05.10.2020

Australian retail indusry omnichannel presence required

The death of brick and mortar stores has long been heralded. In this postCOVID era, will their death knell finally ring?

Given the shifts in consumer behavior, retailers limited to in-store networks are struggling with stunning sales losses and high fixed-costs. Yet those with a strong omnichannel or digital-only presence are growing rapidly – as are their valuations. Three examples are Australia’s MyDeal, Kogan and Temple & Webster. Their ability to attract new capital for continued investment will give them an imposing strategic advantage in the years ahead.

Businesses still dependent on actual stores need to redefine the purpose of those outlets and rapidly shed their more onerous assets, such as noncore stores and extensive inventory holdings. This will create a fire sale environment, but does not signal the end of in-store shopping. Even Amazon, the world’s largest online retailer, is investing in storefronts through Amazon Go, the company’s chain of brick and mortar establishments.

But these emporiums will be defined by the new shopping patterns that have emerged out of our currently locked-down, socially-distanced world. With more consumers sheltering in place, the decline in store footfall has increased basket sizes, changing the speed of transactions. Stores that reopen need to serve as pick-up locations and delivery depots for orders placed online. As restrictions ease, great attention must be paid to in-store hygiene and ensuring a safe and clean shopping environment. In particular, heightened health concerns will drive contactless transactions to new levels.

Lock downs and social distancing have induced consumers to seek out an omnichannel shopping experience. Retailers that act quickly and acquire the necessary facilities will prosper.

Those that fail to make the leap beyond the store-centric model of yesteryear will either become inexpensive acquisition targets or close their doors for good.

The Australian retail sector is experiencing high end activity including the recent sale of online retailer, Catch Group to Wesfarmers (ASX:WES) and the current IPO of MyDeal. 

This article was originally published via Oaklins as part of the ‘Adapt and evolve in a time of crisis’ content series, read the full article here.

 

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