Online-savvy shoppers and sophisticated use of technology by competitors is turning up the heat on Australia’s stores. Retailers must ready their own technical systems to adapt and thrive in this transformative market.

Challenged by changing customer expectations, competition from new players and customer-centric online/offline models, retailers have raced to compete with online ordering, aggressive price matching policies and Omni-channel loyalty programs.

Online retail is devastating the United States market, where an expected ‘retail apocalypse’ (1) could have worldwide repercussions as lower foot traffic drives big-name chains to reduce floor space and default on billion-dollar loans. The headline grabbing bankruptcies of big-name US retailers Toys ‘R’ Us, Payless ShoeSource, Sports Authority and RadioShack show just how significant are the changes underway in that country’s retail industry. In Australia, failed efforts by overseas retail brands Forever 21, Topshop, and Gap show the difficulties of gaining traction in a tough competitive market.

Today’s online-savvy customers know what they want – and so, with the Christmas shopping rush gearing up and online behemoth set to shake up the market, successful retailers must use both online and offline channels to deliver it. Shipping has been a natural first target, with Myer, Target, Cotton On, Booktopia and dozens more brands joining Australia Post’s Shipster program[2] to offer free shipping on many items. And online retailers like Kogan[3] and[4] are using free shipping to counter buyers’ hesitation about shopping online.

Online sales in Australia are a fraction of the total retail market – but with foot traffic through major stores down 4.4 percent over last year5], retailers must stop viewing the Internet as a competitor and see it as a crucial way of maintaining customer relationships. Clothing retailers, for example, lean heavily on loyalty programs to better market to their core female demographic. US department store Neiman Marcus has installed Bluetooth beacons in its stores[6] to signal loyalty apps on customers’ smartphones as they walk in and around the shops. Integration with online stores lets the beacons direct customers towards products they were looking at online, and summon salespeople to help loyal customers.

Retail has always been competitive, but the normalisation of online commerce has today’s retailers working harder than ever. Here are five key things to know about today’s retail market:

  • Online shopping growing but physical stores still dominant channel
    Online sales in Australia grew 6 percent in the year to September 2017, to be worth $23.4 billion, while small retailers saw sales decline by 0.1 percent – outpacing large retailers[7]. This was 7.5 percent of Australia’s $310b total retail market[8], or 16.6 percent of the $141.3b non-food retail market[9].
  • Fewer store visits
    ShopperTrak’s Australian footfall traffic for September 2017 was down 6% year-on-year[10], continuing a long run of monthly year-on-year drops.
  • Women make up 75 percent of all retail purchases
    This is within Australia[11] with clothing the fastest-growing category of spending[12].
  • Smartphones are an integral part of shopping in-store
    Some 90 percent of consumers use a mobile device while they are shopping[13] for tasks like price comparisons, researching products, and reading online reviews. 20 percent of Australian 18-to-34-year-olds also say they have bought something on their phone while standing in the shop. And in one survey, 35 percent of consumers said they would use their mobiles as their main purchasing tool[14]. Yet just 51 percent of business sites are optimised for mobiles[15]. Retailers must make sure their Web site is mobile-friendly and enhances the in-store experience, rather than trying to replace it.
  • Experiences a growing category
    Customers want experiences, not stuff alone – and they’re buying experiences three times as frequently. This ‘lean closet’ approach, as Deloitte puts it[16], has driven consumers “away from rampant consumption towards intentional consumption”. Rather than investing in bigger-is-better retail outlets, PricewaterhouseCoopers recommends retailers invest in brand-enhancing showrooms: 59 percent of consumers, after all, said they want “an inviting ambience” when they shop. Online integration will take care of the rest.