The Internet economy potential

March 31st, 2014 at 3:00 pm by David Farrar

The Herald reports:

New Zealand retailers are falling behind other sectors of the economy in their use of the to drive sales and business management, says a major new study funded by NZ and the global search engine, .

The “Value of internet Services to New Zealand Businesses” report, issued this morning, says firms using the internet well are between 6 per cent and 11 per cent more productive than their competitors in the same field. Best practice users were as much as 73 per cent more productive than average businesses in their industry.

The report suggests if all businesses were using the internet to its full potential, New Zealand’s economy – currently worth around $210 billion of output annually – could get a $34 billion efficiency and productivity boost.

Maybe retailers should stop trying to tax the Internet and should embrace it more!

The research was conducted by the economic research consultancy Sapere and used data from 5,589 businesses in the Statistics New Zealand Business Operations Survey.

It excluded firms in the information technology sector, which were presumed to be high internet users and interviews with 76 businesses were conducted in the tourism, retail, dairy/agriculture, and professional services sectors.

The report says while internet speed and connectivity were once the major issue, that is no longer so. The use to which the internet is put is the larger issue for most firms.

In the retail sector, where the common complaint is that e-commerce is robbing traditional shops of sales, the survey found retailers were “slightly lower users of internet services than businesses as a whole.”

“They are less likely to have a website, less likely to have most of their staff online, and less likely to use fibre, with bigger firms generally higher users than smaller firms.

“On our numbers, it is highly unusual for retailers to be selling a lot online at this point, with only 3 per cent of firms reporting that more than a quarter of their sales are made online, although retailers are heavy online purchasers.”

And of interest:

It reports one service provider as saying no more than one in 12 New Zealand retailers was doing a good job of integrating online and offline stores.

So huge potential there if it is grasped. The full report, for those interested, is here.

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26 Responses to “The Internet economy potential”

  1. wreck1080 (3,881 comments) says:

    I doubt they can compete online anyway.

    I buy on price, and i don’t see that local retailers can match the likes of amazon.

    Eg, just bought a pair of reef jandals from amazon (they are in transit now).

    Local NZ cost is a smidge under $100nzd,

    I got them off amazon for $34USD with free shipping (total order cost was over $120 which qualifies for free shipping as i bought some other stuff too).

    I don’t see how a local retailer can compete with that even if they do go online.

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  2. MT_Tinman (3,130 comments) says:

    Wreck, I disagree.

    I also purchase mainly on price.

    I have purchased approx $1,000 worth of goods over the internet in the last month.

    All of that went to NZ based retailers.

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  3. peterwn (3,242 comments) says:

    History repeating itself. There were many country stores who could demand premium prices because they were the only feasible option. Once a postage system, at least to post offices. was established, mail order thrived. Farmers’ original business model was based on mail order, and the major Auckland department stores like John Courts, Smith & Caughey’s etc would have also transacted significant mail order business. As the provinces developed, with more local shops, mail order became of decreasing significance except for specialty items (eg RS – Radiospares has operated for decades).

    Now things are turning full circle with internet ordering doing what mail order did. And there are other differences – the internet retailers will often flick the order to a logistics warehouse operated by NZ Post etc to pick, pack and deliver. Dick Smiths for example has just signed a logistics deal with NZ Post and Australian Post for warehousing and logistics including deliveries to stores and end customers.

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  4. Pauleastbay (5,035 comments) says:

    Had to go to St Lukes this morning, which is punishment enough, needed to buy items urgently. Walked into store, was not even acknowledged by the two staff talking about the weekend, walked out, I didn’t need the items that urgently, saved $200 thanks Macpac

    Bricks and mortar are moaning about the drop in sales – I’ve worked in retail, its not beneath you to be of service to customers.
    Service standards in NZ are generally poor.

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  5. wreck1080 (3,881 comments) says:

    @MT_Tinman

    I buy all the time from amazon and have saved 1000’s over the years.

    eg, i also bought a harddrive from amazon in the same purchase….cost in NZ is around $300, amazon price was $150usd. I got a microsope from the US for $230 usd a couple of years back. The NZ retailer was asking $1000 for the model down from the one I got.

    You don’t really give any examples so we only have your word on this.

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  6. Ryan Sproull (7,101 comments) says:

    If only a professional digital business strategist were coming back to New Zealand.

    OH WAIT THAT’S RIGHT I’M COMING BACK MOTHERFUCKERS

    I WILL MAKE YOU EFFICIENT WHETHER YOU LIKE IT OR NOT AND YOU WILL THANK ME

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  7. Colville (2,261 comments) says:

    As stated above, service in NZ sucks arse.
    I avoid bricks and mortar shops like a dose of the clap.

