$2 billion of sales shifting from bricks and mortar stores to online each year
Retail conditions "more challenging" than any point in past 25 years but (commercial) rental growth still outpacing sales growth
Small businesses being left behind in the digital economy
I moved back to my hometown of Swan Hill, Victoria, in 2014, having seen it disappear in my rear vision mirror as a teenager in 1989 when I left for university.
In the 25 years since high school I've lived in Warrnambool for study and worked in Melbourne for 5 years, London for 6 years and Paris for 9 years. It's fair to say that, like many young people who leave regional Australia to chase opportunities, I never entertained the thought of moving back to Swan Hill, almost 4 hours from Melbourne and close to almost nowhere.
With three little ones in the nest, however, and crammed inside a little apartment I convinced my French wife to swap Paris for the blue skies and wide expanses of the Mallee region in North West Victoria (has she forgiven me? That's another blog post in itself).
Decentralisation and connectivity - coming to a country town near you
It's an interesting time to be living in regional Australia.
I would hazard a guess that people in their "mid life" are increasingly returning home to country towns with young families and if you've grown up in the bush you'll know that it's a great place to raise a family.
With the rollout of the NBN broadband network well advanced, satellite data allowances for people in remote areas improving and 5G wireless connectivity arriving in 2019, businesses and communities in rural and remote areas have cause to be (cautiously) optimistic about future opportunities.
This connectivity will be an enabler for the decentralisation of population from over-crowded cities towards the countryside and permit more and more professionals to "live the dream" by working remotely in a regional location while picking up their pay cheque from their employer in the city. Better still, these professionals bring new skills and perspectives to the regions, contributing to the creation of new businesses and jobs.
In farming regions like the Mallee, free trade agreements into Asia and productivity gains from advances in AgTech present new opportunities despite sectors such as broad acre grain cropping remaining vulnerable to drought and high water prices.
In fact, job opportunities abound in the regions. Our local council is desperate for more engineers and town planners, there's a shortage of doctors in many regions, the advanced manufacturing sector is trying to lure highly skilled candidates from the capital cities to sustain ambitious growth targets and more people are needed to help strip fruit from orchards from here to the horizon.
Add the quality of life (ie. liveability) and incredible sense of community that binds regional communities together and you wonder why more city folk haven't made the move already.
The case for reinventing retail in the regions
While there's a lot to be optimistic about in regional Australia, many traditional retailers - a visual barometer of any country town's health - are struggling to adapt their businesses in the age of digital disruption and online shopping.
I've got something of a ringside seat, as a consultant driving small business digital transformation as well as having a position on the board of the local chamber of commerce.
The increasing number of empty shops is a hot topic at the moment and local retailers feel that landlords' rental expectations are unrealistic.
This point was reinforced when I read Retail rents under pressure as $2b in annual sales shift online (paywall) in the Australian Financial Review recently. What I took away from the article was that commercial rents continue to rise annually while in-store sales are being eroded by online shopping. Throw in rising electricity prices and penalty rates for weekends and public holidays to the mix and it makes you wonder why anybody would want to go into retail these days.
My own business, Mallee Rising, has been on the main street of Swan Hill since 2017 and I can empathise somewhat with retailers: once rent, electricity, council rates and permits, telephone/internet, the laundry list of insurances, advertising and staff are paid, there isn't a lot left in the kitty to pay yourself.
A world wide web of consumers at the click of a mouse (or swipe of a finger)
We could, however, view today as an incredibly exciting time to be in small business with the digital economy opening up new customers in new markets.
Today it costs next to nothing to build your own website, be found and sell online, send an email newsletter to customers, track them in a CRM, setup an ad campaign, shoot a video, design a professional looking poster or logo or record a podcast.
Tactics that used to be exclusive to big business are now available to businesses of all sizes and budgets. What holds many people back in small business, particularly retail, is the short supply of time and know-how.
With small business making up 96% of all businesses, and something like 60% of small businesses having only one employee, it's clear that many business owners have a lot on their plate. With time in short supply there are always more urgent things higher up the to do list than learning new skills and professional development.
Could young people be the answer?
Mallee Rising will introduce a program in 2019 to develop young people, these "digital natives" who are abundant in our region, to work with small business on their online presence.
It's a win/win for all concerned and on the surface it appears to be a simple solution to a simple problem which makes us wonder why nobody (to our knowledge) has implemented it before at scale.
Would you believe that only 32% of young people in the Swan Hill region go on to university (versus the state average of 55%)? That leaves two thirds of young people entering the workforce or undertaking an apprenticeship or traineeship according to the 2018 On Track survey results of school leavers.
We're witnessing incredible levels of digital literacy coming through primary schools like Swan Hill Primary School, with the early years introduced to Microsoft Word and Powerpoint, Grade 5s creating forms using Office 365 and grade 6s building solar powered boats and entrepreneurship (see video). Kids are introduced to robotics across most ages as well as coding.
This wave of digital natives are only a few years away from being able to do casual paid work.
What if this time rich, cash poor cohort could be matched with small businesses uncomfortable with digital technologies and with no time to learn?
When I was 15 I stacked shelves in Woolworths - today's equivalent could be adding products to a website or ebay store.
This approach could address a massive problem facing small business while providing valuable skills for a young person's resume as well as handy income. To many digital natives it may not even feel like work!
And with two-thirds of young people currently not heading off to uni, imagine the economic outcomes for regional communities if this production line of digital natives stay behind and enter the workforce or start new and innovative businesses?
A blended approach to retail
I heard an encouraging story recently. A client visited a shop in a neighbouring town first thing one morning and observed one employee unpacking newly arrived stock and two staff putting stock into parcels to send out to customers who had bought from their website (presumably generated from their dynamic Instagram following).
Is this the changing face of retail that we need to wake up to? As foot traffic entering physical stores decreases, could retailers use this downtime to add new products to their online stores (your website, eBay, Amazon, etsy and so on... why settle for one channel?) while photographing products on their smartphone to reach new customers on Facebook, Instagram and Twitter while setting up an ad that hyper-targets people by postcode and their interests?
Could an under-utilised employee be updating a website or publishing a photo on Instagram while the shop is quiet? Or could a part-time employee be made full-time and spend half of their time focusing on attracting new customers online?
In some ways traditional bricks and mortar retailers enjoy advantages not available to pure online businesses: you can pick up a product and try it on or even talk to the salesperson about it. Refunds and exchanges can be performed face-to-face and if you're strapped for cash you can put an item on "lay-by" (remember that?) and collect it when you've paid it off.
Throw in the fact that bricks and mortar retailers can blend their physical presence with an online presence, servicing both local customers as well as new customers in new markets then we could be talking about the reinvention rather than death of retail.
The solution to some of the perceived woes of retail and small business may be right in front of our eyes.
Now is the time for real estate agents, commercial property owners and tenants to have constructive talks about rethinking commercial rents and the duration of leases.
It's also time for stakeholders at all levels to make a serious commitment to building capacity in small businesses and regional communities to understand and seize opportunities in the digital economy, one step at a time and at a price point they can afford.
Perhaps young digital natives can lead this transformation.
A rising tide floats all boats and we're doing out bit at Mallee Rising to raise the digital tide in the Mallee. Who's up for the challenge of building capacity in our nation's small businesses?