Retailing for the home market: how stores compete with online
Shop till you drop might be the mantra of the shopaholic, but increasingly the purchasing power lies online. So how does a bricks and mortar franchise retail business in the household sector sustain its business? Sarah Stowe reports
Shopping is very much part of the Australian psyche, although increasingly the methods of purchasing are becoming technology-based. Research from the Australian National Retailers Association (ANRA) shows almost a quarter of Australian consumers have used a phone app as a shopping aid, and 38 percent compare prices online.
Commenting on the survey of 1000 Australians, ANRA CEO Margy Osmond said "We have known for some time that Gens Y and X are bargain hunters, and now they are employing their smartphones and iPads to hunt down deals, but the use of gadgets is now growing across the board."
As consumers' purchasing habits evolve, so too must retailers, who need to respond to this brave new world.
The Australian Bureau of Statistics showed in June 2012, in trend terms, a 1.4 percent rise in retail turnover compared to June 2011. The overall spend for the June quarter in Australia was $62,562.3 million (seasonally adjusted).
At the time, Osmond responded to the news that the sector was showing positive signs: "Retail has been in the doldrums for some time and we are beginning to see the much discussed green shoots of recovery in 2012 with consistent, positive growth in retailing which is both welcome and long overdue."
However the household goods marketplace fared less well in the statistics: seasonally adjusted the hardware, building and garden supplies rose by 0.9 percent while furniture, floor coverings, houseware and textile goods fell by 0.7 percent. Osmond describes the drop in household goods retailing as "disappointing".
So in the light of all this, what do retailers in the household goods sector do to keep customers coming back and spending?
Jeff Poyser, network development manager, Clark Rubber says the focus is on product: down to earth, reasonably priced, d-i-y lifestyle products in a variety of categories – foam and rubber, pools and recreational outdoors.
"We review suppliers, ensure the right products are sourced at the right price, and our buying department continues to source on the right terms, which is a key component of our success," he says.
The buying department provides a core range for franchisees who can then stock merchandise according to local customer demand. Targeted products are also developed in response to consumer trends and the chain now has a very broad customer base, from families to tradies, even young kids are now consumers, he says.
Despite this, it is neither the merchandise selection nor the product price that is the overarching point of difference for the retailer. "The biggest thing for us is service. People can get some things elsewhere, we stock a lot of what's at Bunnings, but they don't have our service," explains Poyser.
The franchisor invests time on training to ensure that good customer service is maintained across the network. It's all part of a strong support structure for franchisees, with assistance in both retail and the business admin, Poyser says.
"Our business development managers are mainly focused on retail aspects, the layout of the store, promotions, the retail team, service and sales. Business admin trainers are qualified accountants, and this is huge for us. BATs visit monthly in some cases, we do an annual review, we compare a budget to actuals and do next year's budget."
Franchisees also have access to an IT department and help desk.
Online sales channels are proving confronting to many retailers today who are struggling to compete with the easy access and competitive prices that generally mark e-retailing. So how is Clark Rubber facing up to this very modern challenge?
The business has only recently joined the online retail crowd, says Poyser. "Is online having a downward effect? Absolutely not. It won't have the impact because sales go to stores. For us it's about franchisees keeping their focus on the stores.
"We spend millions of dollars on marketing, we're driving people to the stores and franchisees need to be ready to take advantage of the opportunities; TV, catalogues in all areas, some are also on radio."
At Clark Rubber, local area marketing is designed in-house. Franchisees engage in local sports sponsorship and this helps build the strong brand awareness.
Over at Carpet Court, national marketing manager Natasha Gallardo explains how the flooring business is taking strides to embrace a new retail world, and has a new creative direction.
"The new creative is based on the idea that flooring is the fundamental component of designing a room, and is the place interior designers and homemakers begin when planning to decorate a space," says Gallardo.
"Looking at the flooring industry in particular it's quite functional so when consumers are looking at designing a room flooring can be the last thing considered, and it has to fit the budget. We're trying to educate consumers that floors are more of an aesthetic, can show personality and make rooms really beautiful.
"It's about changing perceptions."
Competitors are the main flooring specialists, but Carpet Court is looking to differentiate itself with its method of communication. "We're communicating to the consumer, we're looking to engage in different media. Part of our campaign is using technology."
In February the franchise chain launched heavily into online. It started conversations with customers on its social media sites and there's now a Facebook competition and it has launched a Pinterest account. The philosophy is to be in the space customers use: where and how they want to get information, Gallardo says.
The retailer has teamed up with interior designers to launch the company's new direction and creative positioning. Interior designers Darren Palmer and Stacey Kouros [pictured left] feature in a suite of new TV commercials as part of the marketing initiative that includes a social media campaign and online advertising.
A social media competition on Facebook was launched on 20 August and aims to encourage interior design enthusiasts and experts across the country to share their own style and inspirations with Carpet Court. Running over six weeks, the competition gives entrants the chance to win a $10,000 room makeover, together with the styling services from Palmer or Kouros.
The interior design brand ambassadors are lined up for a series of tv ads over 12 months and will help further drive the technology communications, Gallardo adds.
Gallardo admits it's hard to have an online shopping environment in the flooring sector but nonetheless Carpet Court launched an e-commerce platform for cash and carry items that are delivered to the customer's door, with sales transferred to the local franchisee.
"People will use the internet to do lots of research, but people really need to touch and feel the flooring, it's very subjective."
While the national campaign is focused on embracing new media channels, franchisees will be utilising more traditional means of communication to get across their message: print ads and radio.
There are just under 200 stores, all franchised, in the Carpet Court chain. For these retailers the traditional peaks and troughs of trading have be
"Investing in the brand is the biggest thing we're doing. Carpet Court is the largest such retailer and we pride ourselves on service, we're specialists."
This provides a point of difference to competing brands, she says. Franchisees can customise their stock, adding to the core range products to suit local demand. In addition, exclusive ranges developed in-house are a standout for the chain and help raise its profile among the mainly female consumers, aged 25 to 54 and house-proud home owners.
"We are trying to have a point of difference. Rugs for instance, there's an exclusive range out in September that's been designed in-house."
When it comes to persuading the customers to purchase, the question of price is relevant but not supreme, she says. "It's more important in terms of showing value, quality and service. It's not necessary to be the cheapest.
"It's about how we use technology too. We're more relevant, giving information when people need it. It's more exciting."
The newest developments will be released in stores in October – interactive interior design hubs that allow customers to use an iPad and virtually furnish rooms with Carpet Court flooring, adjust wall colours and change window coverings to create a fresh room design.
A room decorator tool will be launched at the same time, and this harnesses 3D technology. It's a tool that will also prove useful for sales people visiting customers at home to do flooring quotes, says Gallardo.