Are retailers charging too much?

[sptrawler]

The productivity commission report is out and the $1000 tax free limit on purchases from overseas stays. Well this by Michael Pascoe will have Jerry Harvey steaming.

http://www.smh.com.au/business/whingeing-retailers-not-tackling-the-real-issues-20111210-1oorz.html

I for one, feel the retailers would get a lot more sympathy if the mark up was say 50 - 75%. At the moment it would appear that the mark up on a lot of items is 300%
I have purchased a couple of t.v series on dvd for presents, here approx $170 and $300, from o/s $50 and $60 respectively to the door.
I know the wages, rents etc are high. However it would appear to me that if the mark up has to be that high then they need to sell more or reduce their overheads.
If they can't achieve either, then maybe they are not viable and should shut down.
Eventualy a balance will be achieved where the number of outlets meets demand and the turnover will achieve the desired economy of scale.

 

[McLovin]

Are retailers that obtuse that they don't realise people aren't shopping online to save 10%?

I was looking at the accounts of a privately held Australian based online retailer the other day. They were a start-up several years ago and now sell ~$100m/year. They're certainly not the cheapest although they will price match. Their point of difference is customer service and convenience.

 

[Smurf1976]

Most recent online purchase was some parts for a brush cutter. Nothing fancy, just some parts.

I had the choice to either wait weeks to get the parts from a local retailer "when we order more" (that is, they wouldn't bother ordering just one item from the supplier so there was no guarantee as to when I'd get the parts). Or I could just buy from a supplier in the US at a 40% price discount and with reasonable certainty that they wouldn't take more than a couple of weeks to arrive. A few days later a package arrived on my doorstep - easy. Why would I bother with the locals?

I think the real problem is that there are simply too many shops competing for too few customers. Certainly in any of the mainland state capitals, you have multiple outlets for the same retailer within walking distance of each other. Go to the city centre mall and you see some shops. Walk to the nearest DFO or shopping centre and you see the exact same shops. Go to any other shopping centre and there too you will find the exact same shops. Even a decent walk around the CBD and you'll likely find more than one outlet for the same retailer.

Take Melbourne as an example and compare the number of shops in the city area with now versus 20 years ago. Then compare that to actual population growth over the same period, remembering that the suburbs also have their own shopping centres and these have also increased in size and number. There seems to be an endless number of new shops being built but where is the corresponding increase in customers to shop in them?

If I doubled or tripled my costs with only a modest increase in sales volume then either I'm going to have to put my prices up or my profits are going to disappear. Faced with overseas competition, it's going to be the latter which applies in practice.

Even here in Hobart there are 3 Harvey Norman stores within 15 minutes travelling time from the city centre. Just how much furniture do people really want to buy? It's not as though there aren't plenty of other retailers selling the same products as well.

 

[nomore4s]

The other problem facing retailers is it is so much easier finding stuff online, especially if it is something slightly out of the ordinary.

Why go searching for it, going to 2 or 3 shops having to find parking etc etc when you can find it online probably for cheaper and it only takes you 10 or 15min to make the purchase.

 

[satanoperca]

The other problem facing retailers is it is so much easier finding stuff online, especially if it is something slightly out of the ordinary.

Why go searching for it, going to 2 or 3 shops having to find parking etc etc when you can find it online probably for cheaper and it only takes you 10 or 15min to make the purchase.

This is why online works, being able to search and find product fast and easily. Most importantly being able to price check without having to move from you chair.

Add to this, apps like Redlaser that allow you to scan in a bar code and find the cheapest price on the internet are changing the ways customers shop. I have found that price checking on my mobile while in a retail store very handy and in 90% of case if I can find the product cheaper online the retailer will price match it by simply showing them the site and price on the phone, verification.

Competition is a wonderful thing, traditional retailing is evolving just like everything else. Stick to the old and you will perish, embrace the future and you will thrive.