    Shops in NZ need to do excelent service IF they wish to survive.

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  8. Peter (1,699 comments) says:

    What wreck said.

    When ordering online, there’s little difference, in terms of experience, between a local internet retailer and Amazon. But there is often a massive difference is price. So why shop “local”? Can local ever beat Amazon? Will Amazon be the only retailer left standing?

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  9. Colville (2,261 comments) says:

    Is that a shoutie advertorial Ryan ? :-)

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  10. Rick Rowling (812 comments) says:

    Maybe retailers should stop trying to tax the Internet and should embrace it more!

    Hey, here’s an idea, why not apply GST to NZ online retailers at the same rate as overseas online retailers (i.e. don’t).

    Makes more sense than the current immediate 15% incentive to support an overseas company.

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  11. Ryan Sproull (7,101 comments) says:

    Well, an advertorial should probably communicate more of my astounding skills and experience and less of my simple impending geographic location.

    And also should make me sound like less of a lunatic.

    So yes, Colville, but it’s not a very good one.

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  12. Colville (2,261 comments) says:

    I have said this before but…

    I was looking at buying a tramping pack…the one I wanted was in Auckland online. $28 delivery and 5 -7 days.
    From the UK it was $42 nz delivery and 10 to 14 days. Via air.

    Thing is from Auckland the pack was $399, from UK it was $140 nz.

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  13. Ryan Sproull (7,101 comments) says:

    That’s not a question of using digital to add value to a business, Colville. That’s just competition in pricing.

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  14. mikenmild (11,247 comments) says:

    I was reading a while ago about a sports retailer in Wellington saying how often people came into his shop, tried equipment and asked questions and then frankly admitted they were off to purchase the product online.

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  15. Ryan Sproull (7,101 comments) says:

    I was reading a while ago about a sports retailer in Wellington saying how often people came into his shop, tried equipment and asked questions and then frankly admitted they were off to purchase the product online.

    That’s a big challenge to all kinds of businesses at the moment, and not only in competition with purchasing products online – customers will window-shop through online listings of product offerings and then buy in-store where they get the best price.

    Which is fair enough. Businesses have to adapt by either lowering their prices to be competitive or make it clear what kind of extra service and support they provide to make it worth the customer’s time and money to shop with them.

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  16. OTGO (544 comments) says:

    Online shopping is ok (shit I bought my dream car last year on ebay) but the shopping experience is shit compared to touching what you are about to purchase and actually being sold something by a good salesperson. Although these experiences are few and far between when they do happen I feel more satisfied than with an online purchase, (although when my car arrived I have to say I was pretty fucken satisfied!).
    Having said that if a mall shop is not online as well as having their shop staffed with good people then they are losing sales big time.

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  17. prosper (157 comments) says:

    Retail in NZ is too expensive, with little variety. This is partly because of the way the malls operate taking only chain shops not independents, charging not only rent but taking a percentage of each shops turnover. We visit the USA regularly and find pretty much everything is cheaper there.

    Approx 10 years ago we had 20percent more retail outlets per head of population than Australia. This means each shop must charge more to make a living.

    The stores in NZ need to drive harder bargains with the malls and there should be less shops.

    Both of these will happen as more and more people shop overseas.

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  18. annie (539 comments) says:

    NZ internet retail service is too often useless. It’s so bad that if I want to order online, I phone first to see if the item is in stock, and if so when it will be despatched if I order immediately. The answer is often to guilelessly say that they’ll need to order the item in for me.

    NZ internet retailers need to sharpen up, the loss of business is their own fault. They take internet orders too casually on the whole.

    1. Don’t have an item listed as “in stock” on your website if it isn’t. Indicate backorder time if not.

    2. Clear and process orders continually, not once every three days.

    3. Post or courier within an hour or two of completing the order – aim for next day delivery.

    Ascent is a class act – they manage next day delivery if you order before 3pm, have a great helpline, and good after sales service. If all of the companies I tried to buy from were this good, I’d buy a lot more from within NZ. As it is, I know I can usually order an item from the US and have it arrive BEFORE the same item ordered from an NZ website.

    And bricks-and-mortar businesses have to have their stock online as well, to compete. You can shop around, decide on an item, but then have to go back into the store to buy it, which is a pain.

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  19. Ryan Sproull (7,101 comments) says:

    Online shopping is ok (shit I bought my dream car last year on ebay) but the shopping experience is shit compared to touching what you are about to purchase and actually being sold something by a good salesperson. Although these experiences are few and far between when they do happen I feel more satisfied than with an online purchase, (although when my car arrived I have to say I was pretty fucken satisfied!).
    Having said that if a mall shop is not online as well as having their shop staffed with good people then they are losing sales big time.

