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December 5, 2011 at 1:29 am #976090vacshop.com.auMember
- Total posts: 10
with the ever present stories in the mainstream media of retailers ripping australian consumers off blindly with huge 1000% markups (well one would think so the way its presented to the unknowing average public servant wageslave) & the internet stores oversea is so much cheaper.
my questions are for the forums readers out there, are the great challenges for retail being the perception of profits or the reality to consumers that have zero idea of the cost of running a business in australia??
has the retail world changed, as a secondary income source you can startup a website and list products images at 10% on cost to make a slim margin and undercut exsisting B&M/online stores but just fill orders by dropshipping direct from the supplier so you dont carry any physical stock and the associated costs involved with that BUT all the consumer sees is CHEAP PRICES so the perception is most australian based bricks & mortar retail is a RIPOFF??
your thoughts…December 5, 2011 at 2:32 am #1078616Past-MemberMember
- Total posts: 1,815
Re: Retailer Ripoffs vs Online bargins??
My thoughts …most people have no idea what it costs to run a business and they ‘perceive’ that the profit a person makes is all for the business owner. Little do they realise how much is involved. And I agree that their perception is incorrect.
Yes, there are some companies that do rip customers off; but there are so many more who are genuine and trying to provide great service and an experience in purchasing an item.
Yes, I have researched items myself online – but I try my local retailers first. And if they are close to the price, (or are willing to go near to it), then I will always purchase first from them. Even if it’s up to $30 difference I would still choose the local retailer because I understand business expenses.
It’s about experience, and after-sales service – and being able to discuss the item and getting help if needed. That’s what the bricks and mortar businesses should focus on. The experience is so important.
When a customer has a great experience with a salesperson, and feels good about their purchase, then they are more likely to return and recommend.
Recently I purchased a new car. I ended up returning to the company and salesperson of almost 3.5 years ago because of the great experience, (which was just as good this time), and because all the others I went to treated me more like a number or non genuine enquiry. He listened, without pressure, and just kept trying to fulfil my needs and was genuinely interested. And I absolutely love my purchase.
Interested to hear other thoughts.December 5, 2011 at 2:42 am #1078617Shaukat Adam KhalidParticipant
- Total posts: 1,528
Nothing to do with online or offline or even retail.
People feel ripped off when:
1. they believe price should be based on hard costs (forget them)
2. they have not been educated about value. (seller’s fault).
A ferrari sells for 10X more than a mercedes.
Does it cost 10x more to build? No.
Is it 10X faster or better in performance? No.
Will it get you to close sales 10x faster? yup
Will it get you contracts that you can only dream off ? Yes!
Will it get you ultra high value clients? yes
Is it worth it? yes.
is it a rip off? not to me but depends on your mindset. Ferrari has done it’s job positioning itself as a premium product for the rich. They dont sell cars. They sell prestige and status.
retail stores are not a rip off but if they can’t differentiate and reposition themselves from online competition so comparison are like apples to oranges, they are bound to close.December 5, 2011 at 3:58 am #1078618::
Sadly it is now ingrained into people’s head the notion that online is cheaper.
The equaliser for many products is shipping. Lower cost items are much less attractive when shipping is added. I sell software and people baulk at the $10 delivery price on $200 software (even though my dropshippers charge me $11.50)December 5, 2011 at 4:19 am #1078619dextereugenioMember
- Total posts: 536
i have owned and run both retail and online stores.
when i buy personally, i use both retail and online stores.
your question confuses me so ill just put down what i think.
i buy retail when i want something now (usually). i buy online if i cant get it locally or if its dramatically cheaper online (incl shipping).
i seldom buy big ticket items online purely for the warranty factor.
there are certain industries where buying online is a huge save. cycling and its associated parts and clothing are much MUCH cheaper online whereas computer parts for example, are just as cheap retail (if not cheaper) than online.
retail is definitely dying and i think it’s more due to the availability of secondhand or imperfect products AS WELL as cheaper or “just as good” products available online locally and overseas.
smart buyers buy retail after researching online pricing. they would then approach the retailer with that info, and though the price may not be matched, other incentives could be thrown in (ext warranty, free delivery, other additionals). etc
after reading all that, i dont think i make any sense at all!December 5, 2011 at 4:29 am #1078620::
as a secondary income source you can startup a website and list products images at 10% on cost to make a slim margin and undercut exsisting B&M/online stores but just fill orders by dropshipping direct from the supplier so you dont carry any physical stock and the associated costs involved with that
For many products your cost of fulfilling the transaction could amount to 10% markup.
The issue is further clouded by online competing with B&M, and online (AU) competing with online (China). There are increasing numbers of Chinese sites effectively marketing into Western markets and offering shipping and transit times not much different to local onliners.December 5, 2011 at 4:55 am #1078621bluepenguinMember
- Total posts: 1,026
I think we’re all guilty of underestimating the cost of running a business.
I’m sure pretty much everyone here would have, at some point sat down at a cafe and thought, “It doesn’t cost $3.50 to make a coffee!”, or “I could buy this piece of steak at the supermarket for $8 and they’re charging me $30!”.
