Rise of the online retailer

MegaPC’s Papp says he can see things from both sides, as an online and physical retailer, most of its customers find the product they want on its website, order it, and either pick it up or get it delivered.

“If we sold through printed advertising, we would only be selling to those people who can walk into the shop and pick up the product. At least two-thirds of our customers are interstate, so we’re making our products available to all of Australia through our website,” he says.

“To attempt to advertise to such a broad audience through printed material would be far too costly.”

Fernandes believes while consumers are happy to buy online, having a bricks and mortar presence where they can either collect from or drop off returns certainly offers them more security.

Altech’s Kulikova says at this point in time mass merchant retailers only have a Web presence to drive people to the stores. If these merchants were to set up a website they would compete against themselves with the online store up against the retailers’ store front.

Fernandes says at the moment Harvey Norman’s model works for the retailer, but as you now look at the huge online US-based sites, they are totally Web-focused, and he can see this further developing in Australia.

“Why else would Coles Myer buy Harris Technology?”

Papp believes that mass merchant retailers are missing out on potential business because of their lack of online facility, especially over important holiday seasons like Christmas. He says physical shops should also have an online presence, with a successful formula of combining the two methods of selling.

“Even if they don’t offer online ordering, they should at least have an online product catalogue, preferably showing stock levels at each individual store. One retailer that has online ordering is Officeworks and as far as I know it’s working well for them,” Papp says.

Problems for online retailers

Having an online store is not without its problems. Online retailers have to be extra vigilant as word of mouth is a powerful medium in making or breaking an online store.

For Tully, warranty returns, particularly when it comes to enthusiast products, can become a major issue with customers. Many products are designed for ‘over-clocking’ but their warranty terms and conditions state that ‘over-clocking’ voids the warranty. “This in itself is a legal minefield. There are issues with the level of knowledge the customer has,” Tully says.

Both Papp and Fernandes believe credit card fraud is a major crippler to an online retailer. The online retailers devote a lot of resources to verifying all credit card sales because banks only offer the consumer total security.

Future of Internet shopping

While it is too early in the retail game to tell whether or not online retailing will win out against traditional stores, it is like other businesses: consolidation will occur, it is just a matter of time.
Huang believes that at end of the day, “some smart sites will win over the others”.

Papp feels online computer hardware stores will remain “specialty shops” for a few more years at least. That means they will have to provide pre-sales advice and post-sales support to the customer.

“Therefore, online stores should not be considered as ‘website only’ operations in the sense that they have no personal communication with their customers,” Papp says.

Altech’s Kulikova says over the course of the next couple of years the distributor will see more business from online retailers. She says there will be “more distribution going towards online stores”.

As for Tully, he reiterates that people are increasingly more time poor and do not want to waste their free time shopping. He believes saving time and money
as a real benefit.

“I think we’ll see this ring true with growth in online retail where commodities such a groceries are concerned.

“I don’t ever see how online retail will surpass physical stores but I think we will see a lot of the bigger players make moves to stamp out all the little one-man band online retailers that have sprung up over the past 12 to 18 months.

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