For customers and merchants alike, it’s an intriguing time to be in retail in Australia. We’re bombarded with tales of woe, such as retail sales seeing their biggest fall in four-and-a-half years, plunging 0.6 per cent in August and not moving in September, while the NAB Cashless Retail Sales Index released last month shows a slowdown in December following a strong November.
However, it seems shoppers can be stirred into activity, with Fairfax reporting Aussies pumped $200M-plus into Black Friday sales. Moreover, the Toys R Us demise along with recent underwhelming results from Walmart and Myer makes for some interesting industry dynamics, locally and abroad.
But the elephant in the room, whilst long awaited, has just arrived. So, like a lot of other Australians, we at Digital Transformation Scores (DTS) were hitting refresh on our browser for the launch of Amazon in Australia! Which-50 reports that Amazon will sign up 50,000 merchants by year’s end. At that scale, the global powerhouse will definitely shake thinks up.
It seems that the spectre of Amazon is driving the retail market in Australia to change or, maybe this flurry of activity is just a coincidence? Perhaps both? At the end of last year, we saw a range of strategies unleashed by Australian retailers in the lead up to Christmas. JB Hi-Fi is now providing three-hour rushed courier delivery for customers in Sydney, Melbourne, Canberra, Brisbane, Perth and Adelaide who just need their items now. David Jones, which has already seen the benefits of more active and targeted customer engagement, is now reportedly considering the ability to price match to give it a competitive advantage.
So is all of this activity necessary? At DTS we’ve been tracking the Australian retail industry and found it was already undergoing transformation prior to Amazon’s arrival. Although, there is still a lot of progress to be made.
Using the DTS methodology, one of the key dimensions for digital transformation is People, Culture and Structure. This relates to the expertise and diversity of employees up to board level, as well as the investments and incentives to drive digital transformation. In reviewing Australian retailers, we found the sector generally scores highly for strong leadership and digital advocacy in key roles but the level of transformational maturity differs radically.
Key highlights of our analysis of the sector include:
- Digital Competency and Expertise and Integration of Digital Roles can now be seen across most major retailers. Whilst the results of this hiring are starting to be seen, there is a lot of work to be done in the CRM space (an email a day full of bargains and things I just purchased won’t cut it in 2018) and omni-channel and mobile-first still lags behind.
- Across the sector all organisations are investing in digital but in terms of reach and results, there is a lot of work to be done in the Innovation Investment sub-dimension. Retailers could take lessons from the banking sector where organisations are investing in digital hubs and incubators, co-working spaces and supporting fintechs. For retailers and shopping mall owners we’d suggest that CBA’s investments in AI technologies make for interesting watching.
- Interestingly, boards comprised not just of career retail executives are increasingly running Australian retailers. We are seeing the addition of board members with the career diversity that we would expect to see for a sector undergoing some — and about to undergo a lot more — transformation. This best practice is aligned with the success experienced in financial services with the likes of Alison Deans on the Westpac board. She has held high-profile roles as CEO of eBay Australia and worked at investment firm eCorp.
At a macro level we’re noticing significant partnership activity with the likes of Google and Target, in the US, forming a strategic alliance: collaborating on payments, voice technology, customer experience enhancements and marketing. It will be interesting to see if this trend extends to the Australian and Asian markets?
And finally, Amazon’s launch in Australia is said to be its biggest ever, but can a new entrant manage the logistical challenges that the sheer size of Australia brings? And could it in fact be some existing Aussie favourites such as Appliances Online or even a sleeping giant like Harvey Norman that disrupt Amazon’s plans?