While Australia was cushioned against the fuller effects of the recent global financial crisis, consumer activity levels have now dropped for traditional retail businesses, following the end of stimulus packages. With increasing interest rates and an upward savings trend for most households, the outlook for retail businesses is gloomy.
While consumer confidence appears to be recovering, domestic spending has not yet reflected this optimism. In the short term, consumers will limit or delay purchases or search for discounts and bargains.
Traditional buying experiences are changing as consumers move from luxury to discount and back depending on the product and price; online sales are steadily increasing, forcing new entries into this market; buyers are expecting higher levels of service and giant global chains are increasing their dominance over smaller brands.
But within these changes come opportunities for smarter businesses which can control their operational and staff costs and respond to the rapid changes in consumer demand. Companies must heighten their consumer, shopper and category strategies to devise winning brand, innovation, and go-to-market strategies.
Overseas and online businesses are trialing personalised promotions, based on previous buying patterns or as an incentive. This allows businesses to vary discounts within stores and reward repeat customers.
To do this effectively, technology is critical. Research has shown that Australians are increasingly using two or more technologies to shop, such as checking prices on mobile devices during the shopping process or purchasing online.
The long-term winners will be retail businesses that can offer consumers value and personalisation. They can also increase margins by improving operating performance and increasing the effectiveness and efficiencies of the each of the key elements of their supply chain. An objective, guiding hand is needed to make strategic change.
Consumer vagaries and stock overruns are chronic problems that exist for many retail companies, leading to poor profitability, loss of market share and reputation, increased turnover of management and workforce, lower productivity, and higher costs. With tight margins, the difference between success and failure may only be one poor season.
Much of what applies to the retail and wholesale sector applies equally to the business sector. Customers are becoming more demanding in their behaviour and needs, markets are fragmenting and companies that can adapt more quickly to meet these challenges will be the winners.
Hand in hand with these developments is the real threat of rapid industry-based changes giving rise to new business models in virtually every kind of business, models that will increasingly deliver superior consumer experiences in an expanding digital environment.
Innovation is the crucial differentiator to deeper insights into consumer needs, and this means a focus on hidden complexity, streamlining platforms to improve performance, reducing costs, and making supply chains and extended networks more efficient and responsive to change. Cloud-based computing, cross platform offerings and next generation tools to drive greater collaboration are at the very centre of any discussion to create value.
Oakton’s retail and business consulting experience
Oakton has, for over twenty years advised on strategic issues such as performance improvement, operating efficiencies, cost management and reduction and organisational effectiveness and completed many projects with retail, wholesale and business clients, including many of the country’s best known and most successful businesses.
In the last 12 months we’ve created tangible value for Myer and David Jones.