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Discounts drive online business models

Discounting has become the dominant factor in driving online business in Australia, as reported by Chris Zappone.

Research by technology analysis group Telsyte has confirmed the cost crunch faced by Australian retailers struggling with the worst retail sales figures in decades.

Telsyte identified five new online business models based on this trend, including:

  • group buying schemes such as Groupon and Scoopon
  • daily deal sites, such as DealsDirect
  • by-invitation members-only shopping clubs, typified by brandsExclusive and
  • consignment shopping sites like Graysonline.
  • ”Ratio” shopping site Wyngle lets users play the odds at buying goods for as low as $1.

Group buying, the most popular form, offered customers an average discount rate of 70%, based on 47,000 offers last year, they reported. Telsyte expects the group buying market to grow an additional 30 per cent in 2012, exceeding $600M and reaching $1 billion no later than 2015.

The clear implication for local retailers is that input costs, such as our fully priced rents, must be reduced if they are to be able to compete in the online space. With the share of online sales expected to double in the next 5 years, all retailers must now be actively preparing adapt to this new environment.

Original Article:

Discounts drive online business models

Chris Zappone – SMH Online, March 6, 2012

DISCOUNTING has become the defining characteristic of online sales in Australia, reshaping the way companies sell, according to a report by technology analysis group Telsyte.

While a lowering of prices presents a challenge to the sector, more affordable merchandise is expected to ”soften the blow” of weak consumer confidence.

”All the emerging ways to buy online are tied by a single common factor – discounts,” said Telsyte senior research manager Sam Yip.

The firm identified five new online business models to emerge over the past two years including: group buying schemes such as Groupon and Scoopon; daily deal sites, such as DealsDirect; by-invitation members-only shopping clubs, typified by brandsExclusive, as well as consignment shopping sites like Graysonline. ”Ratio” shopping site Wyngle lets users play the odds at buying goods for as low as $1.

Group buying, the most popular form, offered an average rate of 70 per cent discount on 47,000 offers last year, Telsyte said.

The shift towards more discounting has not been easy for traditional retailers. Last week Harvey Norman cut its target of 5 per cent of sales achieved online within two years of the November launch of its site to 1 or 2 per cent. Myer and David Jones have also struggled in the new market.

National Australia Bank economist Alexandra Knight said online retailing, making up about 5 per cent of the $216 billion industry, might double in six years, based on US growth rates.

“Discounting is having an impact on Australian retailers but retailers themselves will just have to adapt to the new environment,” she said.