New law gives local merchants the edge

23:35, Jun 23 2014

About 20 years ago I headed off to Texas to try to woo a red-headed girl. Despite my best efforts the girl was completely underwhelmed by my wooing, so after a month or so I took the hint and hit the road, literally.

I bought a 6-litre V8 Dodge Ramcharger van owned by the Texas distributor of Steinlager beer. He had spent hundreds of hours painting a freehand wildlife mural right around the van featuring majestic elk, jumping salmon and breath-taking nature vistas.

However it was now starting to flake off, so the overall effect was automotive pointillism. For the next 12 months, the gently flaking Dodge was my home as I sought to scratch out a living as a travel writer.

I ended up clocking up 36 states as well as Mexico, Belize and Canada, but lone star state Texas was my favourite - where road signs are considered art. From Burma Shave and Texaco, to local attractions like rattlesnake round-ups and Cadillac ranches, the berm framed up an eclectic collection of popular culture.

Even the state government got in on the act with a seatbelt campaign featuring a clueless cowboy with the words: "Buckle up partner. It's not just a good idea, it's the law."

Also buckling up for a rough ride are local retailers, both online and offline, as they check out the latest quarterly online retail survey from BNZ. The survey shows that online retail grew 11.9 per cent over the last quarter, almost three times the rate of offline retail which grew at 3.2 per cent.


However the bulk of online growth is looking outward. International online retail sales grew at 16 per cent over the quarter, whereas domestic online sales only grew at 6 per cent.

While domestic online retailers still make up 60 per cent of all digital sales, increasing amounts of buyer dollars are heading overseas.

This flight to online, particularly to overseas retailers, is driven by price and range and then given a supercharged push by social media and online targeting. And some sectors are travelling faster than others.

A year ago, research house Frost and Sullivan found clothing accounted for the biggest category of online spend at 22 per cent, followed by electrical and electronic goods (20 per cent) and recreational/sporting goods (12 per cent).

However the fresh BNZ data shows department store shopping, recreational goods and media, and grocery/liquor now account for 64 per cent of all growth in online purchasing.

While the bulk of local overseas purchasing is from the US and the UK, ironically online retailers in those countries are experiencing the same thing, as Chinese ecommerce giant Alibaba flexes its muscles in the lead-up to its American initial public offering later this year.

Alibaba and its constituent companies like Tmall and TaoBao account for 80 per cent of all Chinese ecommerce. Bloomberg has estimated that the IPO will value the company at around $200 billion. To put that into perspective eBay is currently worth about $70 billion.

Alibaba's AliExpess is an online retail service made up of Alibaba sellers who offer smaller quantities of products to online buyers.

It puts US and UK consumers directly in touch with Chinese manufacturers and distributors, often providing prices that can't be matched in the First World. Meanwhile, 11 Main, another recently launched Alibaba initiative, seeks to emulate a "heartland American town" buying experience for US consumers.

Against all this it's hard not to feel sorry for local online merchants. The question is how they can fight back when they can't compete on price. Ease of returns is a good place to start. Even with the best sizing charts or light-responsive online colour swatches, buyers appreciate the ability to return or exchange products locally. If they are shipped locally, then this is easy to accomplish.

"Free exchanges" is a low-cost competitive advantage that foreigners find it hard to emulate.

Local customer service - including click-to-call - is gold when you have had to endure the alternative. Again, marketing this as part of your retail offer is smart.

However perhaps the biggest competitive advantage was underlined last week when the long- awaited changes to the Consumer Guarantees Act (CGA) and Fair Trading Act (FTA) went live.

All the major loopholes around consumer protection have been closed up such that now consumers are actually safer online - where sellers have to disclose their trader status - than they are offline.

It also means the seven specific guarantees within the CGA - like the goods being fit for purpose and of acceptable quality - are now fully enforceable in court. However only New Zealand retailers need to comply with New Zealand law.

The reverse is also true: overseas online merchants don't have to comply, and would be wary of acknowledging compliance with a "foreign law". To be clear, that's a qualitative difference that plays to local merchants' strength.

Local online retailers can actively exploit full compliance with the freshly refurbished consumer laws as a competitive advantage.

This could mean turning the Texas seatbelt campaign on its head. It's not just the law, it's a good idea.

Mike "MOD" O'Donnell is an ecommerce manager and professional director. His Twitter handle is modsta and he ended up wooing the red-haired girl some seven years later.