If I had a dollar for every whinging column-inch where our Australian newspapers copy and paste press releases from Myer, David Jones and Harvey Norman’s PR departments, blaming the dreaded interweb for the end-of-days in our retail stores, I’d be wealthy enough to buy my Levis from DJs all the time. Which is another story, but to be fair, a related one.
As data from Marketing Magazine recently reported, and as I have duly illustrated above, online sales (the pirate) amounted to a mere 4.9% of total retail revenue in Australia. You’d think it was 49% the way the captains of industry are moaning! You would have to take the 15 top-ranked etailers (look away venture capitalists) to beat Myer’s sales in 2011.
Three quarters of those etailers are Australian based (like recent Melbourne niche 
startup Oola Toys, catering for quality kid’s toys online), belying the hysteria that the foreign pirate devils are plundering our shores.
Like pirates, etailers are moving fast and nimbly, growing 29% per year, but it’s a perilously small base, and although the power of compound growth of that kind is well-noted by economists, the pirate’s flag was visible from a great distance.
In the long run, can ye olde worlde Australian retail survive this onslaught from the internet? Will websites that enable people to self-serve, in their own good time (websites rarely snear “you’s been fixed?” while texting their mates on their iPhone), with near perfect information on price and quality, put bricks and mortar to the sword?
What’s particularly disturbing as Luna Tractorites, is that while we wait for the millionaire boys club to figure it out, the Australian retail experience just seems to get worse, accelerating our move online. As management consultants advise the command and control CEO-classes that the only sure-fire road to profit is cost reductions, they cut wages, staff numbers, staff benefits, premises and service.
I just don’t buy all their complaints about retail rents and wages. As this report on the state of Australian retail by The Australia Institute shows (yes, I know, they have an axe to grind and I should declare, distantly linked to my new employers), there is plenty of misinformation being spread at present to discombobulate us all.
Australian CEOs should know by now that by their very nature, big consulting firms will only recommend a cost-cutting program, since a well-known result of an ideas or innovation-based strategy is that some of the ideas won’t work. Cost cutting always gets a result for a CEO, and since they’re only going to be in the job 2 years, the next guy can handle the fallout.
The less than 5% of Australian retail sales that ecommerce plunders appears to have undone the psyche of the highly paid leaders of our big retailers. Their inability to grasp pure online is only surpassed by their choking over their morning tea and tim-tams trying to figure out how to make online and bricks & mortar stores work together. Which the rest of the world has had a better go at I might add – according to the Marketing article, 13 of the top 15 etailers have a bricks and mortar presence of some kind.
The web is growing fast too, off that tiny 4.9% base, and it appears nobody near the top of big retail has a single good idea to play. Remind me again why we pay them so much?
To add final insult to big retail’s EBIT injuries, the Australian ecommerce industry is still sexy, bright and cool 12 years later – and still attracting talent and investment. And more often than not, attacking using small teams moving fast and agile.
Luna Tractor sent me to the USA in May 2012, the land of BIG retail, and I am pleased to report that whilst on assignment, I have seen the future.
Knowing a fair few camera nerds (James, Gus, Jamie, Steve I am looking at you all), they often recommend a website called B&H Cameras, based in the USA, as trustworthy, value for money and easy to deal with. The 3 horsemen of the retail apocalypse.
And thus, being in Manhattan for a few days, I felt duty bound to check them out.
The approach, from Penn Station through roadworks and fairly drab streets did not auger well. The only retailers in this area were basic, small and a bit sad looking.
Eventually I spotted a nondescript B&H sign, and a couple of traditonally dressed and coiffed Jewish guys sitting outside the door to a loading dock, looking exhausted from their morning’s work, and seemingly pleased to be in the open air. Hmmm. Entrance round the corner. Okayyyy.
Round the corner, in the front doors and BAM! Like a cross between Penn Station and Willy Wonka’s factory, there are people everywhere, and the zziiippp, zzziiiippp sound of machines, rollers and gears. I look up to see green boxes flying around gantries above our heads at high speed, like a Terry Gilliam film.
Photo from wikipedia
With electronics gear everywhere. It’s about the size of a decent JB HiFi store in Australia. On each level!
It is immediately explained to me I should check my hand-luggage in at the concierge, and then I’m free to head into the store.
Nondescript on the outside, treasure trove on the inside. Hundreds of customers, and dozens more of those mysterious traditionally-dressed Hasidic Jewish men. They are everywhere, chatting to each other, chatting to customers, laughing, looking serious,
Level 1 of B&H
debating, calling out to one another. I quickly get the picture they own and run the business.
My genuine requirement (and yes, there is one my dear family) is a couple of packs of Polaroid’s new zero ink ‘Zink’ printer paper, for the gorgeous little GL-10 portable printer we use. It is portable, battery powered, and most importantly, emulates the look of a genuine old Polaroid camera print. Essential cool.
