Online winning retail battle

16:00, Oct 25 2013

One year ago, Sam Bansal bought a United Video store and has turned it into New Plymouth's largest sugar shop.

He had to. Demand for the DVDs and games he stacks his shelves with is dropping every day as people increasingly download movies online or buy them for peanuts from online retailers.

With it nearly impossible to compete on price, an eye-watering display of lollies is his point of difference, his bottom line saviour.

"You have to diversify. You just have to," he says. "What we have lost in the DVD section we have recovered from the lollies. Parents say they have to stop bringing their kids here because they love it so much."

The sweets will give his business another three years and in that time he plans to diversify further, which he hopes will allow him to stretch the life of his shop out for another four.

A year ago when he bought the business, the former owners gave the shop a life expectancy of just two years, he says.


But now, with the lollies, innovative marketing techniques and ever-changing instore promotions, the shop is now the busiest United Video in the North Island.

Not every shop is able to snatch victory from the jaws of a seemingly unstoppable internet defeat. While brick and mortar stores still dominate the country's $70 billion annual retail spend, online sales are increasing at an incredible pace. Worth about $5b now, online domestic sales are going up 10 per cent a year.

The value of goods bought by New Zealanders from overseas retailers is increasing by 20 per cent annually.

The roll out of ultra fast broadband will likely speed this increase up even more as downloading movies, music and books becomes ever quicker and easier.

Where competition used to come from the shop down the street, it now comes from around the world, says Ross Laurence of Hawera's Real Sports, and he is one retailer who is getting out.

Customers turning to the choice and prices online hasn't been his store's downfall, but in an already difficult retail environment it hasn't helped.

Independently owned stores are probably on their way out, he says, victims of cashed-up chain stores and online retailers, often one and the same. "The ability to be able to buy something overseas online is going to change the whole way people shop and the expectations of what is available," Laurence says.

"How can you stop that. It is going to change the face of small town retail.

"I just don't know what it is going to look like."

Like Laurence, New Plymouth's Julia Phillips believes the retail future is bleak for independent stores. The owner of Benny's Books, she announced earlier this month the store would close at the end of the year.

Sitting at her computer she is just a few clicks away from demonstrating why. Books she sells for $20 can be bought online for $10. "How can I compete with that?" she says.

The online competition has been around for years but it's only in the last 18 months that she has felt its bite.

Though she has a website and spends countless hours keeping it current, when she types in a book title on Google her site doesn't even come close to being on top. Those spots belong to massive online companies such as Amazon, The Book Depositary or New Zealand's Fishpond and The Warehouse sites.

Her decision to close has not been forced on her. She is one of the busiest shops in New Plymouth's CBD she says, but if she doesn't jump now she faces the prospect of being pushed.

"My father-in-law has been in business for 70 years," Phillips says. "He said ‘Julia, it's just another change. It's just something we have to adapt to'. I'm not getting bitter about it."

But there will be a sour taste left by her departure. On her desk sit dozens of requests from Taranaki schools for books to give out at prizegiving. Most will be answered, this year at least.

"Your chain stores aren't going to do that," she says.

Further down the street, Lisa England of Verge Gallery is fighting for profit against a modern-day phenomenon known as "showrooming" - customers browsing at goods in her store and then buying them online.

"They come in and see it in our store, then take a photo or note down some details and then go direct to the supplier's site, cutting us out. So that's turning us into a free advertising site for the supplier. They are using us really," she says.

While the retailer might save a few dollars on an item, England says the short-term gains will have real long-term impacts on retailers.

"You will have chain store after chain store after chain store and yet it's shops like ours that really make a CBD because we have different products, unique products," she says.

Further up the street, Vinyl Countdown stands out as something of an anachronism. In an age dominated by hi-tech products, music and video downloads and ridiculously cheap streaming radio, it is thriving on the back of vinyl records, perhaps the epitome of low tech.

"I try and price them as low as I can to give people a good deal," owner Mark Thomas says. "People can shop for the same things online. They can get them anywhere so I have to offer a sharp price."

As well as a retail store, he operates a Facebook page and a website with an growing catalogue. He's also recently posted videos on YouTube of him flicking through album covers to give customers a quick look at what he has to offer.

"It's definitely harder than it was 10 years ago," he says.

"Main street retailers have still got the same expenses but there are less and less people coming through the door. It's got to hurt at some point.

"But it's hard to say what's going to happen. Five years ago, no-one had heard of Facebook or Twitter. With broadband getting faster and faster, things can change quite quickly, but at the end of the day I am dealing with a product that has been around for decades and decades and still being bought and now younger people are buying it."

That niche may not last long. With vinyl becoming increasingly popular, rumours are that big players like The Warehouse and JB Hi-Fi are looking at entering the market.

Even if that is the case, Vinyl Countdown's small size and ability to know its customers by name may actually ensure its continued success in the new retail age.

"It's become a focal point of the music community," Thomas says.

"People meet in the shop. It's become more than a music shop. It's a place where like-minded people get to meet and talk about things.

"You get to know people, get to know what they like so that when something comes in you can give them a call."

Taranaki Daily News