ONLINE RETAIL WARS: How Zara's launch impacts the local market, and what retailers will need to master to succeed

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  • Online shopping wars in Australia are heating up following the launch of Zara’s e-commerce offering.
  • Speed, delivery options and returns remain the critical points for a successful business.
  • The biggest challenge facing retailers is “TRUFIT” – ordering a garment in a preferred size, one above and one down, and returning the two that do not fit.

  • With the recent launch of Zara’s online offering throwing another spanner into the shopping wars in Australia, retailers need to stay abreast of the competition across the country and understand how the shopping landscape is changing.

    First, speed is key. The retailer that wins the war is going to be that which offers the quickest delivery and simplest returns policy – it is what consumers have come to expect.

    This in itself is causing an additional strain on transport and logistics. Australia Post reported 37 million parcels were delivered in December 2017, a 17% YoY growth, as well as a 24% growth in fashion deliveries.

    However, looking across the Australian online retail market, there are some big names that haven’t quite cracked it yet. Myer recently announced online sales growth halved from 67% in the first quarter to 35.9%, as well a $467 million half year loss, and Harvey Norman only generates 3% of its sale from online orders. With giants like these struggling with online sales, it will be interesting to see how Zara cuts through.

    Sarah KimmorleyA package from Zara

    Zara currently has only 15 stores across the country, so in terms of accessibility, its online offering gives it a bigger opportunity to reach a growing population across Australia.

    Another aspect to look at is how Zara is going to facilitate its online offering into its existing business – the physical shops and the current online international presence.

    There are two strategies that Zara is looking to capitalise on. The first, and perhaps the strongest, is the offering of its European range to Australian audiences, which many Australian-only retailers do not have access to. The second is the simplicity of its purchase and delivery process; next day delivery, pick up and a simple 30 days instore return policy.

    Zara’s main competitor, The Iconic, has placed great importance on its online customer experience and has set the bar high with its key differentiator being same day delivery within 3-5 hours in Sydney. However, Zara has adopted exactly the same approach, delivering to residential addresses between 6-9pm on the same day during the week.

    A key weapon in the online war will be how retailers address “TRUFIT”; that is, when consumers order a garment in three different sizes, their preferred size, one above and one down, and returning the two items that do not fit. Pressures like this are increasing strain on a retailer’s returns policy and supply chain offerings, especially with there being a greater need for real-time information demanded through all stages of the supply chain cycle.

    Where Zara edges ahead of The Iconic is in its returns policy. Both retailers offer free returns which can be dropped at a local Australia Post Office, however Zara also offers the ease of an in-store returns policy, something consumers may want to take advantage of as to not delay their refunds.

    Given the increase in demand for quicker and easier deliveries and returns, as well the time spent on mobile and apps, online retail seems to be driving the future of retail brands. The industries around it must be sure to adapt quickly and understand the market in order to remain competitive.

    Paul Soong is the Regional Director ANZ for BluJay Solutions.

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