Having bought the printer at Michaels in Melbourne, I figured I would acquire more paper on the road in the USA easily enough. I figured 100% wrong, as I found in San Francisco, Minneapolis and Boston. “Polaroid?” they all said. “What’s that?” or “they went out of business”. Even the specialist camera stores blanked. At worst I got the surly ‘haveaniceday’ which translates to ‘whydidIwastetimeonyouloser’.
I wandered upstairs at B&H, seeing the family safely despatched to check out the world’s largest 3D televisions, and am once again taken aback by the sight. Not dozens of Jewish men, but hundreds.
Product is divided by brand, and by categeory. A whole shop-sized stand of Canon cameras, of Nikons, Leica, and Olympus. Printers arranged accordingly. Historical displays. Apple computers, Sony, you name a brand, it’s there. I am drawn to the Polaroid and instant camera stand, and to my utter disappointment see their old Pogo printer and a paper rack saying ‘out of stock, new product coming soon’. Images of the Lady Gaga designed GL-10 printer as a paper weight flash into my brain.
“Sir, you look like you saw ghosts” says a man at my elbow. I explain my problem, what I want, and he steers me by the elbow – “it’s not my area, but come over to where the printers are, we’ll see what we can do”. I am introduced to the 3 printer guys, who have the tiny range of Polaroids (there are only 2 printers, and a couple of cameras) on their shelves.
Then my server shocks me – he opens the freaking company website on a computer on the stand! I quickly jump to the conclusion that the game is over, and I’m about to be sent home to order it on the web.
To have a retailer even admit they have a website is rare enough, but using the site within the store to actually assist a customer even rarer. There’s no commission on that sale surely! Having got a visual check on what I want through the use of a quick search, the guy CTRL-C’s the product SKU, alt-tabs to another boring old mainframe looking screen, pastes it in, and whammo, we have an order.
“Were you thinking of anything else on today’s visit?” he asks. As it happens, I have ummed and ahhed over a simple 50mm f1.4 lens for shooting indoors for a while. “Do I have to go somewhere else for lenses?” I ask. “No, no, if you know what you want we’ll find it” comes the confident reply. One website search, visual confirmation, cut and paste of the SKU, and I am done.
The B&H service counters where you inspect the goods brought up from the warehouse. Spot any queues here?
I now expect my guy to take me to a till and ring it up. Silly me. Nor does he point and tell me to wait in the queue over there. He TAKES me to a free service person at the biggest customer service counter I have ever seen (I counted about 70 stations), and introduces me to the next guy in the chain. Then he waves goodbye and goes back to the printer display.
I have a small ticker-tape printout in my hand of the items, with a bar code. I am greeted, the serving guy simply scans the code and suggests I try one of their delicious candies, as the goods will be a couple of minutes. Ummm, so where are they then?
In under 2 minutes, 2 green boxes with my lens and paper arrive on the invisible railway underneath this gigantic service desk. I get my credit card out, ready to pay. “Oh no Sir” he waves my card away, “we’re just going to let you check the items are what you wanted – you will pay downstairs at the next step…”
Now really intrigued, I decide to race the items downstairs. My effort to beat them will doubtless be foiled by a queue at the payment counter though. Except there isn’t one. In fact, I have not seen a queue anywhere in the entire store. Payments is only the second place I have seen any women in the store at all (the first was bag check). Six checkouts for credit cards, 4 for cash and cheques.
Having paid, I am ushered over to the collection counter, where my items, with warranty cards filled out, my receipt stapled to them, have been delivered by the magic railway and are in a bag ready to collect.
Boggling.
So what has happened here? Well, given that these guys have been in business for decades, I have just learned where Steve Jobs got his Apple Store commerce and Genius Bar service processes from.
B&H are basically masters of FLOW, and ensuring that value is accruing the whole time 
for the customer.
B&H have counter-intuitively divided up the value stream into discrete parts that are delivered rapidly by discrete people. In a time where everyone else is cutting staff numbers, training and service levels, they are dialing those factors to 11.
They have worked out the bottlenecks in their store flow, and simply calculated the required ratio of servers, inspection staff, cashiers, help desk and collection staff based on the pull of customer demand.
They also have a booming website business, shipping huge quantities of product across America and the world, with integrated logistics partners like Fedex. To comply with traditional Jewish law, they are shut on Saturday, and do not even process internet orders placed on a Saturday. The system just queues them up for Sunday.
Now, I’m not saying they are perfect. According to Wikipedia they are defending a 2009 lawsuit focused on the lack of progress opportunities for women in the store. I can see how that arose!
But between innovators like Zara (right next door to our David Jones in Melbourne’s Bourke Street Mall, and as busy as DJ’s is quiet), Michaels and B&H, there’s hope that a retail shopping experience in Australia can still be a pleasant, and profitable one.
Just don’t expect any consultants to recommend that strategy any time soon.
