I am recently returned from a holiday in New York. I went with my gorgeous wife, a girl that I have been with for some 12 years. In all that time I have never known her to get quite so excited about shopping as she was in NYC. It was like hanging with an aroused shark. She tore from shop to shop gorging on one bargain after the next.
I have to confess to being impressed by many of the shopping experiences that I witnessed. Sales staff were attentive. Even though the prices of clothing were extremely discounted (up to 50% off prices that were already between 25 and 50% cheaper than we Aussies are used to) there were always plenty of staff to serve and they all did a great job of sucking every last penny from our willing wallets!
I turn my mind back to my most recent Australian shopping experience as a point of comparison. One Saturday am, I visit Doncaster Shopping Centre with the express intention of purchasing some new work shoes. I go to my large department store of choice (probably no point in naming it specifically as they seem to be much the same anyway) and make my way to the shoe department. I take some time to browse the shoes and find a couple that I like, all the while waiting for someone to assist me. But no one comes. I wait, and I wait. I finally tire of waiting and notice a staff member in the distance serving some chaps trying on new shirts. There is also a staff member manning a check-out counter. Given that I need someone to actually fetch the shoes I have chosen in my size I wonder over but am horrified to find that there is a queue of equally frustrated punters waiting for someone to assist. After a further 5 minutes of frustration I threw the shoes I was carrying in the general direction of the shoe department and left in disgust. They were too expensive anyway.
I think retailers have a few hard choices to make in the near future. There is no doubt that the savvy shopper is cottoning on to the fact that someone (manufacturers / wholesalers / retailers?) is profiting too much from us and that a bargain is only a click away. People are wary of spending too much at present but there is money about. Give them a bargain and they will buy it but shops are reluctant to drop their gross margins for fear of not covering costs.
Our retailers have problems – they can’t buy in the quantities that others like the US can, though it should in theory be cheaper to get it here given Aus is much closer to China than NYC. Our staff are more expensive than almost anywhere else in the world (which is not necessarily a bad thing) but our focus on training them is not as good – ie I would have a guess that we do not get the sales per staff member that many of the groovy shops I visited in NYC would be getting. Finally rents are high.
Retailers are hence faced with a challenge. If you halve the price (and hence gross margin) to match overseas competition, then you need to sell twice as many just to make what you are making now, which is invariably not enough.
Overtime rents will need to come down but it will take many businesses being unable to pay them before this will occur. Staff prices at best will stay the same. This leaves the shops with better buying, and use of better sales staff and shopping environments as the main opportunities to change. Shoppers will pay a small margin to retailers for the instant gratification of purchasing in the shop but getting the price right will be the challenge too.
In the meantime though remember that your bank is sitting reading the newspapers and listening to your competitors complain about their difficulties. Do not surprise them with bad news. Get on the front foot and explain to them what you are experiencing and what your plans are to fix the pickle that you are enduring. Feel free to contact Pearl Finance if you would like to discuss your plan before you communicate it and we can assist in making sure you get the story right.