    There is a definite difference between products you need to touch/see and those you don’t in terms of online vs brick-and-mortar purchasing, and those businesses also have to take into consideration the cost-to-serve of people bringing back things they bought online and saying they’re not what they expected to be.

    Even with good sales staff and good brick-and-mortar-focused businesses, digital can play a part in all kinds of ways – CRM and customer loyalty programmes, content marketing that drives foot traffic to store, a social-media presence to mirror the brand voice and good in-store customer service…

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  20. cha (3,943 comments) says:

    I was reading a while ago about a sports retailer in Wellington saying how often people came into his shop, tried equipment and asked questions and then frankly admitted they were off to purchase the product online.

    Hence the rise of the gawking fee.

    http://www.salon.com/2013/03/26/why_are_stores_charging_customers_to_browse/

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  21. Mobile Michael (445 comments) says:

    If a retailer can build a compelling online offer, and use the bricks and mortar locations to back that up they will thrive. I can’t name a single NZ retailer doing that.

    One upside of the Amazon/internet purchasing is NZers are getting more fashionable – the black on black is going away…

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  22. Colville (2,261 comments) says:

    ;That’s not a question of using digital to add value to a business, Colville. That’s just competition in pricing.

    Ryan, I suppose my point is that if NZ cant get close on price is there a point to having a online store?
    I mean was I going to pay twice as much just to wait a few days less?

    I see TardMe is now doing shoes direct from USA.

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  23. Ryan Sproull (7,101 comments) says:

    There is a lot more to how much digital services, processes and tools can amplify the value of a business than e-commerce propositions, Colville, is all I’m saying. People in this thread seem to think “internet? oh, buying online.” There’s no way that the report in the OP was just about that. There are all kinds of missed opportunities, internally and externally, that NZ businesses are missing tricks on.

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  24. MT_Tinman (3,130 comments) says:

    wreck1080 (3,480 comments) says:
    March 31st, 2014 at 3:44 pm
    @MT_Tinman

    You don’t really give any examples so we only have your word on this.

    You are correct, you do.

    This does not alter the fact that my statement is correct and true, nor the fact that you can choose to believe it or not.

    It does, though demonstrate that you are once again incorrect.

    Amazon may be cheaper in some items (the six kitchen knives I had delivered today were cheaper on Trademe) but not always.

    Nor does Amazon always have the item I want – the wine I expect tomorrow is from a local source and not available elsewhere at the price I paid.

    In fact, when you think about it respectively most items one will buy online are more easily sourced locally (online or off) than through a foreign outfit and you are in fact spouting complete and utter crap and local retailers can compete very well if they choose, both on price and with service.

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  25. Jack5 (5,051 comments) says:

    Agreed many NZ retailers are lagging, but many are doing good work on the internet, too.

    In some cases they can do the job cheaper than overseas thanks to international courier charges or delivery charges imposed by overseas sellers.

    I pay more to NZ internet retailers for complex items that may may fail. For example if I want a new motherboard, which occasionally can be a dud, I am happy to pay an NZ online retailer a little more.

    When some overseas firms refuse to sell to NZ, to protect their NZ agencies, you can use one of the new packaging sites that supply a US address, but this would be a pain if you had to return something you bought.

    Here’s one item an NZ internet retailer could pick up. Many people who have been heavy keyboard users for 20 or 30 years remember nostalgically the IBM Model M “clicky keyboard”, long out of production. These have a buckling spring under each key and are great to type with. They give tactile feedback.

    Surviving Model M keyboards, now 20 or more years old, sell on TradeMe for around $100 each. A USA firm is making Model M replicas, and also modernised versions with the same buckling-spring keys. However, the courier cost to NZ is more than the cost of a keyboard. An NZ internet retailer could import these in relative bulk and slash the transport cost, promote them, and NZ’ers would be able to buy the keyboards at a more reasonable price.

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  26. wreck1080 (3,881 comments) says:

    @mt_tinman — So, you are calling me a liar then? I’m not sure why you have to be so aggressive and rude. Generally , that is a sign of someone losing an argument.

    There will always be some things you can source locally at a better price. Especially foodstuffs and less easily transportable good (although, i recently discovered I could buy a large BBQ in the USA, ship it here, and it still be 25% cheaper after all costs accounted).

    What I am saying, is that there are a LOT of products (not just ‘some’) that you can buy more cheaply from amazon. You seem to be saying it is the other way around .

    The very fact that the government has been looking into the issue of the increase overseas purchasing indicates you are wrong.

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