Cheers

 

[Calliope]

The productivity commission report is out and the $1000 tax free limit on purchases from overseas stays. Well this by Michael Pascoe will have Jerry Harvey steaming.

http://www.smh.com.au/business/whingeing-retailers-not-tackling-the-real-issues-20111210-1oorz.html

I for one, feel the retailers would get a lot more sympathy if the mark up was say 50 - 75%. At the moment it would appear that the mark up on a lot of items is 300%
I have purchased a couple of t.v series on dvd for presents, here approx $170 and $300, from o/s $50 and $60 respectively to the door.
I know the wages, rents etc are high. However it would appear to me that if the mark up has to be that high then they need to sell more or reduce their overheads.
If they can't achieve either, then maybe they are not viable and should shut down.
Eventualy a balance will be achieved where the number of outlets meets demand and the turnover will achieve the desired economy of scale.

The listed price is just the bartering starting price, for the wise. TV series and movies are also freely available for download. You just know where to look. This is driving DVD rental shops and music shops out of business.

 

[Tyler Durden]

I've never really understood why Gerry Harvey would think he could persuade us to do otherwise.

Basically, he is saying "stop paying less online and come to my store to pay more so I can keep being a millionaire...I mean, so you can help the Australian economy".

Yeah ok. Like he wouldn't do the same in our shoes.

 

[pilots]

I needed a Gen set for the caravan here in PERTH, I was quoted in town $750 up to $875, bought it on line, delivered to my door for $529, all our shopping in now on line.

 

[johenmo]

Wholesalers are the norm in Oz, whereas they will deliver from factory to retailer overseas. I was in a music store after some strings and aske why Us prices were so cheap. It happened the sales guy was from overseas & his store used to buy direct from the manufacturer. This adds to the price difference but isn't all of it. Also, 20 million ppl is a small market.

But i have got a few things on-line, part. books. And I agree there are too many of the same stores too close together.

 

[Smurf1976]

This is driving DVD rental shops and music shops out of business.

The independent video store just down the road from me closed a few weeks ago...

As for music shops, I've just realised that none of the music shops (or record bars as we called them back then) I went to as a teenager are still in business in their original form and location. Not one of them. One turned into a betting agency, another one into a DVD rental store, another one closed and the space ironically ended up being used by JB Hi-Fi after extensive renovations, another one is a clothing store, another one is a Bakers Delight and a pet shop, and I'm not too sure what's in the space that was once occupied by the 7HT one in the mall. All gone and their demise is only partly due to online shopping - there was never going to be any serious money in it once it became nothing other than a discount war on the Top 40 with practically everything else classified as old stock / clearance.

Proper back catalogues in physical stores disappeared at the end of the 80's along with vinyl, partly due to the physical thickness of a CD case making it difficult to fit large numbers on a few cheap shelves. Add in online shopping and digital downloads and it always was going to be game over sooner or later.

A bit off topic but the pace of change is truly amazing in my opinion. I remember when nobody had CD's - I never thought I'd see the day when they and all other physical media became obsolete, at least not so quickly. I don't know anyone in that age group to ask, but I get the impression that the average 15 year old wouldn't have any physical albums these days, or at least very few, and downloads everything they listen to. That's a massive change from the days of vinyl albums and calling the local (AM) radio station to request songs so we could tape them. They don't even do requests on radio these days...

 

[Eager]

Maybe it's just me, but I've never been sympathetic to retailers.

If they are getting swamped by the online stores it simply means that they are not being smart enough to adapt. Sheesh, I'm just a blue collar worker who has spent 30 years working for someone else, but it was obvious from very early on that if I wasn't prepared to accept change, then I was out of work! Why do retailers keep expecting to make a living if they do not provide the right product, at the right price, at the right convenience?

Isn't it ironic that the big retailers are complaining now, when they had no qualms about swallowing up the small retailers selling the same product, just a decade or two ago.

