When Gerry Harvey went into battle recently for a 10 percent tax on overseas online purchases he set off an explosion which resulted in most Australians suddenly becoming aware that a lot of retailers are price gouging when one compares the overseas cost of a same brand product to that being sold in an Australian retail store.
It also exposed the online weaknesses of several major retail groups such as Harvey Norman, The Good Guys, Betta Electrical and Retravision who primarily operate as franchisees.
Online today is no longer about having a web site and a transaction engine. Online is about delivering choice, competitive pricing and above all having the engines in place that allow operators to deliver a first class customer experience.
Email marketing and product tracking engines that allow consumers to track their purchase on a mobile or tablet are essential and so is bar code linked technology that allows consumers to access the latest information about a product or Company.
A web site and a transaction engine was web 01, smart retailers in the US and Europe are now moving to web 03, with content openly available in several forms on multiple devices.
Groups like JB Hi Fi who already has a web site and company-owned store operation can respond quickly to change. Franchise operators are not in the same position, as Harvey Norman has recently found out.
To have to carve out an online margin for a franchisee and an operator like Harvey Norman or A Good Guys, instantly creates a layer of margin that non franchise operators don’t have.
Then there is the issue as to who the franchisees are competing against. Is It Harvey Norman Vs The Good Guys or is it Harvey Norman Vs Amazon or E Bay store operators who are able to ship from overseas warehouses direct to an Australian consumer.
These operators already have the technology that allows them to engage with consumers across several levels and several continents.
They have the comparison pricing engines and the engines that prompt the sale of an accessory or extended warranty purchase, which in a lot of cases is supported by vendors who are moving to global warranty programs for their products.
They also have the bar code technology that confirms instantly when a product has been delivered to a customer.
Going forward, an Australian retailer is going to have to think global to compete locally.
Working in their favour is the fact that Australians will pay a higher margin to buy locally. A recent Australian Institute research study revealed that Australians expect to pay a difference between 20 and 35 percent for an Australian delivered online product. Anything above that and the consumer will shop online.
This presents big problems for a franchisee that has neither the technology nor the knowledge nor the funding to compete in an online environment where the benchmark is being set by a big global operator such as Amazon.
By late 2012 we will see several Australia retail operators roll out overseas linked and operated web sites. Companies like Myer are already giving it a go. This will add a further level of competition as Myer battle with big brand players that are linked to organisations like Google and Amazon.
