UK 'bricks and clicks' retailers are going global

UK 'bricks and clicks' retailers are going global

Online sales across the OECD countries are expected to grow by more than 10% each year for the next four years. And that is during a most-countries recession with total retail sales either falling or flat. In these countries, online sales will probably account for some 15-20% of all retail sales within a few years, and that noise you can hear is coming from the owners of shopping malls especially in Australia and the United States.

That is the unexpected feature of this online gold rush. Recession-free, resources-rich Australia and the mighty-but-shaken United States (respectively, early adopters and creators of the digital world) are two countries whose retailers are finding this tectonic shudder the most difficult.

Why else would Australian retail giants like Woolworths, Myer and Westfield find themselves in a fight with unions over labour laws that, they say, make it uneconomic for stores to remain open after 6pm or on Sunday or public holidays when the hourly pay rate is trebled? And they are accusing foreign online retailers of engaging in an unfair fight: The store groups are demanding that the country's GST sales tax should be applied to "offshore" online retailers. It is difficult to believe but the country's prestigious David Jones store chain actually announced, just before last Christmas, that it was "re-entering e-commerce" after "testing the waters" a few years earlier. What?

It all seems so out-of-step with the high-growth, tech-savvy Aussie economy. But, then, other strange things are happening. The country's Commonwealth Bank scared the xenophobic horses by "disclosing" last week that 44% of all online shopping in Australia is through "offshore" retailers. A few hours later, the Sydney-based ultra-smart analytics firm Quantium Online (think Dunnhumby in the UK) said that Australian online purchases are rising by 26% a year - and that "only" 20% is from offshore retailers. But, still, only 5 of the country's top 20 online retailers are 'bricks n clicks' traditional store groups. Because Quantium has valuable real-time access to customers' (anonymised) bank transactions, this is data with real authority. Taking everything together, it probably indicates that Aussie stores are losing out heavily, but to domestic as much as offshore online retailers. So it's not that "unfair" after all. It is, though, Aussie bricks losing to clicks - so far.

And, across the United States, why would Walmart (which accounts for 10% of US retailing) be campaigning for state governments to chase onliners like Amazon for disputed sales taxes that have only been due when they are selling goods to a resident of a state in which they have a physical presence? California, the home of ebay, Apple, and Facebook, has just changed its tax rules in order to levy the sales tax on online sales regardless - but the collecting (presumably from shoppers, yeah right!) has not started. Amazon has reacted to what has been tagged the "Amazon tax" by cutting its business ties with affiliates in the state and is planning a campaign to overturn the new law at the next election. So the smooth-running Amazon juggernaut will soon be striking fear into the hearts of state politicians as well as retailers. It is easy to see what is being played out on the West Coast is a historic fight between the world's biggest store chain and the world's biggest online retailer. For Walmart, whose sales have been declining for the past two years, this may prove to be pivotal.

The teams of lawyers, lobbyists and PR people - and the stridency of their corporate screaming - tell you that very many good old-fashioned retailers (for all the glitz and glamour of modern malls and precincts) are finding it difficult to cope with a world in which consumers are changing faster than they are.

That's fair enough, of course. Coping with this dizzying rate of change is never going to be easy. But there is something a bit more surprising. And that is to be found in recessionary UK. This is the kingdom whose population (well, many of them) daily lament the woes of a creaking railway system that was a world-beater 100 years ago, where bankers are more important than manufacturers, and where London is economically on a different planet to much of the rest of the country. But this is the same country where online sales account for 9.4% of all retail sales (compared with 6% both in Australia and the US, 8% in Germany and 6% in France) - and are growing at 22% a year.

What's more, this UK online boom is characterised by a complete absence of screaming by the country's leading retailers, simply because many are seizing the opportunity with both hands. For all the real pain involved in this retail revolution (and there have been bankruptcies and closures aplenty across UK high streets), most of the major store groups (unlike many of their peers in the US and Australia) are working extra-hard at online sales in the domestic market - and internationally. And that is the big news.

In June, the London-based nouveau-riche online fashion retailer ASOS ('As Seen On Screen'), which has grown rapidly by helping budget-conscious young women dress like celebs, was trumpeting its latest successes in the US, France and Germany - and was looking to Australia with relish. Last month, the world's largest online retailer Amazon lauded (and is now acquiring) the seven-year-old, folksy Gloucester-based The Book Depository (TBD), 75% of whose £100m turnover is from outside the UK. TBD has grown fast on the back of offering "a larger range of books than Amazon" and uses Print on Demand for one-off editions, rare books and lost volumes.

But, more significant still may be the burgeoning online business of the UK retailer John Lewis. The distinctive 147-year-old store chain (a 'partnership' owned by its staff ) is making huge waves across UK retailing on the high street and online. It announced recently that online sales had reached £600m and would top £1bn by 2014. The group said last week that there had been a 31% surge in online sales "boosted by international sales". So it is quite clear that its online growth ambitions are not expected to come from soaking a pretty depressed UK retail market (although the firm is getting some growth here, especially with its winning hybrid 'click and collect' service). In June, John Lewis Online opened a French web site, which will be followed, in the next few weeks, by rollout across Europe. In the coming month, this slickest of retailers will be targeting Australia, the US, Canada and Singapore. Stand by for more screaming.

And not far behind John Lewis comes the UK's other venerable retailer, Marks & Spencer. It is important to recognise the huge online achievements of Tesco, the UK's leading retailer by far - online and offline - and the world No.3. Tesco launched its multi-billion, highly-profitable online service way back in 1996. It is expanding online as quickly as offline in the UK - and across its growing international operations.

It paints a picture of the UK's winning difference: the country's online retailing is all but dominated by the best of the 'traditional' chains. True, the ubiquitous Amazon and home-grown groups like Argos (and ASOS) are also weaving their online magic here. But the absence of protest by UK retailers tells its own story of 'bricks and clicks' success - and what are now among the fastest growing online sales of any major economy. (It's a similar trend in France and Germany which, with the UK, now account for some 70% of all European online retailing. At this stage, the southern European countries like Spain and Italy are lagging far behind.)

Official statistics in all countries seem to under-state the scale of online retailing (funny, that). But it is clear that it is fast becoming a major international industry and that the UK is further ahead - and still gaining - than you would ever have guessed.

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