AUSTRALIAN HARDWARE JOURNAL
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2017 Hardware Suppliers & Industry Directory

5

Online shopping:

Convenience/‘shop at home’ is driving the

purchase of products and services via the internet. Expect a major

internet ‘retailer’ (e.g. Amazon or e-Mitre 10) to emerge over the

coming five years to better fill this need. The retailers that have the

brand and footprint of stores to support an online offer will win

this battle. In the author’s view, the announcement of the entry of

Amazon, late next year, with the building of a fulfilment centre

and some store support is fraught with danger. If this is correct, it

is unlikely that Amazon will recover the cost of capital and may be

happy to burn dollars simply to have a presence in a high consumer

market such as Australia. Reasons for difficulties include:

• Australia is a country of shop-keepers, more shops per head than

any other country. Returns from online shopping as high as 35

per cent for apparel and footwear equal cost in time and dollars.

Innovative retailers who build relationships with their customers;

personal care and service. High cost of delivery; Australia equal

tyranny of distance when it comes to delivering orders. Without

an effective (not large) store network, cost will erode margin, a

major reason why Amazon will not succeed commercially. Price

comparison ‘vis-à-vis’ the same brand, is not about the price itself

as is a key driver for online shopping by Australians.

COMPETITIVE ADVANTAGE:

Suppliers and retailers can build competitive advantage over

purely online providers (Amazon), through service. This element

of ‘Do It for Me’ is expected to account for up to 30 per cent of

revenue from a ‘project’ and higher margin than purely product.

SMALL IS BEAUTIFUL:

Amidst turmoil, we have seen shining lights amongst nimble

independent store owners. Seasonal variation in regional and

tourist areas has proven successful with fishing, camping,

sporting/leisure goods all winners. Winning sales are also

coupled with home maintenance, including holiday homes,

which also adds to the differentiation that entrepreneurial

independent stores can offer local communities.

EVOLUTION:

The evolution of the home improvement and lifestyle market

continues due to key factors;

• Australia’s love affair with make-overs, R, A & A. Now a

major reality television phenomenon.

• Increase in number of ‘trade’ services that are more DIYable.

Cost and availability of trades people is a significant factor.

Examples over the past decade of DIYable (and Do It with Me)

projects, once the domain of a tradie include:

• Garden design and landscaping.

• Flat pack kitchens, bathrooms and laundries.

• Decorative flooring.

• Decking and pergolas.

• Outdoor galleries and entertainment (fifth room).

• Ready to hang/install window furnishings.

• Plug and play saunas and spas.

A key out-take is that all of the above DIYable projects require

a solution for completion that proactive suppliers can provide.

Retailers, in general, do not make an effort to on-sell these items or

promote them as important ingredients in most of the above growth

categories. This may be a proactive approach for suppliers seeking

deeper ranging in retail and trade segments as well as add on sales

(service) for retailers. Emerging expansion categories as follows and

driven by safety and security concerns, ease of use and operation:

• Personal security

• Home automation

• In home entertainment

• Connectivity and mobility.

With JB Hi Fi acquiring The Good Guys, these categories

will be developed by the group, all of which fit JB’s DNA

(technology). Other retailers to follow include Harvey Norman,

Amazon (and others) and specialists such as Lawrence &

Hanson (trade/light commercial).

E-COMMERCE

In preparation for trading in the ‘new world’, proactive

suppliers can develop and build a proprietary EDM program. As

lists are generally outdated and vague, suppliers are advised to

build their own and importantly, ensure that the gathering and

use of personal data complies with regulatory requirements.

Suppliers may need to go through a data cleansing process to

remove obsolete SKU’s from data bases, while ensuring accurate

price files and customer details. The opportunity exists to be

proactive with customers whilst building the capabilities to

offer technology based solutions to trade and DIY end-users via

online channels, if required.

Suppliers have the potential to broaden distribution across

the wholesaling and retailing segments including best in class

e-commerce platform and embracing end-users with a dynamic

CRM program.

• Australia’s costly retail environment equals high margins.

• Attractive to overseas ‘brands’.

• Too many shops, impact of low cost models and growth of Big

Box ensures further erosion.

• Poor service from many large Australian retailers, all categories.

• Psychographics: Australians early adopters of technology.

• Demographics: Newborns equals mobility and connectivity.

• Increasing age of population. 20 per cent over 65 by 2031.

Elderly confined to home. Cannot navigate supermarkets,

shopping centres etc.

• 2031 - 55 per cent of households singles and couples without

children equals with dual incomes, who are time poor.

• Amazon driving dollars and losing money equals bigger picture.

Expanding into new categories such as food, insurance etc.

• Success in Japan does not equal success in Australia, just ask

Lowes. Amazon is unlikely to recover the cost of capital if

they build fulfilment centre and store network, as reported in

the media.

• Australian retailers chained to shops due to capital and ROI

demands.

• New world e-tailers will gain market share.

• Successful brick and mortar retailers managing the transition

via omni-channel. If they do not, their competitors and

suppliers will.

Limited understanding of technology solutions is holding back a

number of Australian retailers entering the E-Commerce arena.

This can and will change!

Geoff Dart,

Director DGC Advisory

0419 575 252

gdart@dgcadvisory.com

Industry Overview