'Tis the season to be online

'Tis the season to be online

Shoppers are spoilt for choice as Myer and DJs get serious about their internet offerings.

It's beginning to look a lot like Christmas, but not one Bing Crosby would easily recognise when he crooned that famous carol.

That was 60 years ago, when shoppers were delighted by wooden toys in shop windows, candy canes and silver lanes aglow with simple department store decorations.

Today, in Australia and across the big cities of most Western nations, retailers big and small, old and new, are employing the internet, mobile apps and hand-held tablet devices in an attempt to attract a slice of the consumer wallet in the final and frantic 23 shopping days to Christmas.

Christmas cheer is certainly alive online, and this season will compete like never before for the attention of consumers who once happily passed through the doors of department stores such as Myer and David Jones to purchase their gifts.

But they will now, in growing numbers, do their Christmas shopping at home, or at their desks, or on the train - on the web.

The stakes don't get much bigger. Up for grabs is an estimated $16 billion in spending by Australian shoppers crammed into last month and this one, with some spillover into the New Year stocktake sales for those with more wriggle room on their credit cards.


And it is online where the fiercest battles among retailers are being fought. A cursory inspection of the sector shows why. Online sales in Australia have recorded annual growth rates of 20 per cent to 40 per cent since January last year, according to figures compiled by National Australia Bank, against an anaemic 2 per cent to 3 per cent for traditional bricks-and-mortar retailers.

The market trend analysts IBISWorld estimates Australia's online shopping sector accounts for $11.3 billion in annual revenue.

And Google believes this holiday season's biggest push for online retailing will come from mobile devices, with nearly 40 per cent of shopping-related Google searches now coming from smartphones or tablets.

Retail spending will wash through the economy with the force of a raging torrent, and while still only accounting for about 5 per cent to 7 per cent of total spending, it has traditional retailers worried, perplexed and in some cases panicky.

''Retailers have got to understand the different ways that different kinds of people like to engage in the whole shopping experience as an activity, particularly this time of year,'' the chief executive of The Leading Edge consultancy, Tim Riches, says.

''From a behaviour point of view, people do act in a different way because they have a different mission fulfilling that need. [Christmas is] unlike other times of the year; you might find them less price-sensitive, for example, because they don't have the capacity to shop around and compare on every single gift that they need to cross off their list.''

Most retailers will earn enough profit over the next five weeks to last them through the slow, dull days of next month and well into winter. Those that get trampled in the rush may not survive to see their next Christmas.

This year, traditional retailers are putting up a fight, and will attempt to claw back every customer they can from the likes of eBay, Amazon and the legion of online fashion sites that have hoisted their cyber shingle over the nation.

Most consumers engaged with online retailers will be those in their 30s and 40s - they represent the bulk of online spending in Australia. NAB research shows those in that age bracket are particularly happy to spend on fashion and cosmetics online.

But can retailers get these shoppers, as well as those under 30 and above 50, to spend online this Christmas?

The answer to this bugbear that has sprung from old-world retailers is the ''omnichannel model'', the idea of offering a range of online and offline platforms for shopping (store, website, mobile app and tablet) where customers decide what best suits their needs.

The trick is to make the online site as compelling as the store, to migrate the loyalty and prestige of a classic department store or shop on to the web and make it shine on a tablet or smartphone screen.

Karson Stimson, the founder of the internet retailing agency WeAreDigital, says the omnichannel strategy can actually mean that bricks-and-mortar retailers could be at an advantage over online pure plays, as their physical presence enables them to touch consumers in the offline world.

''Omnichannel allows the customer to research in the store and buy online, or research online and buy in the store, or buy online and return in store,'' Stimson says.

''And omnichannel customers are spending significantly more than single channel shoppers.''

Figures from NAB reveal the rate of online growth strengthened considerably over the past six months and heading into Christmas, rising by 26 per cent year on year, compared with just 14 per cent year on year to May. When seasonal factors are included, growth rates for the traditional retail sector eased slightly in recent months and were only 3 per cent year on year in October.

''We're seeing strong online growth from local retailers as online becomes an integral part of their sales and distribution channels,'' NAB's retail sector head, Tiernan White, says.

''In part, this can be attributed to domestic retailers understanding their customers' buying preferences and providing their customers with choice.''

This Christmas will certainly be the year of the omnichannel, The nation's leading department stores, which admit they may have come a tad late to the online retailing party, have plenty to prove.

David Jones launched its new site last month with 90,000 items available for purchase. Myer is offering 40,000 items on its site and adding to that as fast as the pictures can be taken and scanned by the department store's IT minions.

At Coles, you can pre-order your Christmas meats online, with demand growing more than threefold. Woolworths has a dedicated Christmas site, and other stores are tempting buyers with free delivery, free returns, special one-off sales and much more. In short, retailers are throwing everything they have at the internet this year to make Christmas a success.

David Jones, the nation's oldest department store, has plunged headfirst into the internet after an absence of nearly a decade when its original investment in e-retailing was pulled by the previous chief executive Mark McInnes.

His replacement, Paul Zahra, is a true believer when it comes to the opportunities available online, and he has pushed his team to get the site up and running.

