Also commonly known as e-Commerce, e-tailing or Online Trading from the retailer’s perspective, online shopping is now a major component of the retail trading mix. Australia is currently lagging the rest of the developed world in the uptake of online shopping, but the situation is changing fast. Here are some quick facts about online shopping in Australia:
- Total Retail Spend in 2010: $223 billion
- Online Spend (Penetration): $9.5 billion (4.3%)
- Online Penetration United States: 8%
- Online Penetration United Kingdom: 11%
- Domestic Spend Online: $5.3 billion (56%)
- Online Spend on Overseas Retailers: $4.2 billion (44%)
- Global Online Spend in 2010: US$680 billion
- Global Online Spending Growth: 19% per annum
- 70% of Australian businesses still have no online sales presence
- The National Retail Association (NRA), the peak Australian retail industry body, has warned that at present rates the majority of growth in online retail will be to offshore retailers, and consequently has recently forecast 88,000 retail jobs will be lost in the next 5 years if the present retail situation does not dramatically change
It’s not all doom and gloom though. There are amazing online tools available now, like hosted shopping carts, eBay, PayPal, and website content management systems, that until recently were either too complex, or too expensive, for most small businesses to use. The important thing is to take the time to investigate and implement your own online selling strategy, and position your business to capture the benefits of this booming new market.
See The State of Online Retail in Australia for a detailed analysis of online shopping in Australia and go to What is e-Commerce? to learn more about e-commerce and how you can get started selling online.
The internet is a disruptive force which has dramatically altered retail trade globally and Australian retail in particular.
Australian retailers already face 3 major hurdles when competing with other developed nations:
- Rents at the highest levels in the world (¹)
- Labour costs at near the highest levels in the world
- A comparatively small market, pushing up wholesale cost of most comparative goods
Adding to these pressures, the Australian currency has risen to record highs against our main trading partners, so at this point in the cycle Australian consumers can purchase items from the US and UK for around half the prices of recent years.
Capping off this perfect storm of trading conditions, the internet has now matured as a viable buying medium for most consumers, and Australian consumers are embracing the opportunity to extract the discounts available from purchasing online. Recent JP Morgan data shows global online commerce growing at 19% per annum, to $680bil in 2011, forecast to reach $963bil by 2013.
In Australia, where Online retail penetration lags global standards (4.3% c/f 8%) this growth is expected to be far greater. Forrester Research estimates that online retail spending could reach as much as $36.8 billion by 2013, up from $10 billion currently.
However, 45% of this revenue is already spent offshore, and the National Retail Association (NRA) warns that the majority of new growth will go to International retailers if government policy doesn’t evolve to stem competitive disadvantages faced locally, estimating that as many as 88,000 retail jobs will be lost over the next 5 years.
Evidence of the crisis affecting local retailers is abundant, with daily media coverage, and the recent collapse of major retail groups such as Borders, Angus & Robertson, Brown Sugar, Bettina Liano and Colorado.
The government counters though by pointing out that Australian retailers have been extremely slow in embracing Online Trading opportunities. Federal communications minister Stephen Conroy stated recently that over 70% of businesses aren’t offering products on the internet.
Retailers everywhere, but particularly those in Australia who have traditionally relied on high margins from sales to cover their large cost bases, are under extreme pressure to adapt to the new online environment, or perish.
Hope for Retailers
The news certainly isn’t all bad though. For retailers willing and able to adapt to the realities of the new Online Trading paradigm, there is abundant evidence of successful local businesses and a clear path available to emulate this success. Consider the following figures that were revealed as part of the Government’s Online Retail Forum that took place in Sydney in February:
- Online auction and retailing giant eBay says its top 2,000 sellers in Australia recorded revenue growth of 38% during 2010, with the most successful merchant turning over $12 million. The smallest member of the group of 2000 had sales of $120,000, while the largest had sales of $12.6 million.
- PayPal also attended the summit and said that in the last six months of 2010, 500,000 customers signed up with a PayPal account – the number of transactions of merchants accepting PayPal is growing at an annual rate of 19%.
- 10 million Australians are now using the internet to shop.
Table 4: Australian Online Market – Share by competitor
Table 6: Australian Total Retail Market (ABS)
Table 7: Australian Total Retail Market (ABS) (including Online)
(¹) Australia’s retail rents the highest in the world: Report
Friday, 01 July 2011 09:14. In all categories of retailing, Australian retailers pay significantly higher rents than offshore retailers in comparable markets, according to research by Morgan Stanley.
The biggest gaps in rental costs are to be found in the speciality retail sector, where Australian retailers pay rents about three times higher (and sometimes more) than similar US business. See the table below for details: