ChannelLife NZ - At the mercy of Giants

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At the mercy of Giants

Cheaper and faster broad-band internet connections have boosted households with broadband from 33% in 2006 to 63% in 2009, raising the number of internet users, as well.
During the same period, according to Statistics New Zealand, the percentage of internet users who used their browsing time to obtain information about goods and services rose from 65% to 74%, while the percentage of internet users making a monetary purchase online jumped from 29% to 43% (to end of year 2009).
A study conducted by the Auckland University of Technology found higher figures for both, with results showing that 83% of New Zealand web users research products online, and more than half (60%) make purchases online.
In the United States, megastores like Wal-Mart and Target have annihilated ‘mom and pop’ retail businesses in many communities, with Wal-Mart accused of selling products below cost to draw customers in, and waiting until the local retailers close their doors, before marking prices up again to obtain a profit. And in the online space, Amazon.com has done much the same by creating a megastore that sells everything from books and music to clothes, nappies, computers, cleaning supplies and furniture.
Alex Rampell, CEO of TrialPay and TechCrunch blogger, argues that the "Wal-Mart effect” will be much more prolific in the online space, because the geography factor is removed. Consumers no longer need to live near a megastore to take advantage of the rock bottom prices and huge selection – just a click of the mouse and entry of your credit card details, and product x is on its way to your doorstep.
The advance of online mega retailers has led some analysts and bloggers to predict the death of small, niche online (and offline) retailers. In the United States, maybe the argument is a good one, but does it hold any water here in New Zealand?
Sure, in New Zealand, we can order books and music through Amazon, but you’ll find attempted electronics, technology and most other purchases are stopped as soon as you enter your address. And according to The Warehouse Ltd’s annual report, just 20% of money spent online by New Zealanders is paid to offshore e-commerce sites (as opposed to 43% in Australia, according to eBay).
So, for the time being at least, there isn’t a real risk of Amazon stomping all over our NZ online tech retailers and resellers. And there isn’t a true equivalent to Amazon.com or Wal-Mart anywhere in New Zealand – we simply don’t have the buying power as a nation.
But when New Zealand’s version of the megastore, The Warehouse, made the decision to sell online as well as in-store in 2009, the results were phenomenal. With an online product catalogue of more than 10,000 items, TheWarehouse.co.nz draws a million visitors a month in peak shopping periods and averages more than 500,000 visitors a month the rest of the year.
There is some evidence that New Zealand consumers are just as drawn to the mega-site, one-stop-shop as their American counterparts. In the most recent People’s Choice Web Awards (2010), put out by The Channel’s sister publication NetGuide, electronics and technology retail website MightyApe.co.nz was ousted from its winning position as ‘Best Retail Site’, after holding it for four years, by TheWarehouse.co.nz.
While MightyApe still came in first as ‘Best Game Related Site’, the loss to The Warehouse last year is most likely indicative of more than one thing – namely the broadening and expansion of New Zealand’s online purchasing community and a move toward the megastore shopping ideal.
It helps, of course, that The Warehouse is such a familiar and popular brand in the Kiwi marketplace. While it is unlikely that New Zealand companies are currently at risk of being put out of business by huge, consolidated online shopping engines, they do risk being outsold and out-marketed. Sites like Amazon.com, StrawberryNet.com, eBay.com and BookDepository.co.uk all sell and ship to New Zealanders, often very cheaply.
And "price comparison sites like Pricespy.co.nz are levellers, and also a risk for small businesses,” says Roanne Parker, strategist and Head of Digital at email marketing company Jericho.
"Pricespy allows small online stores, particularly in the tech space, to compete with the big guys on price and by store rating. But, if the big guys are buying larger quantities, then of course, the small retailer will need to be clever in how they compete.”
So if competing on geography isn’t practical, how can New Zealand’s tech resellers and retailers stay in the game? TrialPay’s Rampell lists five variables that affect a consumer’s choice of retailer: geography, price, selection, service/brand, and experience.
If geography is out as a differentiator, price is not likely to be the saving grace. It comes down to available selection, quality of service, ease of use, and brand awareness/reputation.
Leading NZ e-commerce web development company Datum Connect is looking to bridge the gap with its latest offering, the Retail Promotional Matrix (RPM), an online comparison and demo offering that pulls together features from global online shopping carts, allowing retailers to quickly access promotional and loyalty scheme programmes and implement them on their own retail websites.
The intent is to assist New Zealand retailers who are currently restricted by the size and functionality of their websites, giving them an affordable and easy way to compete with world-class e-commerce sites.
"We’re going to make it easy and affordable to compete with the big guys – the major online retailers,” says Danny Ing, CEO and founder of Datum Connect.
The number one most important thing is to be findable online, says Jericho’s Parker. "Make sure your web address is everywhere and that your business is listed in all the key online directories, and I don’t mean paid ones. Go through the ones that come up first in search engines, like Finda, Yellow Pages, Zenbu, the new Localist, and also Google Places – that last one’s critical – so that you can be found in random searching. And of course get some trusted help for your organic search engine optimisation, as well as with your paid search strategy, as appropriate.”
Once shoppers have found your site, make it stand out in their minds; make it easy to use, find products and information; make it easy to purchase from (i.e. don’t force people to register in order to make a purchase); incentivise customers to leave their email address and sign up to your database; and use clever e-marketing techniques to bring in new and repeat business.
Retailers and resellers were hurt during the recession – both online and in-store revenue took a hit – but New Zealand’s online tech resellers have an edge over their American and Australian counterparts: the majority of Kiwis still buy from Kiwi businesses, and Kiwi businesses, in vast majority, remain in the SME category.

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