As retailers face existential crisis, agencies need to step up their game
Edge’s Fergus Stoddart compares Australia’s retailers to the rest of the world, and considers why its lagging market means agencies need to step up.
So we see another round of retail Christmas ads. Remarkably similar to last year’s selection. You can’t knock the production values or the festive feel-good factor, but is it another demonstration of the lack of innovation in the retail space?
Tectonic shifts in technology, society and personal attitudes have dramatically changed the way consumers behave. Brands cannot settle because consumers won’t, and no one is more exposed than our retail industry.
There’s no doubt it’s a challenging time and most of our retailers are not well placed to survive and thrive. We all know the top-line story:
Ferg, whilst I agree with parts of this the reality is behaviours haven’t changed as much as everyone makes out.
E-commerce is 7.10% of the mix in Australia and 15% of the mix in the US. Most retailers (bar department stores) have been experiencing growth post-recession.
There are macro-economic declines in retail driven by two factors which are hard for retailers to solve:
– The middle class has less discretionary spend as more income has been invested over longer periods of time in the housing market.
– Digitization of a number of key goods (DVDs are a good example, as are games) have driven down footfall in electronic categories.
Amazon is a specter leaning over everyone, but I do wonder if people pay attention to their numbers. Amazon Prime is an expensive activity for them (the faster they scale and get market share, the more expensive costs per customer become — there is no economy of scale).
And they’re taking hits on most of their business to try and maintain market share.
What no one talks about with Amazon is predatory pricing — they’re almost certainly doing that — to get market share. The only thing propping them up is the extremely profitable AWS business (which negates $900m in losses in e-commerce with about $1.2b in gains).
It’s also why Amazon is revving up the ads model all of a sudden. They’re going to need more revenue to solve this Prime issue in the longer term.
So the future of retail isn’t that radically different…
Still doesn’t mean agencies can’t change, though. Everything can be improved.