Franchisors told not to fear the online reaper

By Patrick Avenell

SYDNEY, NSW: Fear of online trade cannibalising the sales from bricks and mortar franchisees should not be a deterrent to multichannel retailing, according to Carla Ferraro from the Australian Centre for Retail Studies.

Speaking at a press conference to mark the release of Monash University’s research findings into new and emerging retail channels this week, Ferraro said that whilst online retailing presented significant challenges to traditional franchise models, it should not be ignored, as it will eventually cost retailers in lost revenue.

The research findings from Monash’s study showed that consumers are becoming more comfortable and adept at online retailing, with only the older generations eschewing the technology completely. As more young people emerge from youth into adulthood, the percentage of consumers solely dedicated to bricks and mortar retailing will decline.

In order to prevent these consumers being lost forever, retail groups need to accommodate the nascent tech-savvy market. The obstacle for franchised CE retailers, such as Harvey Norman and The Good Guys, is how to present a viable online platform to retailers without upsetting their franchisees.

Because whitegoods and CE equipment is often bulky, difficult to post or courier and requiring set up and installation, one of the systems that could be exploited is ‘Click to Collect’. Under this model, consumers can research products on a retailer’s central website, purchase the product online, and then nominate a bricks and mortar store from which to collect the product or arrange delivery.

Some portion of the sale can then be accredited to this store, as it will be responsible for handling the shipment and whatever face-to-face service is required.

Another option is to apportion a percentage of any centralised sale to the nearest store geographically. This method has the advantage of a retailer making money without actually doing anything. The consumer has the benefit of convenience, the retail group makes a profit due to low overheads and there is the potential for consumers outside of serviced areas to be monetised for the first time.

The important message from these results, according to Ferraro, is that online retailing, or at least having a substantive online presence, cannot be ignored, no matter how traditional the retail group’s business model is.

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