Retailers pin hopes on online buyers

BY WILLIAM MACE

Kiwis will flip their calendars over to September this week and be greeted by pictures of new-born lambs and blossoming flowers. They will start to feel better about life and, if the prayers of retailers across the country have been answered, they will buy something, anything.

But for their first venture into the market after winter hibernation, it's increasingly unlikely that they will even step outside the front door. This year it's a good bet that more shoppers than ever will do their purchasing online.

With cheaper, faster broad-band internet connections penetrating further into New Zealand's communities – 63 per cent of households had broadband in 2009, compared with 33 per cent in 2006 – it's becoming uneconomic for Kiwi retailers to leave their online push any later.

Every man and his dog-shampooing business has a website these days, but "going transactional" has become the buzzword among retailers, who are now seeing establishing e-commerce sites as investing in the future of their businesses.

Bricks and mortar stalwarts such as The Warehouse, Mitre 10, Glengarry, Whitcoulls and Progressive Enterprise's Foodtown and Woolworths supermarkets have all turned their brochure sites into online stores. Even if customers don't buy online, they appreciate browsing the product range and comparing prices.

According to Statistics New Zealand, the percentage of internet users who used their browsing time to obtain information about goods and services rose from 65 per cent in 2006 to 74 per cent in 2009.

In the same period, the percentage of the entire population that had made a payment online during the preceding year increased from 29 per cent to 43 per cent.

The rising popularity of debit and credit cards can only contribute to online shopping.

Retail Association spokesman Barry Hellberg says the trend is undeniable and retailers are following customers online in droves. "There's absolutely no doubt that the importance of online trading has increased markedly in the last five years, not only through many more retailers offering online sites, but increasing numbers of traders offering the ability for consumers to buy online."

The Warehouse is jumping on the bandwagon: the company's website "went transactional" a year ago and the customer response has blown away Richard Harrison, head of multichannel development for the nationwide "red shed" retailer.

The site now has a product range of more than 10,000 products, including the most recent addition of whiteware and furniture. Mr Harrison says the site averages more than half a million visitors each month, and hits a million visitors a month during peak shopping periods.

"Customers are in the online space and there's real competition now coming from global retailers, so the marketplace is moving," says Mr Harrison.

TheWarehouse.co.nz was recently voted by NetGuide readers as the nation's best online shopping site, beating MightyApe. co.nz, which had won the title four times in the past six years.

The switch is indicative of the broadening of the consumer base that is shopping online: MightyApe has served a tech-savvy, video-gaming online community since the mid-1990s.

Founder Chris Barton launched into e-commerce long ago, got rid of his bricks and mortar store and extended the site's product range to include computer hardware, electronics, DVDs, CDs, books, toys and collectibles.

It is a well-established niche, but competition from retail giants such as The Warehouse can't help but crowd more than a few domestic markets.

Until now, competition for local retailers has been from international companies, especially for the commodities of music, movies or books that can be bought cheaply and shipped quickly through Amazon.com, eBay.com or Apple's iTunes store.

StrawberryNet.com is a discount cosmetics and perfume retailer based in Hong Kong, but which sells into 49 countries with no shipping costs.

Shaun Ryan, of Christchurch search and navigation specialists SLI Systems, says 95 per cent of his work developing and upgrading e-commerce sites is for overseas clients, mostly in the United States.

But local retailers are waking up to the possibilities of online retailing, despite the recession.

"Retailers were hurt during the recession and online retail wasn't immune to that, but it did fare a lot better. It was one of the few sectors that continued to grow through the recession."

Mr Ryan says growth in online retail in the US slowed from 25 per cent to about 10 per cent during the global financial crisis, but is starting to pick up again.

"The recession probably highlighted that when everything else is so bleak in the whole retail outlook, to have a bright spot that's still growing does cause some attention to be paid to it."

SLI Systems' clients include Warehouse Stationery and Noel Leeming, and it has worked with Dick Smith in New Zealand for about six years. Like MightyApe, the popularity of the electronics retailer's site has also benefited from a technologically driven consumer, says Mr Ryan.

"They've always been phenomenal in terms of the amount of traffic they get to their site, and it's partly because their audience is quite techy, but e-commerce has moved mainstream. You now expect to be able to do the same for your clothes shop, or if you want to buy something as mundane as stationery.

"Consumers definitely want it, they expect it and are frustrated when they go to a site and can't search through and find the products, but traditional retailers have taken quite a while to get their heads around it."

Ralph Brayham is the former head of Telecom's online shopping portal Ferrit.co.nz which closed last year. At that time Mr Brayham told The Dominion Post that retailers weren't prepared to "invest in what they see as a potentially high-risk thing over the next couple of years, being online" – an investment that the site desperately needed.

An example of a more economic model, Lasoo.co.nz, launched earlier this month promising to be New Zealand's leading "pre-shopping" site.

Lasoo browsers can search catalogues from retailers, including Bunnings, The Warehouse, Paper Plus, Nosh, PGG Wrightson and Farmers, but are directed to the retailer's own site to make the actual transaction.

Mr Brayham says the Government's planned investment in broadband infrastructure is already stirring activity among traditional retailers.

- © Fairfax NZ News