Online sales: A new ‘normal way’ to buy

by | Feb 15, 2022

Australians’ purchasing habits have changed dramatically over the last two and a half years, with increasing numbers of trade tools being sold with a ‘click’ rather than ‘cash’. John Power reports.

Trade tools web purchase

Human psychology is as relevant to hardware-based sales processes as the course of the pandemic, it seems, now that COVID is losing its stranglehold over us.

As strict lockdowns give way to erratic testing regimes and selective travel protocols, markets for products like trade tools are undergoing rapid change – and the changes go well beyond the public’s direct response to COVID restrictions. 

Aside from dealing with government-based health measures, the retail market is also adjusting to an array of other (sometimes contradictory) social influences, including: enhanced computer and smartphone literacy, ongoing caution about catching disease in bricks-and-mortar stores, a deepening desire for greater shopping convenience close to home, improved trust in the reliability of local online sales compared to overseas orders, as well as an aversion to the high delivery costs and lengthy waiting times for overseas orders. Throw in a growing preference for locally owned businesses and Australian Made products, and it is plain to see that COVID is just ONE of many forces contributing to our ‘new normal’ marketplace.

The onset of COVID in early 2020 encouraged many Australians, including trade professionals, to tackle online purchases for the first time. Smartphones transformed into indispensable identification tools, while online sales enjoyed a growth spurt in popularity that shows no signs of slowing. 

Traditionally, trade tools, as a segment, has been somewhat immune from the ups and downs of online sales trends. The theory has been that more expensive, specialist product lines with complex operations inevitably require a ‘touch and feel’ sales process in a physical store.

That preconception is now being challenged, and the ramifications for retailers are significant.

What is changing?

Prior to the pandemic, trade tools sales above entry-level status were deemed to be the exclusive domain of over-the-counter transaction systems, offering ample opportunity for the customer to compare the features of different models and brands in a tactile manner. Adding appeal to in-store shopping was the fact that delivery processes were fickle – many tradespeople and homeowners were reluctant to make costly online orders that might be delivered to an unsupervised home or site, and post office delivery and holding services were notoriously erratic. Combined with a risk of product damage in transit, these fears encouraged a continuation of in-store sales.

While in-store sales continue to predominate, there is a groundswell of popularity for online purchases in order to minimise exposure to disease in stores, and to also save time.

It is a trend that applies to trade tools servicing both professional and DIY markets. Not only are online sales processes improving in terms of fit-for-purpose product packaging and satisfactory local delivery times, but the convenience of online ordering is gaining traction as a social norm. Practicalities are keeping pace with public moods. For instance, Australia Post now offers more than 1,000 suburban 24/7 Parcel Locker outlets, half of which are aligned to 7-Eleven stores following an agreement between the two businesses last year.

This service has major implications for online sales. In the past, anything bigger than a small private post box required the customer to pick up their order from the post office during business hours. Parcel lockers, on the other hand, allocate a different locker to each delivery based on the size of individual parcels, meaning a customer can retrieve a large, boxed power tool, for example, from a secure locker at any time of the day. Unsurprisingly, Australia Post has reported a massive surge in interest in these kinds of services, in line with overall online sales increases. According to Australia Post, approximately five million households made at least one monthly online purchase in 2020-21, which was 1.1 million orders above 2019 levels.

Cynics might argue that such figures simply reflect customers’ inability to visit stores in person during lockdowns, particularly in regional areas where distances to retailers can be prohibitive.

However, the statistics indicate the opposite: Online sales in 2020 were strongest in outer metropolitan suburbs in localities that are well serviced by hardware stores and similar retail infrastructure. Indeed, the five biggest growth areas for online sales nationally in 2020 were ALL in outer suburbs of Melbourne: Point Cook, Cranbourne, Hoppers Crossing, Craigieburn, and Doreen. (NB: there is a Bunnings store in or near each of the above localities.)  This growth trend reinforces the notion that ever-strengthening online sales are now more of a social or cultural phenomenon of convenience rather than a one-off response to COVID or travel restrictions.

Another observation: If online sales were aligned directly to the difficulty of accessing a physical store, then we might have expected regional centres – such as those in the 10,000-square-kilometre grid north-west of Melbourne where there are no Bunnings stores, and precious few large-scale retail hubs – to display the greatest growth in online sales during the pandemic, but this has not been the case. Which is hardly surprising if we remember that regional social or cultural trends (as opposed to COVID-based behaviours) tend to lag metropolitan ones by a year or two.

The upshot of all this is that online sales are here to stay and will continue to strengthen long after COVID has vanished from our shores. But what are the consequences for retailers?

Online sales are universal – there is no such thing as a ‘local’ online market for commodity goods. Important questions, therefore, arise in relation to enhanced online commerce: Will bricks-and-mortar stores become dinosaurs? Will profit margins for generic products like trade tools become eroded as customers filter and compare prices nationally, are customers less likely to remain loyal to a business if it is online? 

Trade tools sold via the retail hardware sector, which is characterised by a small concentration of retail and buying groups, are more protected from some of the above dangers than other sectors. Exclusivity is the name of the game, which is why merchants of generic items prefer to eliminate rivals (as far as is practicable) by controlling full distribution channels for specific lines. If a large retailer is the only provider of a certain product, then they control its pricing and availability both in-store and online. Obviously, from a retailer’s perspective, it makes sense to prioritise unique brands and lines of tools that are unavailable elsewhere and, therefore, will not be subject to self-defeating discounting wars with rivals.

Additional prerequisites for strong online sales relate to quality, reliability, honourable corporate values and social interactions, as well as virtues like Australian Made production, locally meaningful warranties, etc. Uniqueness and associated market appeal shift the focus of loyalty from the retailer to the product. If a customer likes a certain tool, which ‘ticks all the boxes’ as a good purchase and is only available from a single merchant, then the issue of ‘customer loyalty’ no longer applies.

As for bricks-and-mortar relevance to future markets, when it comes to trade tools there are always motivations to attend a store in person, namely the immediate acquisition of tools for current jobs, the flexibility to make purchases ‘on demand’ rather than have to anticipate requirements with online purchases, saving money by dispensing with delivery charges, as well as a host of more personal reasons: the pleasure of discovering new tool ranges, handling products to gauge weight and quality, assessing opportunities to negotiate price reductions (you cannot haggle with a computer!), and maintaining social interactions with suppliers and merchants. 

These are all powerful reasons for purchasing trade tools in person in a store, and grounds for optimism for bricks-and-mortar retailers who are in the process of supplementing their businesses with online sales.