Another fatal blow for bricks and mortar?

AIMIA bricksAn extremely successful wholesaler told me recently that if he were able to put the clock back 15 years, he would not be supplying bricks and mortar (B&M) retailers.

Reason? It is much easier and more profitable to supply online retailers (OLR).

And more than that. The OLR are becoming increasingly sophisticated, some having teams of software engineers on their payroll. The B&M retailers are therefore unable to compete and are falling further and further behind. In fact the systems and processes that the OLR are developing is the intellectual property that gives them the edge on competitors. They don’t want to own inventory. They don’t want a warehouse. They don’t want to worry about freight. They want to leave all that and more to their suppliers who must ship direct to the customer. The OLR can effectively sit in a high rise building in Sydney, Melbourne or on the moon. They don’t need to ever buy or see merchandise. They are merchandise brokers.  They negotiate the deal which invariably means they have no risk. The suppliers are falling over themselves to get a product accepted by the OLR and if they are partnering with a good OLR, they know that the stock they will need to purchase, will fly out. Sure they need to take a tight margin but volume is what it is all about. And the suppliers better get the logistics right starting with the packaging and including the freight charges and service.

So what can B&M retailers do about it?  Well the likes of Gerry Harvey simply dismiss the threat as he did on TV last night talking about Amazon. A message for Gerry who dismissed OLR for years before accepting and belatedly getting on the bandwagon. Gerry – you have had a wonderful career. It is time to hang up your gloves and focus on your horse racing and hemp farming.

Dick Smith is more realistic and takes Amazon seriously.

But back to the question. What can B&M retailers do to fight OLR?

The only strategy is to take the OLR head on.

Rather than treating the online division within your B&M company as a necessary evil with a handful of staff running the department, there needs to be a paradigm shift in attitude. B&M need to develop their on line capabilities by investing (a lot of) money. And if they don’t they will rue the day. Gerry, any hot tips?

Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at [email protected] or 0414 631 702

Comments

3 comments

  1. Peter posted on July 26, 2017

    Never in my life have I read so much hyperbolic nonsense. Product that can be sourced direct from suppliers only applies to a slither of the retail spend pie. People are carrying on like signs of armageddon for B&M retailers. I see the exact opposite occurring once the "would be if could be" faux retailers exit stage right, which is inevitable because they have built their offer on a bed of sand and lacked relevance or offered REAL value. Any B&M retailer not at the forefront of competing on the OLR scene is foolish , but only as an insurance policy to be in the game, but they shouldn't hold their breath. The meek may inherit the earth, but they certainly will not inherit the mineral rights. reply

    • Tracey posted on August 1, 2017

      100% correct reply

  2. Tracey posted on August 1, 2017

    Hmmm, i agree in some aspects. It depends on what bricks and mortar type businesses you mean. Some bricks and mortar businesses like ours requires customer in store assistance and advice and product viewing with a touch and feel option. Most of it is impossible to sell online. In saying this we have an online business....it's fallen off the earth somewhere over the last few years, and yes we have spent money on it. By the way...you said you need to spend "a lot of money"? How much is a lot? Maybe you could give out some percentages per $ you should spend and what return you should expect? Personally I think the bricks and mortar stores have an added advantage since we are humans who like speaking with other humans and actually know what we are selling and what we are talking about! You should be pushing for the bricks and mortar retailer because one day you won't have any specialised people left in retail (or family run businesses). I think you should respect Gerry Harvey too. A very successful business person who has had the fundamentals right and employed thousands of people over the years. You might be able to learn something from him......if you listen reply

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