It’s so easy to forget about the cost of rent, staff, insurance, electricity, marketing, cleaning, tax etc. and then conclude that you’re being ripped off.December 5, 2011 at 6:15 am #1078622::
Apples for apples, it’s hard to pay more for some items and when an online store has a fraction of the cost of a bricks and mortar business they are always going to be on the back foot UNLESS they deliver value to compensate for the difference. Now value is pretty subjective and can be speed or convenience of having the item at transaction, or it could be the experience. Yes we could make coffee cheaper or have a steak at home but the experience is what has most people paying the difference. The retailers that aren’t struggling as much are those that are delivering value and there are a few in most categories. Those struggling are often the ones that have the same strategies pre online competition and this no longer represents the value that savvy shoppers are looking for.December 5, 2011 at 9:27 pm #1078623James MillarParticipant
- Total posts: 1,738
This is a great topic and there have been some very interesting opinions. Being privey to a very wide range of data across just about every type of business and industry, my take is that all of the views are partially right.
1. There is a misguided perception that the average small offline retail business is enjoying high gross margin (the gross margin being the best measure of general mark up). There average is not what I would consider spectacular (subjective in know). Most big brand products have Australian distributors that actually enjoy the same or higher gross margin on a lower risk business model. Until this is addressed the big brands (and their retailers) will continue to lose ground to online eBay etc. Distributor models in Australia are not sustainable.
2. There is a misguided perception that small offline retailers enjoy high net profit margin. Obviously net margin takes into account the overheads of running a physical store and in Australia this can be very high. Commecial rents and wages are a killer here. Commercial rents in shopping centers are not sustainable for most small businesses. Commercial property trusts that own these malls are in for some pain in the next 10 years. Wages are also a problem. Regulation and general employee expectations are unacceptable. Despite what people think we have a high standard of living in Australia and people still complain. The younger generation are use to relative prosperity and opportunity and they are not prepared to engage in long term employer loyalty.
3. For an offline store – a core part of providing better service and value (to counter their price disadvantage) is having staff that are enthusiastic about customer service. Again this is a major challenge. We have great staff at every business we are involved with but I am under no misapprehension that they are not watching the clock – generally they would rather be elsewhere and too often this comes across to the customer (not good). Note this is not our advisory firm staff who are of course first class in every way
4. New technologies will continue to make online buying a better experience and closer to the touch and feel of traditional offline. These are not science fiction – they will be rolled out on a wide scale within 3 to 5 years. Offline businesses should not be complacent here.
My view is that offline businesses should ALL seriously consider running parallel ecommerce operations to help counter the effect on their business, improve their general net margin and mitigate the risk of having all their eggs in offline selling. Running a shopping cart is now easier than ever. $100 a month and you have a turnkey solution that will work acceptably well. Setup in no time.
Embrace technology in business – its a vital part of maintaining a competitive advantage and without that you are a dead duck.Helping build better businesses and better lives with expert financial and taxation advice. firstname.lastname@example.org www.360partners.com.au 03 9005 4900December 5, 2011 at 9:43 pm #1078624Shaukat Adam KhalidParticipant
- Total posts: 1,528
Let’s not forget the fundamentals of business success:
1. Strong USP
2. Niche marketing
3. Irresistable offer
4. Great relationship with your list.
5. Anticipating and embracing change
Its easy to get distractedDecember 5, 2011 at 11:57 pm #1078625::
Commercial rents in shopping centers are not sustainable for most small businesses. Commercial property trusts that own these malls are in for some pain in the next 10 years.
I agree 110%
It would be great to see their model change (everything from high rents, up to 20% of turnover as fees and compulsory shop refitting every five years at min $5k) and allow innovative independent businesses into malls, rather than subject shoppers to a bland presentation of chain outlets that are found in every major centre.December 6, 2011 at 12:11 am #1078626AgentMailMember
- Total posts: 1,741
For me personally, I see retail businesses that are just not agile enough to survive in today’s market. I will use an example close to my heart, the cycle store.
Now personally, I would never buy a bike online, but I wont hesitate to buy some inner tubes, clothing etc. from online, where the prices are dramatically lower, and I do not need the aftersales support of the retail.
The problem with the traditional bike store, is they are too stuck in the traditional bike store mentality. They need to think more laterally about how to encourage more people to the store. For me, I would be using an area of floor space for a cafe, another area for spin classes, an internet bike zone, where people can shop online for bike stuff. Getting people through the doors is sometimes half the battle, and I think that if businesses were to move their focus from margins and % to foot traffic and experience, the former would take care of itself.
Think win-win not win-lose with the online/retail space
Just my opinion of courseDecember 6, 2011 at 5:26 am #1078627::
Have you noticed how many bicycle stores are opening up and have you tried to book a service lately? It’s been about 4 years in a row now that more bicycles have been sold than cars, it’s a very fast growing segment and yes they may be losing out to a fair bit of online parts and accessories but those that have sound business acumen and recognised brands are doing really well with bikes and service. There are even a few that are also online and matching prices with the big online stores from UK and USA. I get what you’re saying as far as traditional vs. future business model but bicycles are doing really well in comparison to some other segments.December 6, 2011 at 6:28 am #1078628James MillarParticipant
- Total posts: 1,738
I’ve seen a lot of bikes stores come and go here in Melbourne. Seems there are a lot of bike enthusiasts that think they can make it work – same old story letting passion govern decisions. Definately a growing market but I’m not sure where that spending growth is going (a sizable percentage offshore imports). I think competition is pretty high as well.Helping build better businesses and better lives with expert financial and taxation advice. email@example.com www.360partners.com.au 03 9005 4900December 6, 2011 at 8:39 pm #1078629::
Yes James in all categories there are enthusiasts that let passion govern decisions and they are often part of the high failure rate. My proviso was “those that have sound business acumen and recognised brands are doing really well with bikes and service”
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