Battle for best online retailer

THE battle for the title of Australia's top online retailer has come down to a fight between the two heavyweights of the local e-tail sector. Both sell discount goods, both are growing rapidly – and both claim they hold the top position.

In SmartCompany's second annual list of the country's biggest online retailers, department store DealsDirect and one-product-a-day destination Catch of the Day are clearly Australia's dominant online-only retailers.

Separating the two is a difficult task. Both cite Hitwise analytics figures putting them at the top, and both say they are the most successful online retailer in the country. DealsDirect claims warehouse space of 40,000 square metres with 120 employees, while Catch of the Day claims 4,000 square metres of space and 40 staff.

According to Nielsen figures, DealsDirect has the biggest audience, but Hitwise data puts Catch of the Day in the top spot. DealsDirect has about $100 million in revenue, while Catch of the Day has grown from $32 million in 2008-09 to about $60 million in the last year.

But while these fierce rivals again head the list, there are signs the Australian online market is changing. While last year the list was dominated by smaller, independent players, the trend over the last 12 months has seen larger brands such as JB Hi-Fi and Telstra move into the top of the market.

This could be an initial sign that bigger Australian stores are starting to embrace online as an alternative to bricks-and-mortar shopping.

There's no denying that online retail is continuing to grow, with data from IBISWorld showing revenue from e-commerce amounted to $18.6 billion in 2009 with 3.6% growth.

While online sales in Australia still only account for about 3% of total retail sales, compared to about 7% in the US and Britain, Gabby Leibovich, founder and chief executive of the Catch of the Day, says the online retail market continues to mature.

"The obvious trend is that online retail is on the way up, and that's becoming more and more prominent. Obviously more and more people are saying buying online isn't crazy anymore. But we still have a fair way to go, when it comes to being like the US or Britain."

Paul Greenberg, founder of online department store DealsDirect, says there is good evidence the e-commerce market is taking over.

"There is anecdotal evidence that retail shopping in general online is growing, and the space is really hotting up. Through our own surveys and external research, we think online retailing, while new, is getting its act together."

"I think levels of service are improving, and really, it's just the survival of the fittest. I've seen many operators wiped out already because margins are so low. If you don't have a good operational base you aren't going to make it, so smaller businesses fall away and our competitors are getting bigger."

While the success of the take-up of online retailing may be hotly debated, these businesses are clearly taking advantage of the trend. And there's a common thread between them - bargains. Mark Higginson, analytics director for Nielsen Online, says the most popular sites are those offering value over a bricks-and-mortar offering.

"The thread here is bargains and aggregators. These sites are getting consumers the best price possible, which is the underlying offering of eBay as well. If you go to any of these sites you'll probably get a better deal than a physical store."

"It's also about availability and how prepared you are to wait for something. If you can't find something locally, or for a good price, then you're likely to go online. Retailing online is extremely competitive and it's really all about the benefit you can offer customers, whether geographically or financially."

On the other hand, there are those who believe online retailing is just a small component of the overall picture. JB Hi-FI outgoing chief executive Richard Uechtritz says his company's online sales are just a small percentage of overall revenue, and as a result, the company will continue to focus the majority of its efforts bricks-and-mortar locations.

"We will invest in online as much as we see a return on our investment, and at this stage a lot of people research online but very few people actually buy online. We think we are sitting in a pretty good area now. We are mindful of the fact it is an alternative, but the sales aren't huge."

Mark Higginson says many retailers shouldn't rely on e-commerce altogether.

"The trend doesn't seem to be changing hugely. From the data we have, eBay is still the top American site and it's been that way for quite awhile. I'm afraid overall it's a very static category."

Uechtritz says the hesitant take-up of online retailing in Australia is due to several factors, including the size of Australia's geographic stretch and a lack of a catalogue culture – often quoted as part of the success of online retailing in the US.

"It all goes back to the culture of the country, and in this aspect we've never really had a mail-order background. Whereas in the US, they've had mail-order for some time and have that culture."

"The urbanisation in Australia is also a lot more prominent than it is in other countries, our population is spread out so we don't have the infrastructure service and competitive pricing like they do in the US. Whereas here, many options are within a short drive of residents in the country as we have limited capital cities."

But some say the answer isn't necessarily one or the other.

Brian Walker, chief executive of Retail Doctor, says successful retailers need to operate offline, online and in social networking, in order to make the most of several different revenue streams.

"I think it's incumbent on online retailers to have a multi-channel distribution strategy, which in other words means they need to have a physical presence, an online presence and embrace social media."

Retailing is retailing, according to Walker, and it doesn't matter whether that product is sold online or in a store. If they have a good competitive proposition offline, then it will apply online as well.

"Consider a place like JCPenney in the US, their average spend is well up 25% now by having integrated a multichannel offer which incorporates physical stores, an online offer, a catalogue and now a growing social media. Their customers can be in touch with them through any number of points."

Higginson says the future of online retailing will depend on whether they can compete with offline stores, not other online offerings.

"It all depends on getting the best price possible, and that is what will hold up retailers, offline or online. Consumers online certainly go after the whole price aspect of shopping. Retailing is competitive, and the more value you can offer the better."

But Walker also says retailers wanting to survive online need to take note of one of the biggest trends over the past few years – social networking.

The success of Facebook and Twitter has seen hundreds of companies gain sales and customers through the use of fan pages, conversation-based marketing and customer service.

Read more...

Finding, winning and keeping customers



Warwick dad helped stop the fighting in East Timor

Warwick dad helped stop the fighting in East Timor

Proud father watches on as his daughter follows in his footsteps

The journey from small-town kid to military hero

The journey from small-town kid to military hero

Decorated Warwick soldier 'the best Warwick has ever seen'.

DEVASTATED: Tom Potts robbed of his prized possession

DEVASTATED: Tom Potts robbed of his prized possession

Prized possession stolen from devastated Endeavour employee

Local Partners