Lessons startups can take from traditional retailers

Published in Fairfax Business on July 7, 2015

When I took the helm as CEO and Managing Director of David Jones Limited five years ago, traditional retailers were a little on the nose. It didn’t take much for anyone to start an online business, and many Australians did. Some customers felt that walking into a store was a little archaic and the talk of the town was all about online shopping. Some predicted the local store was dead.

At this time, the Australian dollar and net outbound tourism was at a high and consumer confidence was an all time low. Australian consumers discovered that they could shop offshore and pay a lower price (and additionally avoid the GST). The digital disruption hit hard and most traditional retailers were simply unprepared. As a traditional retailer, I called this time ‘the perfect storm’.

Five years on, the bricks and mortar store is not dead. Most traditional retailers have made the switch, negotiated lower prices from suppliers and have reinvented themselves as omnichannel retailers. But to lay claim to this, a retailer must have created a seamless customer experience across all channels: desktop, mobile, iPad, and in-store.

Startups taught traditional retailers many things, including agility and the power of social media. And traditional retailers can thank startups for serving as a catalyst into a rewarding new world of digital commerce.

However, five years on, traditional retailers can now equally teach startups a few things. Built on my experience transforming David Jones into a contemporary omni-channel retailer, here are three insights I believe online retail start-ups can glean from bricks and mortar retailers:

1.THE STORE IS ALIVE. People still like shopping in stores. It’s a tactile, sensory and social experience. Customers want to shop anywhere, anytime. This includes shopping in a store. Many online retailers have now had to consider physical locations. Shoes of Prey, an Australian start up which launched a customised women’s shoe company online, knew it would also need to launch a physical location to ensure it leveraged every opportunity. Startups need to think about where bricks and mortar sits in their strategy.

2. CONFIDENCE. Traditional retailers have distinct points of difference. This includes being the preferred place where most consumers would choose to make their first purchase when it comes to buying certain products like a suit, a new pair of jeans, or a new colour lipstick. The ultimate service is being able to return a product and be able to talk to a person, face to face, particularly when a product has failed to meet expectations. Startups need to consider how they build confidence when they are a faceless company.

3. GROWTH. The new retail growth will come from those that can use technology to leverage and improve the in-store experience, and have ideas that drive traffic in-store. The biggest percentage growth is not coming from online retailing but from click and collect (the ability to order on-line and collect in-store). The future is the app that recognises you when you enter a store and delivers customised information, allows you to locate merchandise, staff assistance or alerts and directs you from your predetermined shopping list.

Most would think that Amazon is the most successful online retailer in the world with impressive sales of $US89 billion in calendar 2014. However, as impressive as they are as a brand, Amazon also posted a net income loss of $US241million for 2014, and have been forced to look at traditional retailer strategies to regain profitability - including opening up physical stores. What is interesting to note is that even those traditional retailers now boasting that 20 per cent of their business is online still have 80 per cent of their business being done in a store.

Being a modern day retailer means that the customer can shop anywhere, anytime. The challenge for any successful retailer, of course, is ensuring the customer experience is consistent and seamless.