From Harris Scarfe and Bardot to Curious Planet and Jeanswest, the retail industry in Australia has experienced a difficult start to 2020, with multiple store closures leading to a so-called ‘retail bloodbath’. But while the closure of big-box retail stores is a cause for concern, driven by a robust, inspiring and innovative independent retailer sector – those with 10 stores or fewer – Australia’s retail industry has the potential to defy the current challenging economic downturn, writes Dave Scheine, Vend managing director APAC.
Indeed, the Black Friday phenomen – long associated with the US – becoming a firm fixture in the Australian shopping calendar, adding a significant boost to the local industry in 2019. What’s more, Vend research found that, on average, our smallest retailers generate more revenue than all comparable markets outside the US. There is clearly, therefore, hope that 2020 and beyond can be a prosperous and empowering period for our retail industry. There’s certainly no suggestion that the challenging environment will disappear overnight, but here are a few trends Australia’s independent retailers have identified to help them successfully navigate any uncertainties ahead.
Retailers across Australia understand that creating a sense of community can help brands set themselves apart and build stronger relationships with their customers. In turn, this drives sales and loyalty. In 2020, communities will be more important than ever before. That’s because retailers across Australia understand that an active and inclusive community can help them build unique, personal relationships with their customers. This, in turn, drives sales and loyalty.
Consider the case of Skate Connection, a skatewear business with stores across Queensland and New South Wales. Run by passionate husband and wife duo Shelley Hedley and Brett Vowles, Skate Connection isn’t just a retailer, but a community. They sponsor aspiring skateboarders, have their own skate team and even a fully equipped skatepark at their Newcastle location. For them, selling skate apparel is only a small part of a business which has bigger goals to make Australia fall in love with skating. Their approach is paying off handsomely, with an engaged and active community helping stimulate business growth. This fantastic retailer has plans to open stores in every city in Australia, and given their approach to community, I wouldn’t bet against them!
Sustainability and a ‘circular’ approach
The circular economy – a system designed around eliminating waste and the continual use of resources through reusing and recycling – will become far more common in the industry. As a concept it has a particular appeal for Australia’s increasingly conscious consumers, and by thinking ‘circular’, businesses can reduce their environmental impact by creating less waste and using up fewer materials. The benefits are not just social and environmental, however, but economic too. According to Accenture, the circular economy could generate $4.5 trillion (USD) in economic output by 2030, while the International Labour Organisation predicts it could generate 18 million jobs in the same period. That’s the longer-term impact globally, but what about those retailers already involved in it on a more local scale today?
Queensland based retailer Biome, for example, is truly ahead of the curve in eco-friendly retail. Since the brand was born in 2003, it has become synonymous with an environmentally friendly lifestyle. Unlike most businesses, Biome’s main focus is not on profit, but instead, sustainability and the health of the planet. The results have been outstanding, with Biome helping customers save over 10 million single-use plastic items from waste, launching Australia’s first zero-waste beauty bar and implementing a TerraCycle recycling program.They were also the first Australian retailer to distribute reusable coffee cups, and now they are considered the nationwide standard. With their revolutionary business model and devotion to sustainability and the circular economy, Biome’s momentum won’t be slowing down any time soon.
To stand out today, retailers have identified that a more involved, memorable and personal experience is becoming increasingly sought after by consumers. For them, the shopping experience is becoming just as important as the products they purchase. It’s about the journey as well as the destination, and retailers such Dresden are prioritising this holistic experience. An eyewear retailer selling sustainably-made glasses in Melbourne, Sydney and Brisbane, Dresden also offers a unique in-store experience – another trend that will resonate in 2020. Unlike other eyewear retailers that sell ready-made products on their shelves, Dresden lets shoppers create their own pair of eyeglasses or sunglasses. That’s because they’re aware that for many shoppers in 2020, experience is everything.
Increased leverage of technology to drive profitability
Technology has changed the way we live, work and shop; and its impact will be felt throughout the retail industry in 2020. While state-of-the-art customer-facing technology like virtual reality and touch screens are becoming more common, retailers are prioritising their backend tools to help in crucial parts of their business, such as inventory management, supply chain, and customer data. Retail tech that enables the “behind the scenes” action is critical to every merchant’s success.
Children’s apparel retailer Petit Bateau, for example, faced the challenge of staying on top of all of their products and needed a retail management system that could handle large-scale inventory and reporting. Petit Bateau has nine sizes for each variant of a garment, so were dealing with thousands of stock keeping units (SKU) every season. Point-of-sale (POS) software helped the retailer manage, track, and stay on top of an inventory of more than 5,000 SKUs. Armed with insights from their software, Petit Bateau can now keep track of stock and make more informed decisions around reordering.
Flexibility will continue to be key when it comes to payments in 2020. While cash and credit cards aren’t going away anytime soon, consumers – particularly millennials and Gen Z – will continue to look for more convenient, flexible ways to make purchases. Mobile payments will increasingly appeal, as will “buy now pay later” solutions such as Afterpay, which allows merchants to receive payments for purchased items upfront, while letting customers pay in regular installments. There is increased awareness from even the largest banks in Australia that alternative payments have a genuine chance to be disruptive. This was further realised by CBA’s $200M investment in Klarna, the Buy Now Pay Later market leader in Europe, and Zip Pay’s recent $1B+ valuation.
Buy now pay later is already a big hit, with 2.9 million customers in Australian and New Zealand taking advantage of Afterpay alone. Between them, Millenials and Gen Z account for three-quarters (75.7%) of buy now pay later use. By providing customers the option to pay over time, they can buy more of what they want while being able to budget. Indeed, we hear from our retailers that in excess of 50% of their online stores are processed through new payment types. We expect Australia’s retailers to increasingly embrace these options – not only online, but in-store as well.
Social media, social shopping
Social media has always played a big part in retail marketing, but expect that to increase even more in the coming months – especially in the form of social shopping. With 79% of Australian consumers using social media, it’s no surprise that it has taken off. And as platforms like Instagram continue to develop their social shopping capabilities, we can expect this trend to accelerate in 2020. Many retailers have already jumped on the trend. TheSuperCool, a South Melbourne-based gift emporium, for instance, regularly publishes shoppable posts on Instagram. Whenever they post an image that features products that TheSuperCool sell, users can simply tap on the product tags to view and purchase them without having to leave Instagram.
While the retail sector does indeed face a period of uncertainty, it’s an industry of innovative businesses doing innovative things to thrive. Those retailers that are able to navigate the current retail struggles, are those who will successfully identify the best ways to appeal to the changing nature of consumer habits. So whether it’s in-store experiences, implementation of technology, community creation or a combination of everything, 2020 could be the year when many of Australia’s dynamic independent retailers see great things happen for their business.