Monday 24 June 2019

Stand and deliver: Irish retailers ready to step up to online challenge

Huge growth in online shopping deliveries is great for An Post, but digital revolution can also click with traditional firms, writes Samantha McCaughren

'Despite the tens of thousands of online purchases being made by Irish consumers every day, retailers here are adopting quite a positive stance in relation to the challenge'
'Despite the tens of thousands of online purchases being made by Irish consumers every day, retailers here are adopting quite a positive stance in relation to the challenge'

Christmas has always been a busy time for An Post, traditionally for the massive volumes of Christmas cards making their way to homes across Ireland and abroad.

But last Christmas was significant for another reason - the huge increase in its parcel business. Although this was due in part to An Post's new focus on the parcels division, it was also reflective of the massive influx of online purchases into Ireland.

Garrett Bridgeman, managing director of An Post's mails and parcels business, said: "We've seen an absolute massive growth in online shopping, up 40pc in 2018 over 2017. But very significantly it was up over 60pc over Christmas on the previous year, which is massive when you think about it."

The number of online purchases making their way to Ireland are staggering.

Last year, an Post delivered 42 million parcels, which equates to around 135,000 a day. Around 55,000 are domestic, which means 80,000 are coming from outside Ireland. Some 45,000 come from the UK, 25,000 from China, 10,000 from the US and the remainder coming from the rest of the world. The majority of these parcels coming in from all over the world are retail purchases.

It is great news for An Post and other delivery companies, but for Irish retailers, the volumes of incoming parcels represents growing pressure on their own businesses.

Despite the tens of thousands of online purchases being made by Irish consumers every day, retailers here are adopting quite a positive stance in relation to the challenge.

"Online retail has changed the retail landscape completely, but it's not a doomsday scenario. Retail in Ireland has changed and adapted, not died," said Bryan Rankin of Retail Excellence. "For instance we now have a 'Golden Quarter' in retail in the last three months, we have a Cyber-Week in November, sales now before Christmas etc."

Arnotts and Brown Thomas managing director Donald McDonald also believes that retailers should not be afraid of the challenge brought by online.

"Good retailers - like ourselves and retailers that are about the customer experience - are thriving. We're very much a multichannel business, which is physical and channel."

Online revenue is growing at 30pc a year for the stores, which are now owned by the Selfridges Group, and now account for close to 9pc of total sales. The company has launched a Brown Thomas app, which accounts for a high percentage of its online sales, with activity growing all the time. Further digital enhancements are planned for both stores.

The good news for Arnotts and Brown Thomas is that its traditional stores are not suffering at the expense of that growth.

"Our footfall numbers are increasing. Our like-for-like sales are increasingly in-store," McDonald said.

McDonald finds that around 40pc of customers do research online before coming into the shop. "And over 50pc of what we sell online is click-and-collect, again people coming back into the store."

The investment in online is being done in tandem with investment in-store, and 'engagement' is a key word. Retailers have to work harder then ever to make their shops worth a visit.

While footfall may be up for Arnotts and Brown Thomas, IBEC's Retail Ireland has claimed that generally speaking, footfall is down.

The shift in trends is making retailers re-evaluate their business models.

Owen McFeely, retail and consumer practice director with PwC, said that while less than 10pc of all global retail is transacted online, some categories are being more affected than others.

Categories such as homeware, furniture and DIY have not been hit too hard, but fashion, footwear, music and books and among the categories seeing a shift of sales to online - and often to competitors based outside of Ireland.

"In the most affected categories, I would imagine those retailers will have seen an impact on store sales," said McFeely. "But retailers are starting to adapt their businesses to it. One thing that has started to come through now is a much greater occurrence of click-and-collect.

"There is a benefit for the consumer and there is also a benefit for the retailers as it's actually now driving footfall back into the store.

"Ikea is now starting to look at its business model and finding customers mightn't want to go to a big store, so it's putting its offer online and that drives the customer to smaller click-and-collect stores and there Ikea can showcase its top 200 products."

