Can Australian retailers compete beyond price?

Some 61% expect marketplace competition to increase, up from 28% last year.

Australian retailers face stronger competition from ultra-low-cost online marketplaces as shoppers compare prices and products online, raising the question of whether local businesses can compete without relying on discounts.

Nearly half of Australian consumers, or 48%, often or always consider ultra-low-cost online marketplaces when shopping online, according to an August report by Deloitte Touche Tohmatsu Ltd.

“These marketplaces are changing what shoppers expect from everyone, because price, range, and convenience can now be compared in seconds,” Damien Cork, consumer products and retail partner at Deloitte, said.

Another 28% consider the platforms at least some of the time, according to the survey, which covered 1,000 consumers and 150 retail executives.

Higher-income shoppers are also using the platforms. Two-thirds of consumers earning $200,000 or more often or always consider ultra-low-cost marketplaces.

Retailers are increasingly concerned about the competition. Some 79% are concerned about online marketplaces, whilst 61% expect competition from them to increase over the next 12 months, up from 28% last year.

Cork said Australian retailers should compete through product quality, service, loyalty programmes, and delivery rather than discounts alone.

Consumers are also cautious about holiday spending. Some 34% plan to limit spending, 32% intend to switch to cheaper options, and 11% expect to delay purchases.

Retailers have lowered their expectations, with 77% forecasting holiday sales growth, down from 84% last year.

Artificial intelligence (AI) could intensify competition by making comparisons easier. Some 63% of consumers are willing to use AI to compare products and services, 59% to find and apply discounts, and 55% to negotiate or match prices.

Deloitte said AI shopping tools could increasingly help consumers search for and buy products.

Cork said shoppers are adopting the technology gradually, particularly for comparing products, finding discounts, and negotiating prices.

Louise Heath, a partner and consumer products and retail sector lead at Deloitte, said retailers will have to adapt as AI shopping tools become more widely used.

Retailers seeking to reach shoppers through these tools will need accurate information on products, prices, stock, delivery, and service, she said.

Questions to ponder:

1. How can Australian retailers compete with ultra-low-cost marketplaces without cutting prices?
2. Will AI shopping tools weaken customer loyalty by making price comparisons easier?
3. How can local retailers keep higher-income shoppers as low-cost marketplaces gain ground?