on wasted material. 😉
    yours sincerely
    alfred venison

  29. jane

    @28, I couldn’t do that either, SG. As you say you have to open the oven door etc. And there are probably a lot of people who either don’t own a computer or aren’t connected to the internet who rely on retail stores for their clothes, appliances, food etc.

    And from the number of people of all ages I see thronging shopping malls when I have a chance to go to these palaces of consumerism, I don’t think a day out shopping is going to be replaced by online buying anytime soon.

    I should also note that my online shopping daughter, oldest son and his fiance still enjoy going shopping and will never shop online exclusively.

  30. tigtog

    @jane, for a differing perspective – I generally hate shopping except for luxury items when most of the appeal is the tactile/aesthetic elements of the item, in which case it’s much more satisfying to shop in person. But for me such items happen rarely – two or three times a year at most (scents, shoes, fine linen etc).

    For almost everything else I much prefer online retail. I do grocery shopping in person for the reasons you relate above – a reasonable degree of certainly about the items being purchased – but I don’t enjoy it at all. Not even a little bit.

  31. conrad

    “Where would you try on your clothes, shoes, inspect your tools, open the oven door, make warranty claims?”

    At least for clothes, online retailers that run like Zappos in the US. All items come with a free return postage bag so if you don’t like what you buy you can return it with no questions asked (and the prices are slightly more than the cheapest you can find to compensate). I’m surprised there is no retailer in Australia like this that has become big yet. As for tools — it seems to me you can do this stuff cheaply without having to do everything online (Bunnings, for example, seems to be spreading like a virus). I’ve also found some online retailers better for warranty claims than some stores — speaking of bike parts, which almost everyone I know buys overseas because they are half the price, the big internet retailers seem to bend over backwards to take things back with no questions asked.

  32. tssk

    One thing I’ve been confused about is retailers and other lobby groups calling for retail business hours to be deregulated.

    Is this an admission that retail is being hurt by potential consumers who still have jobs having to work nine to twelve hours a day?

    And given the current dire shape of retail, wouldn’t this just mean shops are empty for more hours?

    The other elephant in the room is that due to the massive growth of the past few years loads of people now have enough of what they need and what they want. Basically the monster growth in buying didn’t come from thin air, it was borrowing from future growth.

  33. Emma in Sydney

    I’m another one who absolutely hates shopping in person, and will do just about anything to avoid it, especially in the noise-polluted hellholes known as shopping centres. I buy my meat and vegetables in person from my local butcher and greengrocer (mostly because I walk past their shops every day), and go to Aldi once a month for non-perishable groceries. Otherwise it’s all online. I don’t think I’ve bought Australian clothes in years.

  34. moz

    John [email protected]: 3 days sounds about right. But even muppets probably have a day or two worth at home, and can go another day or two on their fat reserves 🙂 Count me/us in the group who have at least a weeks food squirrelled away. Partly because buy in bulk, but there’s a degree of circularity there – since I’m buying nonperishables a week or so in advance buying bulk makes sense. We also have a gas cylinder/ring partly for the same reason – even if we used it for everything including boiling our drinking water 5kg of LPG (half the 9kg cyl on average) will get us through a week or two without utilities (and the rainwater tanks ditto).

    Craig [email protected]: also sounds slightly plausible, but at the same time costs are very similar between couriers and Auspost for the boxes I ship. If I had an account it’d be a little cheaper, but the main thing with couriers is the ability to ship non-boxes. Probably 1/3 of the items I ship are odd shapes, and couriers will charge me based on how annoying the item is to shift not the maximal dimensions, and that can make an order of magnitude difference in the price.

  35. jane

    @tigtog, the tactile part of shopping is on of the many reasons I prefer the physical aspect of shopping to online. I like going into a shop and seeing an abundance of stock; an invitation to pick items up and feel them.

    I particularly like the feel of good china and glassware; smooth, slippery and shiny. A feast for the eyes and fingers. I even enjoy looking at and handling cooking utensils although I have a visceral hatred of cooking. The sooner we can just take a tablet the better, imo.

