When it comes to its digital strategy, Australian retailer Mecca lives by a key concept: adapt or die.
This story first appeared in the March 20, 2015 issue of WWD. Subscribe Today.
While the retailer isn’t a pure-play e-commerce or digital retailer, the vastness of the Australian landscape and consumers’ increasing desire to shop online is making Mecca even more laser-focused on its online strategy.
“Australia is a very funny market,” said Marita Burke, head of marketing, brands and buying for Mecca Brands, during the WWD Beauty Digital Forum. “Our reputation far outweighs our size. With a geographical land space equivalent to the United States, our population tips in at about the size of Florida, and this population is largely populated across five or six key cities. There is an enormous amount of empty space, shipping is very difficult and timely shipping is even harder.”
The business operates on three cylinders — Mecca Cosmetica, Mecca Maxima and Kit Cosmetics.
Burke noted that the retailer has exclusives on 90 brands in Australia and commands a 10 percent share of the Australian beauty market.
Digital has completely revolutionized the Australian beauty landscape over the past several years, said Burke. And Burke and Dorothy “Dot” Grouios, head of digital for Mecca Brands, were refreshingly frank in admitting that there have been speed bumps along the way. “In 2010, Australia and Mecca hit the perfect storm,” said Burke. “The Australian dollar, almost overnight, hit parity with the U.S. dollar; for the previous 10 to 15 years, it had been operating at a level far lower than the U.S. dollar. Overnight, Australia became one of the most expensive markets on the globe to purchase beauty. Buying internationally suddenly became 50 percent cheaper than buying beauty locally, and Australians went on a shopping spree — an online shopping spree.” The Australian government incentivized shoppers even more by declaring that anything purchased online domestically would incur a 10 percent sales tax, said Burke, while anything purchased online internationally would not incur any taxes. “All of a sudden, Australia had gone from being extremely remote to very global,” said Burke. A virtual coup d’etat followed, she said, with international brands heavily courting the Australian consumer. “Macy’s, Nordstrom and Gap immediately saw Australia as an opportunity, and moved quickly to capitalize on the burgeoning demand,” she noted.
“Suddenly, 20 percent of the beauty business had gone offshore to international sites, and Mecca, almost overnight, had to adapt its model to this global market,” said Burke. “We had to decide between targeting a market with a new bricks-and-mortar store or investing in digital.”
That involved leveraging its considerable strengths — a database of more than a million customers stretching back to the company’s 1997 founding, product exclusives in Australia, a national footprint, three Web sites and local market knowledge. It also required a sharp look at prices and how they had to be on parity as much as possible with global prices, as well as refining its Web sites and implementing customer incentives like a loyalty program.
Lowering prices was a considerable effort, due to fixed costs such as real estate and staff, said Burke, and was a three-year process involving three rounds of layoffs. Mecca is now within 15 percent of U.S. prices on global brands even though the market is 50 percent more expensive than the U.S. market, said Burke. New customer acquisition has more than doubled, averaging 34 percent over the last three years, she said. While the move didn’t generally affect the size of the customer’s purchase, it did increase frequency dramatically, said Burke.
The retailer also had what Burke calls “a call to arms” regarding customer capture, going on a massive data effort to be able to market as directly as possible. It worked: Customer capture went from 73 percent to 95 percent, said Burke, bringing an additional 400,000 customers into the Mecca fold. Next, the retailer formed a focus group from its database, dubbing them the Circle of Expertise. “And 200,000 beauty consumers became the architects of our strategic response to this digital coup d’etat,” Burke said. Key desires emerged: fair and transparent pricing, an omnichannel loyalty program that bridged all Mecca formats and one unified beauty Web site rather than the three that already existed.
Grouios is the first to admit that the existing sites were largely outdated. “It was a huge miss in a market where smartphone penetration stands at 76 percent,” she said. The U.S., by contrast, is about 60 percent, she noted. “We realized that we needed to step up our game with a competitive Web site that would hold its own in this new global reality,” said Grouios.
That became mecca.com.au. “In late 2014, we launched our new Web site, bringing together our three retail concepts under one roof,” said Grouios. Grouios and her team launched a global e-commerce platform in Demandware, an American cloud-based e-commerce platform and related services for retailers and brand manufacturers around the world. Grouios and her team focused on streamlining and improving search functionality, offering the ability to zoom in on products, creating searchable and shareable wish lists — “all the usual bells and whistles,” said Grouios — as well as making the site more editorial in feel and extremely responsive, ensuring that it measured up to the brand’s in-store customer service level. New brand pages were added to bring Mecca’s brands to life and better tell their stories, while product descriptions became far more detailed, said Grouios. Behind-the scenes videos, trend reports and articles became part of the Web site’s landscape, as did putting the ability to live chat with a beauty adviser on every page. “The great news is our customers are absolutely loving it,” said Grouios. “They’re spending an average of six and a half minutes per session on the site, which is up about 25 percent over last year.”
At the same time, Grouios and her team built a beauty portal that pulled in all consumer buying data since 2007, giving both store personnel and consumers access to this information both on the Web site and at Mecca’s bricks-and-mortar locations. The Web site also allows customers to search Mecca’s online and in-store inventory for any product the retailer sells.
As a result of these changes, said Grouios, online traffic is up 105 percent, conversion is up 7 percent and sales are up 110 percent.