Does the arrival of Amazon in Australia spell doom for bricks and mortar stores? If you believe the hype in the media and from big retailers like Harvey Norman and Myers currently, yes. But I disagree- in fact, I believe it presents an opportunity. Here’s why.
Earlier this year Myers announced they had suffered a 80% drop in profits in the last financial year alone. 80%. Interestingly, their sales revenue only fell 1.4% in the same period. So people where still spending the same amount of cash, but their net profit was slashed.
What does that tell you?
If you listen to talk back radio, the reasons given for that drastic change varied from “baby boomers aren’t buying as many clothes” to store closures and not carrying the particular item that people want.
If you look at the numbers though- and the numbers never lie- people are still spending. They spent nearly as much money with the store as last year in fact. It was the PROFIT that took the beating.
So they are still looking to cut costs, get “lean” and “efficient”, and what that means is more store closures and less and less staff on the floors. What that equates to is less convenience and poorer service.
There are two reasons their profits took such a beating. The first-
Lack of Price Integrity.
When was the last time you bought something from Myers that was not on sale? Seriously.
(cue old timer voice…) but when I was a kid, Myers had maybe 3 big sales a year. That’s it. Then, some genius came along and decided that having a rotating schedule of department sales all the time would be a competitive advantage- it would draw the crowds, and people would buy other stuff while they’re there.
But they don’t. Not at full price anyway. Why would you when it’s probably going to be on sale next week and you can get it at half the price? And if they are able to sell at that discount price so often, full price is just taking the piss, isn’t it?
The consumer has lost their trust in Myers’ pricing. The pricing integrity just isn’t there anymore. When I pay full price for something I feel ripped off by the store, and I don’t feel I received value. The discounted items sure, you get a buzz from buying them at such a great price, but the product itself is devalued.
Destroying your price integrity destroys the trust your clients have for you and the value of your products (or services). Plus, if you are only gaining customers because you are the cheapest, it’s a very poor long term strategy. (see previous post about this here)
What does Aunty Anita always say? Never Discount. If you do, do it RARELY and strategically, not just to shift the cash around.
(ask any equine retailer who attends Equitana- every one who goes there is looking for bargains, so you have to discount, which is fine. But it means that there are 50,000 potential clients who are saving their coins in the lead up to the event, so there’s usually a hefty sales lull in the 4-6 weeks prior.)
The second thing they did wrong was-
Ignore the Value in Talking to (and listening to) People.
The three competitive advantages that bricks and mortar stores have over online retailers is:
- Immediacy- see it, buy it, take it home now.
- Tactile experience- feel it, play with it, try it on, listen to it.
- Customer service- ask questions, get help, be guided and sold to.
Not only have they destroyed their customer’s trust in them by constantly discounting, they have also annoyed their customers by forgetting about the customer experience.
The last three times I visited a Myers store I felt like I was walking through a ghost town, not once was I greeted, when I was sorting through racks looking for the right size, not once was help offered, no one checked on me in the changerooms. When I found the right item and was ready to buy, I had to look to find someone to take my money so I could leave the store. I left feeling frustrated, unloved and uncared for. I was simply another number, another $50 through the till for the day, and nothing else.
I don’t know about you, but every time I visit Myers now I am reminded how much I prefer online shopping.
Sure, you have to wait, things get stuck with Aussie post, sometimes things are the wrong size and you have to send them back, but more often than not I get better customer service from an online store than I do from a bricks and mortar one.
And guys, that’s a problem. When Amazon can solve the immediacy concern by same day deliveries and solve the concern about not trying something out first with easy returns, the only thing you have left to compete on is customer experience.
So here’s the thing- this is a MASSIVE opportunity.
Customer service and the customer experience (and as part of that, the sales process) is dire here in Australia.
If you can change that in your business, if you can put the customer experience at the forefront of everything you do, if you can make your sales process as enjoyable as a long lunch with a bottle of French Rose, if you can truly help your staff to provide helpful, attentive and caring customer service, you have got this in the bag.
Amazon is a wake up call, sure. But it’s been a long time coming, and the big players just haven’t been listening. It will be interesting to see how this plays out for them.
For you guys- I know you’re already looking at your touch points and your processes to see how you can improve and how you can make your customers and clients feel like the most important people in the world.