As Australians pull in their belts, bringing third-party sellers on board can allow retailers to secure a larger share of the shrinking consumer spending.
Are you expecting the good times to keep rolling in the 2023 financial year? Australian merchants answering in the affirmative are likely to find themselves in the minority.
While Covid has delivered a decidedly welcome boost to the bottom line of many local retailers in the last couple of years – consumers, many of them locked down at home, clocking up $54.23 billion in online purchases in the 12 months to January 2022, according to the NAB Online Retail Sales Index: January 2022. (See full report here)
All signs suggest the party is over and there’s unlikely to be another one in the foreseeable future.
Survival strategies for FY2023 and beyond
Whether your retail business in the face of the perfect economic storm that’s now bearing down? Preserving profitability may become an increasingly challenging proposition this financial year, in the absence of a strategy to drive customers through the real and virtual doors.
Implementing an online marketplace is one way that retailers can keep sales ticking over, at all sorts of times. The proposition is simple but compelling: Use your eCommerce presence to sell not just the items in your own catalogue and warehouse but those of dozens, hundreds, or even thousands of third-party suppliers too.
Typically, those suppliers retain ownership of the advertised goods and take care of their own shipping and returns. That means you’re not tying up precious capital but, rather, can expand your range and play in new categories and market segments, at minimal cost and risk to your business.
Having more products on your site can result in higher search engine visibility; very often the critical first step towards clinching an online sale.
You’re also better placed to respond to fast-moving trends. Rather than having to fund, source, and store stock of your own, you’re able to team up with suppliers that have in-demand items on hand already. And doing so eliminates the risk of your ending up stuck with a stockpile of those items when something else becomes the next big thing.
The post-Covid economic hangover
Economic conditions in this brand new financial year look like being decidedly challenging: the plainer spoken among us might even call them grim.
Australia’s average mortgage size now sits at around $600,000. The interest rate rises that we’ve been told are on their way will potentially add hundreds of dollars a month to households’ non-negotiable outgoings.
Meanwhile, the official inflation rate hit 5.1 per cent in the March quarter, confirming what millions of us had already clocked at the supermarket check-out and bowser: prices for everything from bread and butter to petrol is heading north.
To cap it off, power prices are also on the up. In late May, the Australian Energy Regulator, our national watchdog for the sector, announced benchmark electricity prices would rise by up to 18.3 per cent in NSW and 12.6 per cent in Queensland.
Investing in the future success
The return on your investment in digital marketplace technology can be significant. An increase in turnover of between 30 and 50 per cent in the first year is not uncommon, for businesses that go down this route.
Here in Australia, a growing list of forward-thinking retailers have done so, including the likes of Woolworths, Barbeques Galore, Bob Jane, SurfStitch and Myer. They’re reaping the returns, in the form of greater market presence and increased sales – and, in some cases, they’re only just getting started.
If maintaining sales and profitability matters to your retail business, in FY2023 and beyond, exploring the business case for following suit is likely to prove a very smart move.
Pulling in the belt
Against that gloomy backdrop, consumers are likely to run the red pen over the household budget and look for opportunities to reduce their discretionary spending. That’s bad news for retailers whose products fall into the ‘nice to have a category. It’s not great for purveyors of life’s necessities either, with hard-pressed consumers likely to seek out budget alternatives to their preferred premium products, as the going gets tougher.
As market watchers think it undoubtedly will. In an interview with The Sydney Morning Herald in late May, Barrenjoey analyst Tom Kierath said retailers were becoming rightfully alarmed about deteriorating conditions.
“We’ve been predicting for a while that retail would come off as people start to spend their money elsewhere, but feels like now it’s actually happened,” Kierath was quoted as saying.
“And it’s going to get tougher because the pressures on the consumer are getting worse.”