Aussie retailers finally acknowledge online is the future, and real estate must too
Some would suggest that the global financial crisis (GFC) is over. Some would rightly suggest that today, given many of the remnants that are still unresolved, it is far from over. Eurozone falls into second recession since 2009, and then you have that minor issue called the "fiscal cliff". The cliff is a legislated bundle of government spending cuts and tax increases totalling $US608 billion that are due to take effect automatically on January 1.
So I was fascinated this week to read the latest buzzword – SMBC (small to medium business crisis). Alan Kohler wrote on Business Spectator – What crisis? This crisis – “Yesterday’s monthly business survey from NAB should be setting off alarm bells in Canberra and through every bank and big company boardroom in the country: Australia’s non-mining businesses are in serious trouble just as the resources boom ends. There will be nothing to take its place.”
“This is a genuine national crisis, but the problem is that it’s going largely undetected and unaddressed because it is not showing in the broad economic data, which is what the Reserve Bank sets interest rates by. That’s why rates were left on hold this month, and may be again in December.”
Personally, I see the end of Australia’s mining boom as a positive as it will allow our business sector to re-calibrate – especially the building sector, which put down tools on building sites to chase work at the then highly profitable mines. Mining’s double whammy to weigh on growth in its statement on monetary policy, the Reserve Bank said weaker spending in the resources sector had prompted it to drop gross domestic product (GDP) growth forecasts for 2013 to below 2.75 percent, compared to 3.0 percent in the August statement.
For a moment forget the mining sector. Australia’s alternate businesses, i.e. those that make up the SMBC, are simply being smashed by one predator – online!
Let’s look at the facts that clearly announce where business is headed – startling data I found on the internet.
- There are 7 billion people on Earth, with 5.1 billion owning a mobile phone.
- It takes 90 minutes for the average person to respond to an email. It takes 90 seconds for the average person to respond to a text message.
- 91% of all smartphone users have their phone within arm’s reach 24/7.
- According to Google’s Our Mobile Planet, smartphone penetration in Australia is now at 52%; however a report by Telsyte predicts that nearly 90% of Australian mobile phone users will have a smartphone as their primary device in 2015.
- Nearly 60% of smartphone users access the internet every day on their smartphone and 74% don’t leave home without it.
- A massive 94% of smartphone users have researched a product or service on their phones, and only 59% look at first page results when searching on their smartphones.
- Interestingly, the three most popular places where people use their smartphones, are home (98%), on the go (85%) and in the office (73%).
Online mega sale to lift local retail – from Tuesday Australia will experience its first online frenzy when up to 150 retailers will slash their online prices – by between 15% and 90% for 24 hours. Shoppers will have to access clickfrenzy.com.au to access the retailers’ online deals, and this will be the first of many to come. What we are seeing with this is that finally retailers are acknowledging that online is the future.
As for the real estate industry, it will survive. However, the businesses with the dominant online platforms will succeed and those that don’t understand it will perish – like many other industries.
So what is happening with interest rates? Here is a clue.
Despite the ‘World’s Greatest Treasurer’ believing that the lower the cash rate the better the economy, in 2013 Australia is looking at the lowest cash rates ever seen before. On that analogy, one can reasonably expect that 2013 will be another tough year in real estate.
If this proves to be correct then print advertising (as we know it) will collapse in 2013 and real estate advertising's major spend will be online. Newspapers are not that smart when it comes to real estate advertising expenditure – they need to focus on the little picture not the big picture. Newspaper advertising in the future is merely a point of introduction to online, not vice versa.
Robert Simeon is a director of Richardson Wrench Mosman and Neutral Bay and has been selling residential real estate in Sydney since 1985. He has also been writing real estate blog Virtual Realty News since 2000. The RWM real estate model has sold in excess of $1 billion in database sales globally.