Traditional bricks-and-mortar retailers are fighting back in the online war – gaining ground on their international rivals.
A report released today by the Commonwealth Bank suggests domestic online sales increasing by 40% in the year to July 2012 – more than double the increase recorded by offshore retailers.
Retailers such as Myer Holdings (ASX: MYR), David Jones Limited (ASX: DJS), JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings (ASX: HVN) are likely to have seen a big increase in their online sales, which should help their results in the next financial year.
Myer CEO, Bernie Brookes, has stated that within 10 years, he expects traditional retailers to dominate online selling, as local retailers ramp up their online presence and compete more effectively against offshore sites. Many of our traditional retailers have been investing heavily in multi-channel shopping, and are looking to increase their online sales dramatically. David Jones is rapidly expanding its online offering, with the number of products available online expected to increase tenfold, from 9,000 items to over 90,000 by Christmas.
Mr Brookes has suggested that while online sales are less than 1% of total sales currently, within a few years, they would emulate department stores in the US and the UK, where online sales make up between 10-15% of revenues. 16 of the top 20 online retailers in the US are bricks and mortar retailers.
Superior supply chains, brand and customer relationships and the convenience of in-store pick-ups and returns, also lend traditional retailers an advantage, while a falling Australian dollar could also provide a boost to local retailers, by making products from overseas sites more expensive.
The Foolish bottom line
It seems the death of traditional retailing has been greatly exaggerated. You only have to see the number of overseas retailers setting up bricks and mortar stores in Australia, to realise that.
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Motley Fool writer/analyst Mike King owns shares in David Jones and JB Hi-Fi. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