He said that a significant number of shop closures in the UK reflected a 'readjustment exercise'.

"They are saying that in the future, the number of stores that we have and the format of them just isn't going to work for the customer of the future," said McFeely.

Companies are having to make big decisions about plans for both in-store and online investment.

Emer McCarthy of the strategy and ecommerce director of Kilkenny Group said that retailers need to make sure their online choices match the business.

"You have to step back and understand your own customer. From our perspective, bricks and mortar is our bread and butter, but online is absolutely needed to keep us in business.

"From an online perspective, you've constantly got to keep investing in technology and you've got to keep investing in tools and analytics to understand and improve customer experience."

But she warned against a rush by Irish retailers to try and compete with international retailers. For example, offering discounts may not be viable or good for brands in the long run.

"In November and December, everyone is in discounting mode but is this really what the customer wants?" Retailing has to adapt to survive and we can see the impact where some international retailers have over-relied on discounting online and have subsequently closed their doors."

It can be hard for smaller retailers to compete because the bigger retail players internationally are setting customers expectations, like same-day delivery.

"For a small-time player, that is an expensive commitment to make. It is a tough playing field, especially for smaller retailers, to return a profit. Online requires high-volume sales to drive return. But the trick is to create a strategy which works for your business, otherwise it can involve high fixed costs and what you could find at the end of the day is actually, 'I'm not making any money out of this'. "

Kilkenny Group, which employs 350 people, marks itself by offering Irish-made products often not available elsewhere. It also prides itself on very strong customer service. The company is currently improving its own website "to create a seamless experience" between offline and online.

Rankin also believes that smaller stores need to tread carefully with their online plans.

"The shift to online is not just a major issue for big retailers, we really need to encourage the smaller operators that find it particularly daunting and don't know where to start.

"A classic temptation for high street shops is to try to replicate their shop online when they really need to be focusing on a small number of items and ranges that will transfer well to an online scenario and, crucially, cut down on costly customer returns."

There are other challenges, including making sure that staff are on board with online offerings and understand that digital also contributes to the bottom line, which can ultimately ensure that bricks-and-mortar shops continue to thrive.

Gail Banim, ecommerce director at Anthony Nicholas Group, owner of Fields jewellers, said that a shift to online can require a switch in mindset for staff. For example, click-and-collect - which accounts for 42pc of the company's online sales - won't have involved the input from a sales person and the rewards which might typically go with it closing a transaction.

"We have an awareness in the business that click-and-collect is important part of the day-to-day. It's how you roll it out, the training and the fact that [staff know] you get kudos for click and collect."

The company is close to launching an upgraded website, which will allow people to book online consultations and other improvements.

"We know that our website is part of people's offline journey too. It is very much a marketing tool, but it can't just be a picture of your product, it needs to have all the bells and whistles - multiple pictures of the product, a zoom feature to look at the details. It's lovely to spend time poring over the details and picking the products that you love the most. And you can't do that with a rubbish picture."

Like other retailers, Fields needs to make sure the online experience matches the service people would expect in store.

There is little doubt that the onslaught of competition from international retailers will continue. An Post is certainly readying itself for considerable growth.

Said Bridgeman: "I spend a lot of time in the UK meeting all the e-tailers, Amazon and all of these and they see a huge opportunity in Ireland to grow their volumes even further, the reason is Irish people really have a big attraction to UK brands.

"UK retailers have realised that we spend about half what the UK spends online per person, but we catch up fairly quickly."

Bridgeman is expecting parcel volumes growth of at least 15pc. This is possible partly due to changes in how An Post does business, offering better delivery times to online retailers, such as weekend deliveries, for example.

"The retailers are seeing is a big growth opportunity. Amazon have teamed up with ourselves to double our volumes into Ireland over the next 12 to 18 months. We've doubled Amazon in the last 18 months."

McDonald, however, believes Irish retailers will be up for the challenge. "It's helped everybody up their game," he said. "Online is not the enemy far from it. Bad retailing is the enemy."

Sunday Indo Business

Also in Business