Weekly Wrap #21: Embracing the online revolution, podcast movies and in-home drones

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You’d never have guessed (you would)

AusPost released its ‘Inside Australian Online Shopping’ update this week. The growth is, not surprisingly, bananas or in the words of AusPost (echoing Benedict Evans), “like five years growth in three months”.

August 2020 smashed all records:

  • August saw almost 10% more online shopping purchases than the busiest season last year - the pre-Christmas rush.

  • In Victoria, online sales increased 170% YoY.

  • Between March and August 2020, more than 8.1 million households shopped online, up 16% YoY. Nearly 900,000 new households shopped online for the first time.

  • There were 200,000 new online shopping households in April 2020 alone and bout 67% of those continue to shop online.

And we haven’t even hit Black Friday/Cyber Monday or Click Frenzy yet.

These trends are echoed all around the world. In the US ecommerce sales rose 32% in Q2. The UK went from 22% ecommerce penetration to over 32% from March to May.

According to one study, 49% of consumers globally say they’re shopping online more than before. This figure rises to 70% for Mexican, 62% for American, 59% for Canadian and 58% for UK shoppers.

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Source: Benedict Evans


Embracing online

One reason people resist change is because they focus on what they have to give up, instead of what they have to gain - Rick Godwin.

Without a doubt, assumptions about how consumers buy, and how brands and retailers sell, have been reset by the pandemic. It has forced people on both sides of the sales equation (i.e. buyers and sellers) to get comfortable with online shopping, fast.

The billionaire founder of Harvey Norman, Gerry Harvey is one such person. Having always refuted the ecommerce business model, Harvey has for a long time been dismissive of the threat posed by young upstarts like Kogan.com. From 2010 until as recent as 2018, Harvey has described online retail as a “dead end” and “over hyped”:

Fortunately, Harvey Norman has been investing in its online offering since 2011, despite Harvey’s disdain for the model.

Fast forward to 2020 and Harvey is revelling in record results thanks to lockdowns. Now, profits are up 185%, with growth rates that Harvey says has “never [before] happened in my lifetime”. While Harvey Norman has not disclosed its online vs physical sales figures, it would be hard to imagine that online sales haven’t had an impact on its recent results.

And yet, Harvey is still reluctant to embrace the online opportunity, although he’s sure changed his tune:

I've only got one way to go, and that's wherever the market takes me. But if you give me a preference if I'd rather have 10 per cent or 30 per cent [online sales], I'd rather have 10 because I won't make as much money.

Its online pureplay competitors Catch Group, Kogan, Brosa and Amazon would certainly disagree. Kogan’s cost of doing business is estimated to be just 6%, while Harvey Norman’s is more than 40%.

Source: AirTree

Even the likes of Ikea—with a core strategy centralised around the physical store experience, bulky (expensive to ship) products and a big store footprint—sees the writing on the wall:

Now the shops are reopening, the level of eCommerce has actually sustained so it seems as though there is a permanent shift towards online and its convenience.

As does Coles, whose online sales were up 60% in the first six weeks of the new financial year. In fact, Coles’ investment in digital provides an example of how traditional but forward-thinking businesses are adapting for growth in our future world. Coles is increasing its digital initiatives budget 50% a year for the next five years - an estimated $200 million investment.

Coles is now embracing change on multiple fronts:

  1. Using data and technology to its advantage. From supply chain to inventory management to order fulfilment and loyalty programs, Coles is investing in making the most of data and technology to create efficiencies and better serve its customers. To do this, it is partnering with leading technology providers like Ocado, Microsoft, SAP, Adobe and automated logistics provider Witron. Its ‘Smarter Selling’ strategy, which is centred around using data and technology to optimise the business, has already achieved $250 million in savings. And they’ve only scratched the surface.

  2. Elevating the online customer experience. Coles almost doubled its online capacity in 2020, making the most of its physical footprint with a rapid rollout of contactless Click & Collect. Recently, Coles has re-engineered its main website, coles.com.au to create a better online experience (including a digital portal that offers daily refreshed deals and content: Coles&co), as well as its Liquorland, Vintage Cellars, First Choice Liquor websites. These sites would likely include a personalisation strategy to increase conversion and retention rates. Coles also partnered with loyalty program Flybuys to create a way for customers to easily pay online using Flybuys points.

  3. People as an investment, too. In May, Coles added Ben Hassing to lead ecommerce. Hassing previously ran Walmart's ecommerce business in China. And because there’s nothing like a financial incentive to align people and shift behaviours, this week Coles announced it is changing leadership KPIs to include an online sales metric - in a “shift [that] demonstrates the importance of growth in the online channel to achieving our strategic goals”.

Coles realises that a long-term adaptive strategy requires more than just creating an online offering, click-and-collect or solving the delivery dilemma. Embracing online and preparing for inevitable change is about finding new and better ways to stand out and deliver value to customers.

Throwback to one of Harvey Norman’s original ads - a bit of entrepreneurial spirit to disrupt the status quo.


Rapid fire: News that caught our eye this week 🧐

Australia and NZ:

Around the world (all in USD):


That’s a wrap! We hope you enjoyed it.

Gavin, Bex and the team at Ignition Lane

www.ignitionlane.com

p.s. We love feedback - if you have any or want to continue the conversation, please reach out.

p.p.s. Watch Gavin live on AusBiz at 2pm on Mondays, when he opens the Startup Hour of Power.