“Although disruption will no doubt occur in parts of the retail landscape, retail Armageddon didn’t occur on the morning of Tuesday 5th December with the expanded domestic Amazon website going live.”
It is Christmas and the silly season’s shopping rush is well underway. Despite Amazon going live before Christmas it isn’t likely to make a significant impact on traditional bricks & mortar retail…not yet anyway.
The challenge for Amazon is that we are human. As such, we have habits that are hard to break. We enjoy the experience of visiting preferred shopping destinations and some of us have an unquestioning loyalty to our brands.
For the reason of engagement and experience, landlords here have been outlaying capital expenditure on improving and expanding their centres’ Food & Beverage and Entertainment provisions. With LEGOLAND Discovery Centers across North America, Europe and Asia, it’s not accidental that the only Australian offering is in our largest shopping centre in Melbourne and not on the Gold Coast with the customary theme parks.
Undoubtedly online retailing has become part of the fabric of our retail environment. It has certainly opened up opportunities for the secondhand retail market, for goods traditionally hard to find such as collectables and other vintage items. Online retailing also provides a research capability, to peruse items in a world where most of us are time poor. Then there are items preferably bought online such as books, movies, flowers…and socks. The online presence is essentially complimenting an ability to purchase, not competing.
The stats tend to support the theory. According to the NAB Online Retail Sales Index, the heady double digit year on year growth rates in excess of 30% when the index began in 2011, having stabilised at circa 8% growth during 2017. ABS data suggests that online retail has settled to only 7 to 8% of the bricks and mortar retail trade.
Although complimenting for the most part, retailers still have to adapt. With purchases available online, the need to expand the number of bricks and mortar retail shops has been somewhat eroded. Experiential retail has also become a more important part of the sell. Serviced based retailing, although not vulnerable to online offering, should at least embrace an online presence for engagement and reservations.
Retailing has had its headwinds long before Amazon launch. The failure of retailers to adapt so far has seen many fail with familiar brands disappearing in recent years. With or without Amazon, the retail sector will continue to be challenged in an economic environment of slow wage growth and rising household debt. The full effect of Amazon’s arrival however will not be known for some time. Initially at least, the difficulties of logistics in Amazon’s free delivery offering may suggest that local bricks and mortar stores will be okay for as long as their products are “in stock” for Christmas.