Customers are still spending, so why are retailers closing their doors?

BY Australian Retailers Association
01 May 2019

Customer spending in Australia increased to 261905 AUD million in the last quarter of 2018, and has actually continued to rise since 2016¹, and yet we continue to learn of another retailer closing its doors and entering into administration.

Australia Consumer Spending


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Last year alone, we saw the demise of some of Australia’s well known brands, including Toys R Us, Esprit, Ed Harry and Shoes of Prey, to name a few.

We recognise that retail is tough, with high labour costs and ever increasing rent. Not to mention the highly competitive nature, now with the added threat of digital and e-commerce enabling global competition access to Australian customers wallets.

Can retailers fight their way to sustainable growth? Here we examine why retailers are failing, and share some thoughts on how we believe they can succeed, even in a highly competitive market.

Keeping up with the customer

As customer expectations continue to rise, brands have a real challenge in keeping up. This is having a chain reaction on the relevance of their value proposition. Retailers no longer know what their customers really want or what they value, so they try to be for everyone, when in reality that is just not possible.

They’ve geared their business for network growth and customer acquisition, which is not sustainable for customer growth. They aren’t sure who their profitable customers are - the ones they should be actively targeting. Instead, they have trained customers to expect a sale or discount, however, not every customer is price sensitive.

There is also the challenge of understanding the generational effect. You won’t be surprised to hear that 55% of millennial's use their mobile phone to shop online², however it may surprise you that 1 in 2 millennial's actually still prefer to shop at shopping malls/in-store.

Retailers need to be thinking about how they bridge the gap between online and in-store. E-commerce and retail are no longer separate, they are one in the same.

Digital a pressure, but not an excuse

Digital makes it a lot easier for customers to shop around. Australian retailers shouldn’t be focusing solely on the brands posing a national threat, but also brands across the pond, on an international scale.

Yes, this adds additional pressure to Australian retailers, but don’t bow down to this pressure by simply lowering your prices to buy customers with discounts, assuming they’ll automatically spend more the next time they shop with you (if they do come back). Think about how you can connect the online and in-store experience. You don’t necessarily need to invest in the latest app and digital technologies - understand who your customers really are in order to effectively use tools such as marketing automation platforms .

We haven’t even touched on the impact of social media. Social shopping is on the rise. Instagram has just launched a checkout functionality, which is a reflection of the growth of the retail omni-channel experience.

Retailers should be considering how they use social to build customer relationships, not just through sales, but also through post-purchase and after care support. Don’t underestimate the impact of the human element on your digital channels. Yes, most people love to be self-sufficient when using digital, however they also like to know they can access a real person when something goes wrong.

How can a retailer grow the right way?

  • Stop prioritising acquisition

Find out who your most profitable customers are and look after them. Deliver the right value for the right customer.

  • Don’t become discount led

A good example of this is department store Myer, they have actually started seeing better results since they stopped being price-focused and started focusing on the actual customer experience³.

  • Embrace omni-channel

Don’t treat your channels as separate communication lines. No matter how a customer contacts you, you need to all have access to the same information. If a customer complains via social media, then calls the contact centre - the agent should know immediately what the complaint was and the resolution strategy.

  • Don’t open new stores if the existing ones aren’t sustainable

Some retailers put scalability above sustainability. Before even considering opening a new store, you need to be sure your existing stores are performing and that you truly understand your existing customers needs, wants and desires - and ultimately how to drive them back to repurchase.

  • Employee retention

Everyone always talks about the customer experience, yet the employee experience is actually more important. Great front line staff can really make a difference to your business. Look after your people, and they will look after your customers.

We’ve established that retail is tough, for a number of reasons. Customer retention is vital to succeed in today’s market.Retailers should understand their existing customers in order to influence future behaviour.Segment your customers, and identify the customers who can help you achieve business growth.It’s not all about price, but your point of difference - focus on the path to re-purchase by continuing the conversation; recognise, research, reward and remind your customers.

Customology helps businesses grow by understanding their customers to keep them coming back. Contact a customologist today on 07 3902 7700 or hi@customology.com.au for more information on how your brand can identify the customer groups who can add real value to your business and drive customer loyalty.

¹ ABS

² Retail Doctor Group

³ Inside Retail

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ABOUT THE AUTHOR

Australian Retailers Association

Founded in 1903, the Australian Retailers Association (ARA) is Australia’s largest retail association representing Australia’s $310 billion sector, which employs more than 1.2 million people. As the retail industry’s peak representative body, the ARA works to ensure retail success by informing, protecting, advocating, educating and saving money for its 7,500 independent and national retail members throughout Australia. For more information, visit www.retail.org.au or call 1300 368 041.

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