''My vision is to see DJs as a world-class omnichannel retailer,'' Zahra says.

''We know that omnichannel shoppers are four to six times more valuable to retailers, and power of that platform is simply put this way - to be able to watch Miranda Kerr walking down a fashion runway, live stream via Facebook, to be able to click on that dress, choose a size and have it delivered to your door the next day, that's the power.

''And DJs having the best national and international brands, that's the power we are bringing to the marketplace. It reduces all the risks because while people might shop online at overseas sites to avoid the GST, it's a small price to pay to have that comfort knowing if its the wrong size, colour or fit you can walk back into a physical store and have it dealt with immediately.''

The fun of watching Miranda Kerr on screen aside, what Zahra wants to do is turn the once viewed disadvantage of his physical stores into an advantage as the offline world and the online world mesh seamlessly into one fully integrated omnichannel platform.

''If you wind forward and think about the future of DJs,'' Zahra adds, ''we only have 36 stores, which actually puts us in a very good place for structural changes happening in the industry. We will continue to invest in bricks-and-mortar stores, because we only have 36, but it does mean we can now access locations [via the web] where we don't have a store if a business case doesn't stack up to have a store there - it's really very powerful.''

Across town, or sometimes on the other side of the shopping arcade, sits Myer, where its chief executive, Bernie Brookes, is leading his own charge into cyberspace with special online offers, Facebook followers and Twitter tidings.

To help stake its claim in the online retail market, Myer, the nation's biggest department store with annual sales of $3.1 billion, has increased its website content and is adding to it daily.

''We are growing it at a rate as quick as we can take a photo and put it online, and therefore we expect it to grow almost daily,'' Brookes says.

Myer will launch its special online events and sales before Christmas, including an online version of its popular Boxing Day sales, and with internet purchases made up to December 17 guaranteed to be delivered and under the Christmas tree in time.

''We haven't necessarily set an objective of 60, 80, or 100,000 [items online],'' Brookes says, ''because it's about the customer experience, rather than the SKU [stock-keeping unit] count. Some of the best sites in the world rely on content rather than the number of SKUs, so we could load another 60,000 or 70,000 - and we might well do that over the next six months - but we are very conscious that the more you load, the harder it is to search and the harder the choice becomes.''

''The big thing for traditional retailers,'' Riches says, ''is leveraging the trust of [the department store] brand into the online channel.''

It's an idea that has also captured the interest of Brent Coker, a lecturer in marketing at Melbourne University and a consumer psychologist. He says the omnichannel model might be the answer for old-world stores as they muscle into online space.

However, he warns that they still have a long way to go to match the offers of overseas retailers.

''I think they are heading in the right direction, but I don't think they have quite worked it out as well as some of the largest American websites, who are taking a lot of online revenue away from Australia,'' Coker says.

In the US, the department store Nordstrom has sales of $1 billion a year from its online site, with the digital platform responsible for 25 per cent of pre-tax earnings. David Jones and Myer are coy about releasing their online metrics but it is believed the main department stores now generate less than 1 per cent of annual group sales.

Coker says: ''One problem in Australia is retailers are trying to replicate the experience or use the same marketing tricks they use offline and try to put them into play online - and that's not necessarily the way to go round it.''

Strangely enough, despite the thousands of shopping options online, and where the next store is only a click away, consumers can be highly loyal on the web. This is something traditional retailers should exploit.

''The thing about online is that people tend to be much more loyal than offline,'' Coker says. ''What that means is that online shoppers tend to frequent the same online retailers over and over again.

''They are cautious about switching or trying new online retailers, and that's different from the offline experience where people are more open to the idea of trying a new store. When you know that, you come to understand that loyalty is key - getting customers and keeping them.''

Riches says: ''Because digital channel is also about permission-based marketing, it's not just about transacting, it's about giving me communications that are tailored to me, my taste, my history and the things that I like to buy. The more I know about you as the retailer, the more rich that becomes and more valued, then the stronger the brand loyalty can be.

''Most people look at this and think the old loyalties are gone. In fact, the opposite can be true, and I think you can argue for a department store to give a differentiated experience to a customer is in some ways a whole lot cheaper and easier in the online environment than it is in the in-store environment.''

Some of the early evidence shows local retailers are starting to latch on to the loyalty factor, and are using their trusted brands to retain the attention of shoppers and keep them coming back.

Despite the strong Australian dollar (which makes buying from offshore web sites cheaper), local retailers still control the majority of online sales - about 73 per cent. And this is with offshore online sites not charging shoppers GST for purchases below $1000.

''If online was being driven purely from that tax purpose, you should [get] 80 per cent [of online sales] international and 20 per cent local - and that's not true,'' the NAB chief economist, Alan Oster, says.

The explanation must be that consumers are embracing online retailing but prefer to shop on the websites owned by the brands and businesses they know and trust.


If this continues, pure-play online retailers might find that bricks-and-mortar shopfronts can beat them at their own game in cyberspace. This Christmas will provide some clues as to the strength of that theory, and will also reveal which retailers have successfully engaged with consumers across several platforms and which have reached the end of their corporate life.

Retail can be a tough game.

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