09 July 2013
When ASX listed Mothercare Australia Group folded earlier this year, administrator BRI Ferrier’s Antony Resnick says it was a wake-up call to all struggling Aussie retailers that they must innovate or perish.
And while a perfect storm of high rent and wages costs and online competitors might be making it tough for many, Mr Resnick maintains that if retailers genuinely innovate they will carve out a successful future as many international brands have demonstrated.
It is interesting to note also that while Mothercare globally continues to trade in 55 countries and many in depressed economies, the Australian operation is the only one to go into administration at a time when Australia is considered to have one of the strongest economies in the OECD.
“This of course adds strength to the argument that rent and wages are too high but that’s not the whole story,” Mr Resnick says. “To be competitive Aussie retailers have to run a lean operation, outsource what they are not good at and most importantly, innovate. In short, they have to make shopping a titillating experience.
“If you want to entice the right customer base, you have to be exciting. There is an ever increasing need for effective merchandising - it must be eye-catching. Customers should be enticed into a store on the basis that they will both look forward to and enjoy the experience. This can be achieved through the customisation of products and personalising the experience.
“Take Apple for example. The try before you buy live opportunities are tremendous and the overall ease of dealing with well “connected” staff makes the experience exciting and professional. In Nike stores in London and New York you can become a shoe designer and walk out with a personalised outcome in under half an hour. The excitement is frenetic and well received.
“Equally Abercrombie & Fitch stores in those cities have lines of people wanting to have a photo with the guy with the six pack at the front door before going in to a store that resembles a disco with loud music and staff dancing. Now that’s exciting,” Mr Resnick says.
And retailers need to be ruthless when it comes to running the business. If wage and labour costs are each more than 20 per cent of turnover the business is unsustainable. In addition, retailers should try to avoid large footprint stores with too many staff where a smaller showroom may suffice. The old adage about knowing your customer has never been more relevant than it is today. If a retailer has a thorough understanding of their customers and what they want, they will know that it is not necessary to have their store open for extended hours seven days a week or have an overly large footprint which will just drive up rental costs.
“There is no doubt that some retailers are in trouble but there are enormous opportunities for many of these struggling businesses to turn themselves around. Innovation in Australia is being spear headed by international brands like Zara and Ikea and we need more Australian brands to take their lead,” Mr Resnick concluded.
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