  36. Chris

    tssk @ 34

    Is this an admission that retail is being hurt by potential consumers who still have jobs having to work nine to twelve hours a day?

    No, its an awareness that there are lot more people around these days who either through choice or or job don’t want to shop during the 9-6 hours or have better things to do. Also that there are people like me who hate shopping when there are lots of people around. One of the other appealing things about shopping online is not having to deal with people or queues.

  37. akn

    Shopping in Wollibuddha, apart from prime country hung meat at one of the two local butchers, is pretty much non-existent. There is a local IGA but the prices are monstrous. The ‘shopping experience’ of wide, uncluttered streets and people who will stop and yarn is a delight except for the fact that there most of the shops are out of business except for an excellent organic bakery and two or three food coffee shops. Good coffee too. A half hours drive reaches a massive Aldi where dry goods are available; f+v you do yourself or pay too much. All else, from tools (a sheet metal nibbler most recently) to native orchids (we buy and sell) to good quality American pipe tobacco comes via Oz post through online service. No-one needs to but clothes much because it is Wollibuddha and you don’t want to look to flash. Online shopping nails Bunnings’ prices. So, for country towns already boarded up online shopping is a boon but say goodbye to local retail coz it’s over.

  38. Jenny

    I feel no guilt about shopping online for the following two reasons.

    1. I’ve watched my two teenage daughters being treated brutally and paid miserably in a variety of casual work with Mercedes-driving, tax-dodging retailers. The jobs are shitty and only attractive because of a culture that assumes that there must be something wrong with any kid who doesn’t have a job.

    2. The retail sector no longer contributes much to the Australian economy. Essentially they are an inefficient postal service – bringing in products produced elsewhere, only some of which we want. Surely it is better for our terms of trade and hence our economy that we only import the products that we actually want to buy (the online shopping model).

  39. Rococo Liberal

    It is the ability to browse that makes shopping in store a much more rewarding experience than shopping on-line. No matter how many tricks that on-line shopping sites use, they can’t really replace the experience of finding something new out of the the corner of your eye in a shop. Browsing on line is never the same.

    So many times in the past I have discovered a new line of thought or interest from browsing in a book shop

    Of course what we all do is browse in the shop and then come home and buy the goods on-line. But if we keep doing that will the shops close? I suggest not. Smart shops will re-invent themselves as showrooms for goods which the punter can buy on-line, either using an in-store terminal or ordering from home.

  40. The Lorax

    It seems everyone is happy about the demise of bricks and mortar retail — except the retailers of course who still employ more than a million Australians.

    Australia doesn’t make anything, we don’t export anything (apart from dirt), and our fastest growing domestic employer is health and welfare. Now it seems we can’t even sell imported product to each other — that’s been outsourced overseas like everything else.

    The Australian economy is literally eating itself alive, and the funny thing is, most people are applauding the process.

    The economists tell us we’ll be fine because we’re a post-industrial economy that’s 70% services — domestic services mind you, services exports are in decline like everything else.

    The funny thing is, the entire edifice is propped up by that most basic of economic activities — resource extraction — hardly a defining characteristic a post-industrial economy.

    Meanwhile we’re told that China’s manic investment boom will run for decades despite the lessons of history. Japan 1989? Apparently its different this time.

  41. paul of. albury

    Rococo, the sad thing is that despite the tyranny of distance, the service is often better (more personal, more helpful, more informed, far more accomodating) online than in brick and mortar shops.

    the other interesting thing is that increasingly the crossover is the other way – people research products online and then (try to) buy them locally. However, some retailers resent customers who know more about the products than they do, especially if they don’t want the superseded product the retailer wants to sell.

  42. The Lorax

    Robert @ 43:

    Japan did not have a stupendous investment and real estate bubble in 1959. China’s bubble is much larger and is happening much earlier than Japan’s, but it is most definitely a bubble.

    History doesn’t repeat but it does rhyme.

    India is smaller than China both in terms of area and population. Besides, its not India that’s driving Australia’s TOT. Its all about China and its all about iron ore.