Shop Local has taken on a new meaning. It is now shop local in Australia, pay more and eschew online shopping or your favourite bricks and mortar stores will be gone.
Imagine going to your mall, and it is missing Myer, DJs, Target, Harvey Norman, JB Hi-Fi and the hoardings are up over almost every small business. Only Coles, Woolworths, Aldi, liquor retailers, dollar shops and nail and hair salons survived.
The scenario is playing out right now with online shopping severely eroding retailer’s turnover. Retailers are being forced into a perpetual state of summer, autumn, winter, spring, and whatever sales to encourage traffic. Discounting serves to prolong the inevitable. Traditional bricks and mortar retailers – shop local – are an endangered species.
But it is so much cheaper online
Even with the 10% GST applied to international online shopping from 1 July the price differences are still too great to ignore.
I recently bought 10 rechargeable 5,800mAh 18650 lithium-ion batteries and a charger via eBay for $20 delivered including post from China in seven days. The best local price was $235 for a lower mAh battery. Go figure. eBay is great.
Why are Aussie bricks and mortar – shop local – stores so much more expensive?
Let’s take Gerry Harvey his Hardly Normal empire. It employs a huge number of local staff. Harvey Norman (and Domayne, Joyce Mayne, Rebel Sports and other Harvey aligned businesses like the Brisco Group, Magic Millions horse breeding and cucumber growing) also support community groups and newspapers (sometimes only their advertising keeps them going).
That institution (and we are not singling it out – it is as good an example as any) has costs. Those include premises rent, wages, local warehousing, distribution, marketing, statutory costs, and of course profit. But it does mean that whatever an item costs the company to buy, it probably sells between three and four times that at retail.
Even if you are a lean operation like JB Hi-Fi/Good Guys (warehouse style that relies on volume sales) or a small locally owned corner store its hard to sell for pretty much less than two-to-three times your buy price and stay afloat.
What is the answer?
Global Data Research has some interesting observations and answers.
Adopt the Kmart model where almost 100% of its items are house brands.
Kmart designs products to a price and quality. Overseas factories make the product. For example, it has a toaster that sells for $7.50. The real landed cost is under $2.
What this means is that the major brands and their inherent quality and advanced features suffer. A $7.50 toaster does as good a job as a $75 branded one. You can buy ten of the former if they don’t last as long. Kmart is thriving.
Now apply that to clothes, shoes, Manchester and more. We are becoming a nation of Reject Shoppers.
By-the-way sister shop Target which sells ‘brands’ can’t make it work and is closing 20% or more of its outlets. In the UK traditions like Macy’s are closing stores.
E-commerce is eating bricks and mortar’s lunch
Interestingly Amazon has just been awarded Global Data’s Customer Satisfaction awards, including the most prestigious Best Retailer category, as shoppers vote for its great prices, service and convenience. It also picked up the Best Online Pureplay (no physical stores) and Best electrical retailer. It came in third as best Footwear retailer.