With the Reserve Bank sticking to its wait-and-see approach, the recent decision to keep interest rates on hold came as no surprise. And while we’re yet to see clear evidence of growth emerging beyond mining, last week’s release of retail sales data will no doubt provide a glimmer of hope for the central bank and retailers alike.
What better timing than to announce the second coming of Click Frenzy – testing both the pent up demand of the Australian consumer, along with our collective memories.
For those who missed it last year, Click Frenzy was to be retail Australia’s answer to global online competition. Billed as the sale to stop the nation, insufficient information technology infrastructure (or wildly successful subscriber numbers) crashed the website the moment the sale started.
In the end, it was the nation that stopped the sale and the refresh button that got all the clicks.
The failure led some retailers to dryly note they still had a bit to learn about the internet, so it will be interesting to see how far they’ve come in a matter of months.
Consumers will need to be convinced too. Following last year’s flop, an online poll conducted by smh.com.au asked “Does the Click Frenzy setback put you off online shopping with Australian retailers?”
Sixty eight per cent responded yes and with good reason.
Aside from poor infrastructure, shoppers were left decidedly cold on some deals that required minimum spend. Even worse were “sale” prices on items that offered no discernible discounting or remained cheaper on overseas sites. Rather than fighting back against international competitors, many local retailers instead gave themselves an uppercut.
The price is always right
Ongoing efforts to harmonise prices, exit unprofitable categories and move to omni-distribution channels have lifted the fortunes of some major players lately. Those that have managed to lift sales have also enjoyed a boost in their share prices.
However, we still consider that traditional bricks and mortar retailing is at a structural disadvantage. While Australia does have some promising online businesses, it is internet giants such as Amazon that continue to set the standard and are positioned to thrive in the digital economy.
Amazon has evolved remarkably in its relatively short history. From an online bookstore, the company has expanded into a wide range of categories, excels in logistics and pricing, and surpasses its peers in the customer experience. In short, it has revolutionised the way many shop and this is before you delve into the array of other services the company offers today.
The success of Click Frenzy 2.0 will be interesting to watch, though we suspect consumers will continue to look for the best deal regardless of the date or place of purchase. This behaviour could also serve investors well. The fight between traditional bricks and mortar and the global giants looks decidedly one-sided.
Patrick Noble is a senior investment strategist at Zurich Investments
