Retail reality check

These days, survival in business depends increasingly on the ability to adapt.
THE closure of more than 140 stores of another major retailer - Colorado - last week is another sign of a big shift in the retail industry. Colorado Group has its own issues with debt and a stronger Australian dollar (making imports more expensive) but retailers moving to shopping online is a factor in its demise that can't be denied.
In January, the Minister for Financial Services and Superannuation, Bill Shorten, estimated that just 3 per cent
of all retail sales in Australia were online sales and 20 per cent to 50 per cent of those sales were on overseas websites.

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But if Australia is to follow the path of the US and Britain, where online sales account for between 7.5 per cent and 10 per cent, we may see more downsizing of retailing outlets here. Or we could see more innovation in this space.
Another senator, the Minister for Small Business, Nick Sherry, has been heavily criticised for comments made on Tuesday regarding the future of bookstores. In his defence, he called for small businesses to adapt to the changes in retailing. ''We've got to adjust to this new world,'' he told ABC News 24. ''I don't particularly like it myself - I'm not the greatest IT guy in the world - but I do know that it's inevitable and we have to adjust to this change and adjust to it very quickly.''
Last week also marked the opening of Zara's first Melbourne store. The Spanish clothing retailer is often held up as an example of how a retailing company should operate in the current environment.
It still keeps much of its manufacturing in Spain and has an incredibly fast turnaround time from design to shop floor. It has new items hitting its stores twice a week, which encourages repeat visits, but also has a comprehensive online store that it will extend to the US this year. As other companies are forced to close their doors, or report falling sales, Zara's Spanish parent company Inditex last week announced an increase of 11 per cent in first-quarter sales.
That translated into an increase in gross profit of 9 per cent to €1.74 billion. Gross margin is 58.8 per cent of sales. It doesn't advertise, relying instead on word of mouth. The Duchess of Cambridge and her sister Pippa's decision to wear Zara outfits the day after the royal wedding no doubt helped sales.
It hasn't shifted production to China, preferring to use Africa when it exceeds its domestic manufacturing capabilities, but it has announced plans to open shops in South Africa, Taiwan and Peru by the end of the year.
Retailers may not like it but unfortunately Sherry is right: if they want to survive in the current environment of instant information, social media and access to everything, they are going to have to adapt. Not everyone can be Inditex but they can realise that having a functional and attractive website is a necessity and stop launching ill-conceived campaigns against online shopping websites.
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