The battle for consumers’ loyalty

Traditional retailers are struggling to keep pace with the rapid changes transforming their industry, driven by evolving technology and shifting social habits. Local retailers have an even more difficult task, as the market lacks the critical mass to justify the massive investment required to offer e-commerce services.

The ever-increasing popularity of smartphones and tablets has spurred a second internet-shopping boom. With consumers no longer tied to desktop or laptop computers, they are increasingly getting hooked on buying various goods and services online.

But other factors are also contributing to the decline in the popularity of physical sales outlets, especially in Malta.

The internet-enabled virtual market makes it possible to source the best products at the most competitive prices from anywhere in the world. There was a time when the range of goods and services available online was limited.

Until recently, one could buy books, CDs and small items that could easily fit in an envelope. Today, a wide range of products and services is available thanks to improved courier services, more pragmatic customs practices, and safer electronic payment systems like PayPal.

Most retailers would do well to revamp their tired websites, which fail to attract consumers

Local consumers are known to order fitted kitchens from retailers in Italy that offer a greater variety of models, often at more competitive prices than those available locally, and with speedier installation.

Local courier services are also making it easy to source products that were previously available only to consumers in the UK or the US. The freight-forwarding service comes at a price, but it is often not high enough to discourage consumers from purchasing goods and services locally.

I have recently heard of a case where a pair of designer-brand varifocal spectacles bought online from a UK retailer cost a local consumer just over half the price he would have paid had he sourced them locally.

One can benefit from similar discounts when buying branded and non-branded car parts from online sellers in Europe or the US. Car parts can be a substantial outlay for motorists, who quickly learn to research online to source genuine parts at a large discount to local dealer prices. It is amazing that even local scrap yards still charge higher prices for second-hand car parts than for new parts available online.

The trade war initiated by US President Donald Trump is unlikely to dent the popularity of e-commerce websites that sell consumer goods, mainly from China, Korea and India. Consumers have the power to vote out governments that restrict their choices, rather than deal with the economic reforms to improve competitiveness.

It is a fact that the retail and wholesale industries in Malta have faced difficult times over the past several years. Unfortunately, retailers often focus on the wrong factors affecting their business: poor public transport reliability, ongoing roadworks across the island, lack of security of tenure for those leasing government-owned property, and lack of parking facilities.

These are all contributing factors to the decline of the traditional retail businesses, especially in Valletta. But the main reason for the decline, in my opinion, is that local retailers no longer appeal to their customers’ hearts. They blame unfair competition from sellers abroad. But the reality is that they fail to understand how buying habits are changing.

Up to now, online purchases, excluding food delivery by riders, account for 5% of retail sales in both Europe and the US. In the UK, this figure rises to 11%, driven by the growing popularity of the online grocery market. Figures for online sales in Malta are not easily available, but anecdotal evidence suggests they are increasing, especially among younger generations.

Local retailers face a daunting task in their battle to win over consumers’ hearts. One possible solution is to take on the big boys in the online sales industry and start offering goods and services to potential buyers worldwide.

Today, it is not even necessary for all the goods sold to be located in one particular country. Many US online vendors have associates in China, Korea and other Eastern countries who forward ordered goods to the destination indicated by US partners.

What is needed is a good ITC system that facilitates communication between the seller and the buyer and enables safe, fast payments. The technology is available, but so far I have seen little evidence of its use in Malta.

Most retailers would do well to revamp their tired websites, which fail to attract consumers. They need to give more relevant information about their products and speed up delivery.