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September 23

Australian Retailers Still Falling Behind In Online Sales

Posted by on September 23, 2013 at 9:22 AM

Here’s a fact that might surprise you: even in 2013, just one third of Australia’s retailers offer online transactions.

Here’s another: only around 35% of retailers feel in-store trading conditions in Australia are better this year than in the first half of 2012; nearly 50% saying they are worse.

Australian Retailers Still Falling Behind In Online SalesLook at the numbers and you’d easily be tempted to think the two are related – that retailers who have embraced online sales are feeling the pinch from tougher in-store conditions less than those that haven’t.

Sadly, it isn’t that simple.

While it would be convenient to look at the figures, which come from a recent NetSuite study for the Australian Retailers Association (ARA), as being related, there’s a third stat that proves they aren’t: an estimated 33-50% of all online expenditures by Australian shoppers are going to non-Australian websites.  

It’s a scenario we looked into just recently on Buckscoop when we covered UK-based clothing retailers such as ASOS and Marks and Spencer and the roaring trade they’re doing selling to Australian customers.

For us the reality is inescapable: in many areas, the best deals aren’t being offered by Australian retailers, but by foreign ones offering prices so much cheaper when converted into Aussie dollars that you can factor in shipping from abroad and still come out ahead.

Arguing that individual shoppers should avoid these better deals to keep their custom in the Australian economy is naïve in today’s world. But what about retailers? Are retailers making their lives any easier by avoiding the online marketplace? Clearly, the ARA figures mentioned above suggest they aren’t.

There is a point to be made that local retailers making the shift to sell online don’t have it as easy is similar businesses abroad – more on that later – but there’s also plenty of misinformation doing the rounds, and that’s what the ARA study was aimed at highlighting.

The raw facts are that online shopping is expected to be a $18bn industry in 2013, but will grow by a massive 39% to $25bn in 2015. Yes, that figure includes money being spent on foreign retailers (33-50%, remember) but that still means Australian online retailers will themselves take in 39% more money by 2015.

With overall retail sales expected to grow by just 2% in 2013, the picture becomes clear: subtract the rapidly expanding contribution of online selling and you’re left with a figure for pure brick and mortar retailers that’s actually contracting.

Plus, an expanding Australian online retail sector means the individual consumer is offered more choice, and there’s a greater chance that the best deal will be offered by an Australian business.

Local businesses have several plus points working in their favour, after all: faster delivery times, a name people know and trust, local support through physical offices and stores, and yes, the notion that by buying from an Australian business you’re helping the local industry grow.

One plus point coming soon to the Australian in-store retail industry is PayPal’s Beacon system, that will allow individual shops to offer fuAustralian Retailers Still Falling Behind In Online Salesll hands-free shopping from next year. It’ll work much like a PayPal transaction online – once you’re identified as you, the cost of your purchases will be charged directly via PayPal with a simple voice confirmation.

One the one hand you could see it as a lifeline for the bricks and mortar retail philosophy, but it’s actually just bringing “traditional” shopping more into line with existing online retail practices.

Ideally, retailers should be embracing all these approaches – that way they’ll get to share in the spoils of an expanding Australian online retail industry. Those that don’t are simply going to be left behind.


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2 Comments to “Australian Retailers Still Falling Behind In Online Sales”

  1. odysseus says:

    On the surface, I can’t pay much credence to the above study.

    It was built on a survey of _219 Australian retail managers_. Given how many retail businesses, and therefore managers there are in Australia, that is a VERY small sample size.

    Also, where do the growth forecasts from? The implication is they are from the managers themselves! No estimate can be accurate, but if it’s just an average of their personal forecasts, no credibility can be given. Even in the retail stores, the floor managers are different from the finance manager who sets budget forecasts. Who was surveyed here is a mystery.

    By way of contrast, Deloitte forecast over retail growth of 3% this year, which is 50% more than the one above. Remember that the total retail market is much greater than online. As for online, who knows?

    I’m also not surprised by the 35% figure. Do you really expect your local newsagent, your local butcher, your local drycleaner, and your local $2 shop to have an online presence, let alone offer delivery? People go to these shops for convenience and ready access, not to price compare and wait some days for delivery.

    I would expect that the majority of shops are selling to passing traffic, and selling online is too much hassle for too little return – can you imagine 30,000 newsagents online competing?! What are they going to sell to you, and what is their value proposition? Are you looking for a 1c saving on the latest Womens’ weekly, or box of 12 biros?

    Moving online for them just doesn’t add up.

    One other factor is why netsuite were involved, given their obvious interest towards having businesses online. The ARA could run a survey themselves.

    Adding netsuite just makes it questionable what questions were asked, and why certain results are emphasised and how they were interpreted.

  2. Donkey says:

    The Netsuite study smacks of pretty dull PR pitch. Go out there, get a few people to answer a bunch of loaded and leading questions then use the results to write content for lazy ass journalists. Seen it all before…..

    I do though, agree wholeheartedly with the proposition that Australian online retailers are missing sales, mostly through their neanderthal approach to selling online. Harvey Norman is a classic example. Instead of bitching about how the import regulations create a non competitive market he’d be better off encouraging his management to look at whats happening in the two largest online marketplaces, UK and US for ideas of how to market effectively, price effectively and deliver effectively.

    For a country with a high level of affluence, education and broadband penetration, Australia in many sectors lags a long way behind in the type of offers and innovation that providing serious value to online consumers (its not just retail its all types of commercial consumer transactions).

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