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There may be trouble ahead

There may be trouble ahead

The Internet has delivered many positives but it could spell the end for smaller retailers

In some respects, the Internet has a lot to answer for. On the positive side it’s arguably the most important technological invention in history, one that has changed so many aspects of our daily lives for the better; but from a commercial perspective it has heightened the sense that ‘price is king’ to a point where nothing else matters for many of the goods we buy.

Co-founder of NSW-based retailer SecretNet, Andrew Macks, definitely seems to be of that opinion after blaming stiff competition and tough market conditions for shutting up shop (see page 1). Of course, he isn’t the first to be forced out of business by low-cost competitors with Webonly models and little or no overheads to worry about. And you can bet your bottom dollar he won’t be the last either.

For commodity products it’s a model that makes perfect sense. I recently wanted a bigger memory card for a digital camera and jumped online to see where I could get the best deal. I was able to pick up a card with a recommended retail price of about $70 for much less than half that amount without having to leave my apartment. The card was delivered three days later – I couldn’t tell you the name of the company I bought it from but the experience couldn’t have been easier or more convenient.

As more consumers move to this method of purchasing for a larger proportion of what they’re buying, it’s creating real headaches for businesses that have invested in bricks, mortar and people. An even more worrying trend for these businesses is that consumers will often walk in with product information they’ve sourced from the Web, ask an independent retailer which best suits their needs, and then go home to buy it on the Internet.

Coupled with the fact that retailers are reporting a significant fall in foot traffic, it’s no surprise that several industry sources that spoke to ARN this week are warning that more smaller resellers are likely to hit the wall in the months ahead. The Reserve Bank may have lowered interest rates last month but it’s likely we’ll need at least another couple of drops before this can be considered a trend and some much-needed confidence is injected into consumer spending.

But it’s not just at the lower end of the market that the pinch is being felt. Those playing at the big end of town are also reporting longer sales cycles and projects being put on hold as fears of possible recession see IT spending placed under the microscope. It will be particularly interesting to see what impact this has on the concept of ‘green IT’. It’s been milked by marketing departments to the point where there’s a great deal of scepticism among the user community but, where it can be shown to deliver cost benefits, a constrained market could well help to kick it along. Having just come back from a round table discussion on this very subject, I’ll have much more for you in our next ‘Below the Line’ supplement.


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