09 Mar The Australian Retail Apocalypse
With 170 chain stores already marked for closure only two months into 2020, the appropriately dubbed ‘Australian Retail Apocalypse’ is upon us.
When an individual retailer goes under, analysts will usually blame the business model or issues within management. But when 170 stores in Australia alone, are littering the retail space with their spent carcasses, who is to blame?
As the list of casualties gets longer, it’s pretty obvious that it isn’t just one bad apple that is rotten, but the bucket and water it is floating in.
Stores like Espirit, GAP Australia, Forever 21 and Topshop have been early casualties. But more recently it was the popular game store, EB Games who announced it would be closing the doors on 19 of its stores across Australia. Bardot called it a day on their entire 58 storefronts. Curious Plant (National Geographic) announced it could not find a buyer for its brand and therefore was entering receivership. Or even more recently, Collette by Collette entering voluntary administration.
Admittedly, when I was going through the list I didn’t see anything that I did not expect. Harrison Scarfe, who the fuck is that? I swear these are stores I have either never shopped at or haven’t stepped a foot in, in years. Except for EB Games, this is a closure that genuinely upsets me.
But, there are even more walking wounded, retailers who are literally hobbling around on one bunged up leg. Myer, who has been reporting a record decline in sales over the past few years has announced a new concept which they will introduce to combat this lethal landscape. This major retailer will only hold two sales per year and will, in theory, not fall into the trap of 40-60% off sales running throughout. But I think for Myer it is too late. I feel this restructuring will be severe, perhaps even fatal.
Traditional retailers around the world are grappling with the question, how do we survive? And in Australia specifically, there are a few things that have compounded and led to the demise of some of their seemingly strongest warriors.
A Changing Retail Landscape
First of all, while shoppers may say that they prefer the experience of going to a store and physically shopping, there’s clearly a discrepancy between what people say they prefer and how people actually act. But, clearly, people are putting more of their purchases through online, because it’s quick, it’s convenient and brands that don’t really have a point of difference with their products are at risk of their customers shopping around looking for a lower price on the same item. I am guilty of this.
The Cheap Sh!t Takeover
Fashion retailers are the hardest hit, with the invention of ‘fast fashion’ being a definite attributor to the crisis. And here is my very scientific calculation which I hope sheds some light on what happened here. Cheap stores can buy and sell cheap shit, for cheap. Clothes and other imported fashion goods are created in developing countries, using borderline slave labor for minuscule prices to the retailer. Their economies of scale are ridiculous and it is squeezing the middlemen out.
The Never-Ending Sale
For those trying to compete, sales spell trouble.
There is a bit of a sense that it is just all too hard. Instead of sourcing better products, or investing in the brand experience or better staff – retailers just discount. This is a lazy way to respond to competition. Unfortunately for many retailers that exist within this middle market, sales are becoming the new normal and customers are becoming desensitized towards paying the full price. So people simply will not shop there. Consumer choice is too great. And their point of difference is too small.
Despite the Retail Apocalypse - it's not all bad
This shift in shopping is not all doom and gloom. Amidst chaos, there is always opportunity. In fact, there are a number of success stories, including sportswear behemoth Nike. A brand that has clued onto the fact that today’s retail landscape demands more than just ‘pushing out more products.’
While they do push out plenty of product – there is demand- but this is largely because they are pitching themselves as a partner on the ever-winding road to achievement. They offer so much more than the brick and mortar store, they host running clubs, fitness apps, and software that enhances the Nike apparel. They sell more hardware because of their use of software. And it is genius.
JB HI-FI is also thriving. The electronics superstore reported its total revenue hit $4 billion, up 3.9 percent in 2019, and an increase of almost $2 billion since 2016.
One of the key differences with JB HI-FI appears to be the staff. Why? They seem to all be very passionate about what they are doing and are completely clued up on their area. My partner and I went in there the other day to buy a new computer screen and we spent about 15 minutes with a young man who couldn’t tell us enough about this curved gamer screen.
Australian Retail Apocalypse - Final Thoughts
Stores that are able to deliver a fantastic experience seem to be, shall we say, playing the fiddle while Rome burns. But with all of this disruption, the opportunity for retailers does not make the retail apocalypse any less painful for those who were given the short end of the stick.
Retail as a whole will never disappear. This pressure will only give retailers the opportunity to innovate and capture their own slice of the pie while competition is scarce. After all, retail has navigated other apocalyptic shifts before. The department store was once an exciting new innovation, now it is a relic.
As always, I am interested in your opinion and take on things! Leave me a message or send through an email 🙂