Whether or not the GST is applied to online purchases is quite irrelevant. The problem for major retailers is that in the absence of brand loyalty the desire of Australian consumers is to beat the system and win.
Retailers may well be feeling the pinch of shoppers flocking on-line to get their goods at bargain prices. And the trend to seek a bargain is so powerful and ever growing there is actually very little they can do about it. The nature of retail and the relationship consumers have with retailers has forever changed. The internet is not to blame and it didn’t start with on-line shopping, but rather with the retailers themselves.
The reality is that 10 percent is not the issue. On-line discounts are so attractive (especially with a dollar at near parity) that the GST is neither here nor there in influencing consumers. Should the retailers eventually have their way the reaction of consumers would be to double their efforts to obtain cheaper prices and abandon the major shops.
There is little point appealing to consumer loyalty, when they do not feel it reciprocated. Quite the contrary, for quite some time consumers have felt the wool is being pulled over their eyes at every turn. Marketing and spin abounds and loyalty, other than to those specific retailers that cultivate it well, and make the consumer feel they are on their side, is dead.
What is central here is the motivation of consumers. The substantial savings on-line are, of course, nothing to sneer at. Consider the price differences between the Bookdepositary website and book stores and the price variation is considerable. But beyond simply paying less there is something much more powerful at play. Buying on-line, as is shopping in discount outlets and seeking out specials, is not so much about the actual dollars and cents saved. More important is the sense of winning, of not paying retail, of paying less than someone else does.
A woman shared with me her determined use of grocery catalogues to seek weekly specials. She admitted to driving a considerable distance to obtain a negligible discount on a particular grocery item. When I put to her that her expenditure in petrol and time negated any financial benefit she agreed. “But I feel like I’ve won,” is what she related. She beat the major supermarket chains by paying less.
We’ve seen this trend with the major supermarket brands for some time. Consumers resent the perceived duopoly in the marketplace and the lack of service they get for their money. So they treat alternatives like Aldi with over-the-top adulation and loyalty.
The new reality will see a shared marketplace. Consumers will continue to enjoy the retail experience offered by large stores for some items and on some occasions and they will continue to seek cheaper prices for others to satisfy their need to see themselves as smart shoppers. They want to be known for their shopping nous and are quick to share their success stories with others.
Aldi’s popularity grew out of word-of-mouth rather than advertising. In mothers groups across the country the quality of their nappies was a major topic of discussion. And from there it grew into other categories as consumers experimented and were pleased with the results.
Loyalty can be achieved. Consumer love shopping at the Apple store, for example. It is a brand they feel an affinity with and want to be part of. The experience offered is one which makes the premium price worthwhile. The same cannot be said for most retailers. They will need to lift their game to attract a similar response. They will need to overtly demonstrate that they care for the consumer in the face on strong perceptions otherwise. Currently they are a long way from this, as demonstrated by the ridicule their appeals for a GST on on-line purchases were met with. Some changes are in place. The major supermarkets have invested in customer service and banks have returned to promoting the local brand.
Beating the system is a trend well entrenched. The new paradigm is that sometimes it feels good to pay full price and walk around with a nice bag from a major retailer, and other times it feels fantastic to pay less and be seen as smart.