Local retailers competing with online businesses need to change what services they offer to survive, according to Warragul Business Group President David Cann.
The recent closure of the Music Store Warragul was partially due to online competition, and the closure of Hobby Heaven is understood to have been for the same reason.
Mr Cann said that Warragul’s retail sector is being affected by online competition, but that the level of competition varies from sector to sector.
Mr Cann suggested that Warragul’s population boom presents new challenges for retailers, and that longer opening hours might encourage more people to look in shops before going online.
“I think that they’ve got to be clever about what they offer. I think one of the things that we have been slow to is really assess is the change in demographics in Warragul, where we have a lot more people working outside of the area and living in town,” Mr Cann said.
Speaking on the rollout of new technologies to rural businesses, Mr Cann warned that “sometimes businesses in a rural environment don’t pick up on them as quickly as some of the city-based businesses, and once you miss the boat in some of those sectors it can be hard to fight your way back into it.”Mr Cann also said that online competition in country areas is a greater threat than in the city.
“I think more regional (businesses are) under threat because, I suppose that lack of convenience of bigger shopping centres, or the apparent lack of convenience of shopping centres could push people online,” Mr Cann said.
Former owner of the now defunct Music Store Warragul, Mr Jason Kellett, echoed Mr Cann’s sentiments.
“A small country store can only afford to keep so much stock in the shop, whereas on the internet there’s an infinite amount of choice. So it becomes more appealing to buy online as opposed to going into your local (store),” Mr Kellett said.
The Music Store Warragul closed early this year because the retail outlet was not proving to be commercially viable.
Mr Kellett argues that online competition was a contributor to slow business in the Music Store, as well as the tendency since the Global Financial Crisis for people to spend less money.
“The business closed because the internet is taking a big chunk of business, (with fewer) people walking into the store. Business is slow because the economy isn’t doing that fantastic,” Mr Kellett said.
The Citizen was unable to contact anyone from Hobby Heaven to discuss that store’s closure.
The book retail sector’s competition with online sales is an area which recently came to the fore with the collapse of Red Group; the body responsible for Borders bookshops and some Angus and Robertson bookshops nationally. However, Warragul’s booksellers are largely unaffected.
Owner of the independent Warragul bookshop Book’d on Smith, Jenny Hotchkin, said that it was the size of Red Group which caused its companies to be hit badly by online competition.
“I think the issues that affected Red Group are not really relevant to small retailers. They had massive overheads and stock holdings and the danger with big chain stores is loss of the personalized aspect. Being an independent bookshop means that you get to know your local demographics and stock the shop accordingly,” Ms Hotchkin said.
Ms Hotchkin also noted that their customer service helps reduce online competition.
“Of course the internet is a threat to bookshops – it is pretty easy to buy a book online and the pricing is very competitive. We are aware of this and again, customer service has to become a focus. You can’t get advice on what book would suit your nine year old child who is struggling to learn to read from an internet site. If you want advice on what book to buy for some one, you need to go to your local bookshop,” Ms Hotchkin said.
A business owner in Warragul since 1971 and owner of The Red Door Bookshop, Wayne Hardie, says that the appeal of online shopping is a false reality.
“The prices that I charge… are very much commensurate with what you can buy online, except you don’t have postage prices. So, somebody can come into my shop and say ‘I bought that book a dollar cheaper online,’ but they forget they paid six dollars fifty for postage,” Mr Hardie said.
“I tend to think that the people who come into (the Red Door Bookshop), on the whole, would like to see what they’re buying before they get it. One of the difficulties with buying online, particularly in the second hand market, is that you can’t be certain of quality.”
“If they’re buying an expensive item (online) and they find that it’s not up to the quality they expect, they don’t have recourse. Whereas if they come into this shop and it’s not really of the quality they want then they just don’t buy. So from that point of view there are certain benefits in buying in a shop like this as against online.”
Despite this, Mr Hardie said that his shop is having competition from online sellers.
“Attracting a market is really the most difficult thing to do,” Mr Hardie said.
“The difficulty is… that people have a tendency to go to the internet first.”
The Warragul Citizen has been told that the change in ownership of Collins booksellers earlier this year is not related to online competition, and Warragul Office Smart’s exit from book sales is due to local competition.
Manager of Sanity Warragul, Sherrilyn Jones, does not see online competition as an issue for the music store. Ms Jones has not identified any decline in sales due to online competition from the likes of the iTunes shop or Sanity’s own online shop.
Ms Jones instead identifies parking times as the biggest hindrance to Warragul’s retail sector.
Mr Cann argues that businesses which find themselves competing with online shops should change their sales pitch.
“I think that the sad fact of the matter is if you find yourself competing with online business you’ve got to look at other avenues. There is very limited capacity to compete with online. The prices can be ripped up straight away and the consumer can find 15 prices for the one product very quickly… and if you’re trying to compete with that it’s going to be very very had to do. You’ve got to look in other areas, you’ve got to look at what’s not provided online.”
One Warragul retailer is planning to create an offshore-based online business in order to compete with online sellers, and also as a form of political stunt to encourage the government to change its import tax laws.
Former Head of Independent Sports, Mr Peter Nicholson, is investigating creating an offshore business to compensate for lost retail revenue.
“So we would actually directly bring things into Australia through a company we set up overseas. Which is the only way we can compete, because then we wouldn’t be paying Australian wages, Australian rates, rents and so on,” Mr Nicholson said.
“I think top-end retail is suffering against the internet because you can spend up to a thousand dollars ten times a week (without GST) if you want, to import stuff from any country in the world.”
Mr Cann suggested that Mr Nicholson’s move, as well as suggestions that other retailers like Harvey Norman could go offshore, is not a just a stunt.
“It’s not a stunt at all – it’s the sheer fact of they’re trying to compete with an unfair marketplace,” Mr Cann said.
The outlook for Warragul’s retail sector is not all doom and gloom though, with some local businesses finding great success online.
Proprietor of Port Philip Shop Mr Ian Wenzel has had great success in extending his retail shop online.
Port Philip has an online customer base of 1,600 customers, mostly from within Australia, whilst having a customer base of only 300 people for his the retail outlet.
Mr Wenzel said that when selling online it is important to have a unique brand and unique products, as well as a strong advertising campaign.
“At the moment online sales only represent about three per cent of the retail market (in Australia), but they will represent a lot more than that in the future,” Mr Wenzel said. TWC