 

[sptrawler]

Another thing that seems to have taken place over the last 40 years, is the idea that retailers should be mega rich.
From my memories of the late 60's and early 70's shop owners were just fairly normal run of the mill people. They weren't the filthy rich of the community, but also the stores were a lot smaller.
Therefore I think there has been a type of morphing from smaller shops with less overheads and owners with normal fiscal expectations.
To what we have now, huge shops with huge floor plan financing overheads, huge rents, huge power bills, huge staff requirements.
Add to this the owners expectation of being able to finance a lifestyle commensurate with his obvious standing and to reflect his/her success.
Eventually something has to give.
I was looking at purchasing some ergonomic Swedish 'design' chairs, $1800 each. Iasked the salesman where they were made, he said Vietnam, I said mate $1800, your dreaming. By the time I had reached the door it was $1000 each, then I heard from outside make an offer.
Who says going bigger is better and drives down prices?

 

[banco]

Maybe it's just me, but I've never been sympathetic to retailers.

If they are getting swamped by the online stores it simply means that they are not being smart enough to adapt. Sheesh, I'm just a blue collar worker who has spent 30 years working for someone else, but it was obvious from very early on that if I wasn't prepared to accept change, then I was out of work! Why do retailers keep expecting to make a living if they do not provide the right product, at the right price, at the right convenience?

Isn't it ironic that the big retailers are complaining now, when they had no qualms about swallowing up the small retailers selling the same product, just a decade or two ago.

It's all very well saying they should adapt but how? Most of the "fixes" I've heard proffered have been pretty unconvincing. I certainly don't think there's anything obvious they can do.

 

[Eager]

It's all very well saying they should adapt but how? Most of the "fixes" I've heard proffered have been pretty unconvincing. I certainly don't think there's anything obvious they can do.

For starters, are they offering their products online as well?

 

[banco]

For starters, are they offering their products online as well?

That doesn't seem to solve a lot of problems for most of them though. David Jones has opened an online site but the prices are the same as in the store (and hence more expensive then you can buy online from overseas). If they have cheaper prices online they will just cannabalise their in-store sales.

 

[Julia]

It's all very well saying they should adapt but how? Most of the "fixes" I've heard proffered have been pretty unconvincing. I certainly don't think there's anything obvious they can do.

Maybe consider actually offering a little actual service?

 

[skc]

Maybe consider actually offering a little actual service?

We are doing some reno at home and were looking for some light fittings, and to our surprise we ended up buying them at an independent lighting shop today.

Of course we went online to look at what's availabe, and we went to Bunnings as well. But a few things swayed our decision to buy from the independent.

- The shop carried a different range to what's available online and at Bunnings.
- The light was out on display, plugged in so we could see exactly how bright it was.
- We were greeted by a friendly sales lady who actually walked up to us and asked how can she help. And more than just friendly she also knew the product, the alternatives and offered her suggestion.
- The shop was also doing a 15% off discount.
- The shop had a good returns policy.

It was only a $200 transaction, but we bought there knowing that we could have got something that's pretty much equivalent for say $10 less at Bunnings, or $40-50 less online.

So there's a pretty simple formula.

- Get the range right.
- Have practical display.
- Friendly and informative staff.
- Not too expensive compared to online.

We were happy to have bought there - and these factors were worth the extra 20% to us.

By and large the sales staff was the key though. We have also walked away from cheaper prices in some stores because the sales staff there were so annoying that you feel like they are doing you a favour by serving you...

 

[Julia]

Basic maxim for people in sales:

People buy from people they like and trust.

 

[Wysiwyg]

Maybe consider actually offering a little actual service?

Good service is a necessity for good business but some shoppers expect their toes to be sucked and anything less is poor service. Two sides to every story and the moral of the story - satisfaction is relative to expectation.

Are retailers charging too much?

China will always have a niche market with the lower income workers around the world. Affordability is paramount.

 

[Wysiwyg]

The credit era has well and truly slowed so that changes the consumers attitude to price too. Gerry H. still trying to suckle on the consumer credit card.