The vicious retail cycle

Dec 21, 2010

I recently took part in a discussion with friends regarding an alarming trend that they saw forming in some of Australia’s larger retail stores. Said friends work in retail (some in Australia’s largest department stores) – and it was certainly an eye-opener for me, as to what’s happening out there in retail-land.

If you’ve been following Australian news lately, you’ll know that Aussie retailers are really struggling this Christmas – particularly against an onslaught of overseas online retailers. The virtually one-to-one US vs. Aussie dollar isn’t helping these matters; although, for online consumers like myself, it means cheaper access to a large range of goods – some of which you just can’t get here.

 

Thanks to my father’s keen interest in technology & his knack for bringing home old PC parts like network cards that measured more than my arm & weighed more than a tin of Milo, I started using the internet at the age of 10 (in today’s world this is nothing special; but this was back in 1992) & made my first (albeit very badly designed) website at age 13 – so it’s safe to say that I’m a keen advocate of the internet and its many benefits to business.

But for over a decade now, I’ve struggled to understand why bigger chain stores didn’t have online-store style websites. If the local hubby- or wife- run cat & dog toy & accessories shop or children’s clothing store can have an online store, why can’t a massive retailer like Myer, or David Jones (aka DJ’s), have one?

In essence, I believe it comes down to the setup of systems. A small business is easier to manage in terms of stock inventory & order dispatch. The larger the business, the more problems you have with where stock is located, which warehouse or location the online order’s stock gets dispatched from, who fulfills the orders and how existing “physical”-store POS (Point Of Sale) systems communicate with often-seperate online store inventory, pricing & discounting systems.

A company that really nailed this global logistical and online retail management well, is Amazon.

My recent experience with an online Boating, Camping & Fishing store is an only too familiar story with a large brick-and-mortar retailer that has a great online web presence, but it all falls apart (in my personal experience, at least) as soon as it gets into the hands of a human being in dispatch. To cut a long story short, let’s just say that after 3 weeks of promises from the Online Services Manager at Head Office, I still didn’t have my goods and ended up canceling the order for a refund after hearing that the retail store assigned to dispatch my order didn’t do so, because they’d had “an argument with the courier company & the courier was refusing to pick up from their store”.

Apparently mine was one of about 10 orders waiting to go out. Oh, and by the way – not once did they contact me; I was continually contacting them.

 

In larger environments, often with custom-developed inventory management and POS software, rarely do the two systems link together and communicate with one another, causing headaches come stocktake time.

In actual fact, a growing small business has the advantage here. When a small business runs a physical shop and then decides to build an online store, they’ll often get a system that can do both (like Storman, for example) – because it’s cheap enough to afford when the business is so small. When the business grows, so does the software.

However, if you look at today’s huge retailers like Myer and DJ’s, you get the complete opposite happening – their systems are so customised & fragmented that trying to install an online store over the top is a costly, time-consuming exercise. Here in Australia, DJ’s very recently launched a new online store – design-wise, it’s quite appealing; although I haven’t had a chance to order anything from it as yet.

 

This then brings me to the title of this post… the Vicious Retail Cycle. Because of competition from overseas online stores, Australian retailers are cutting costs left, right and centre, in a bid to turn a profit. Just recently, we had news of Aussie retailers launching their usually-massive Boxing Day sales a few weeks earlier than usual.

As a result of said cost-cutting, we’re starting to see stores employ less, and cheaper, staff… and cheaper is not always better. The direct end result is longer queue’s, as there are less checkouts operating. This, in turn (particularly in today’s fast-past, “want-it-now” generation-Y driven society), makes already impatient shoppers more frustrated & agitated, which drives arguments – and even physical fights (I’ve seen two of these in my time) – between customers waiting in line.

I think the cycle goes a little like this…

1. Overseas online stores (or even locally-based online stores) are driving down profit margins, so retailers cut costs where they can – including cutting staff numbers or hiring less-educated / less qualified (read: cheaper) staff.
2. Store queue lengths & customer frustration levels increase as a result of less registers being open.
3. Customers, who are already sick of waiting in long lines are sometimes treated poorly by “grumpy” & “I just work here” cashiers at the register.
4. Said grumpy register staff are only grumpy because they’re copping a lot of flack from said angry customers. Angry customers are often aiming their anger at the wrong people – the cashier is not to blame; it’s their employer who is cutting back staff numbers (due to Step 1).
5. Customers, upset with their shopping experience, go elsewhere – or go online, to do their shopping.
6. Go to Step 1 & repeat…

…and so the cycle of online shopping vs. cost-slashing at retail outlets continues, going round & round – getting worse and “cheaper” each time.

The same has happened with airlines – although the airline industry appears to be a little further along in the process. Their discounting / pay-for-food / pay-more-for-an-exit-row / pay-to-use-the-onboard-toilet cycle got so bad that it almost invented a new breed of consumer that is now happy to pay a premium for friendly, personal service with all inclusions. Perhaps the retail industry will take note and we may yet see a return to the classy department store that Myer & David Jones used to be some 10 or 15 years ago… where the service alone made it worth the higher prices.

 

In terms of my personal opinion, I’m all for online shopping. After all, I’ve been shopping online ever since I’ve been able to (the age of 18). As a time poor person, I dislike waiting in long lines or walking around between 4 or 5 shops to find the cheapest version of the exact same item. Online, I can have a website compare prices and deliver the cheapest offer to me.

For just on a decade now, I’ve had a bit of a laugh (albeit quietly) at my friends who constantly complain about finding a car park, the Australian summer-time heat, battling crowds, then the long lines at the registers, the grumpy staff – not to mention the Christmas carols on constant repeat and all of the other “joys” that (apparently) come with Christmas shopping. I do all of my Christmas shopping online in under 30 minutes, all on the same day from the comfort of my home. No joke.

 

While this article, so far, has little to do with Self Storage, I’m keen to get your thoughts on whether or not you are currently seeing the cycle of “cheapening” (for lack of a better word) happening in self storage.

With today’s consumer having less & less “spare cash” to spend, are you coming across more people who just want the cheapest self storage they can get – or do self storage consumers still see value in the add-on services you offer at your facility? What about the future – do you think this will change over time – as in, get worse, or get better?

I’m keen to hear your thoughts and if you like, will post them here online  (just let me know whether you would like your thoughts posted online & whether you would like to remain anonymous). Please leave your thoughts, ideas, feedback and $0.02 worth in the comments section, below.

May the discussion begin! (2010)