Clicks vs. bricks: what the rise of online retail means for service businesses

BNZ recently released its Online Retail Sales Index, which showed that online retailing grew at three times the rate of traditional bricks and mortar last quarter. And that’s both frightening and exciting, depending on which side of the fence you sit on.  

A flurry of related articles appeared to support the data, like this one about Brent Cooper from Jet. I’ve known the Coopers a very long time and I can tell you that they are extremely switched on. They’re excellent retailers. But they have found the market shifts just too difficult to justify the expense of a ‘bricks and mortar’ retail outfit. Basically, online killed the retail star.

When you start to examine the numbers, you can see how it happened. Absolutely phenomenal figures are being reported. New Zealanders spent nearly $2.8 billion online last year alone (and 42 percent of that went to offshore websites). ‘Show-rooming’ is a real thing. I’ve seen it in action.

With online shopping up 13 percent in the last quarter (compared to the same period, year previously), there’s now absolutely no doubt that people are rapidly shifting to online from bricks and mortar. As it was reported and suggested, unless you are a very well known ‘chain’ store (check out the excitement around Zara moving to New Zealand in this post), you’re going to struggle to remain relevant, even in a mall with a huge amount of foot traffic.

The message is clear: you must build your online business. This is no longer solely about marketing your brand, this is about a fundamental shift in consumer behaviour. Recently I was invited to speak to the global chief executives of a very large New Zealand business, who for years have operated under a ‘make product, advertise it on TV, get sales, make next product’ business cycle. My message to them was, “the new world order suggests that your model will not work for much longer”. Consumers have become incredibly savvy, they are looking to get more bang for their back. Entrepreneurial and challenger brands understand this and are capitalising on it by also being relevant and interesting in a socially-led world.

But hey, don’t be up and arms about ‘bargain hunters’. This isn’t about the ‘cheap’ set of people who don’t value quality. It’s not that at all. In fact, the trends are shifting away from deals and into value. That’s where we’ve been successful at Flossie.com. We don’t focus on a ‘daily deal’ approach. In fact, we avoid it. It’s about how do we ensure our customer gets the best value for their money. Value to them means the best service, the best treatment and outcome (of where they feel great, for the best price). They understand inherently that if you pay peanuts, you’ll get monkeys, but they also know that they have more bargaining power than ever before. Where once they were told ‘you need to book weeks in advance’, they now have choice and can opt for last minute. This suits today’s lifestyle.

As a service-based business you’re not excluded from any of this. The choices people are making online include booking with your business. According to the nzgirl.co.nz insights monitor (October 2013), 86 percent of all purchases made are being researched and decided in the online world. So even if you do operate a traditional bricks and mortar operation, your ability to put bums on seats is utterly down to your ability to market and sell yourself online. How easily accessible are you? How are you positioning yourself to get some of the $2.8 billion in online sales?

Let’s take a closer look at what’s going to be happening in the online service market: right now you’ll find that a lot of emphasis has been placed around online retailing of physical products (clothing has experienced massive growth). We predict the next mega trend will be in driving services to be booked via online. Once the domain of just hotels and travel, the channels we’ll see pushing us to commit and pay for their services online (before heading to their physical location) will include hair, beauty, medical, fitness, mechanical and pretty much anyone who sells time.

The tools to help you sell yourself online are already here (most of the salon software systems have now gone ‘cloud’), but now the emphasis will be in trying to connect the dots. Creating customer funnels for the bookings—and more importantly re-bookings. Bringing customers towards your business when they’re interested (having a handle on what they need, when they need it and how you can deliver it). Making life easier for your customer.

Some savvy salons have their heads around this. But for most it’s a minefield of seemingly overwhelming tech jargon wrapped up in a frightening moment of ‘where the hell will I find time to do this?’ Some are just throwing their hands in the air and choosing to rely on existing customers to book and come back when they’re ready. Hey, they’ve known you for years. You provide them with a service that is exemplary and you’re comfortable that the loyalty will be two way.

Sadly, we remain unconvinced that the approach will work in the long term. And that’s no slight on output or quality, but a reality of the convenience factor required of service-based businesses today.

  • Jenene Crossan is a director at Flossie.com

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