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Tuesday, 20 August 2013 15:30

Aussie online sales growth lags other markets

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Online shopping: Wikimedia Online shopping: Wikimedia

Australian online sales have grown strongly in recent years, but penetration in the online market is still only around 7% of the country’s total retail sales - including those from traditional ‘bricks and mortar’ retailers - and lag behind other markets like the US and the UK with online sales of about 10%.

According to research by Frost & Sullivan, commissioned by NetSuite and the Australian Retailers Association, despite lagging other markets, online sales in Australia are expected to grow strongly to reach 10% of all retail sales - or $25 billion - by 2015.

Mark Dougan, Frost & Sullivan Managing Director for Australia and New Zealand, for Frost & Sullivan, says the largest online expenditure in Australia is currently is on clothing, footwear and personal accessories, followed by electrical and electronic items.

"As Australian consumers become more confident with online shopping, and as a greater number of retailers actively promote their online offerings, the value of online retail sales is growing at double-digit rates, suggesting that Australia still has room to grow.

"Many brick and mortar retailers are currently missing out on market opportunities from the booming online retail sector in Australia. Taking a multi-channel approach can offer them many opportunities, such as lower operating costs, the ability to reach new customer segments, the potential to broaden their product range and the ability to operate with fewer geographic limitations."

The study of 219 retail managers last month revealed that almost 50% of Australian retailers believe that in-store trading conditions in 2013 are worse than the first half of 2012, while only 35% viewed conditions as better. And, with overall retail sales in Australia expected to continue to grow by only 2% this year, smaller chains in particular are finding retail conditions particularly challenging, according to Frost & Sullivan.

"A number of factors have impacted retail sales growth in Australia, including a greater propensity for consumers to save rather than spend, a challenging job market and rising household costs," Dougan says.

"The market has also been impacted by price deflation, partially caused by the growth in online shopping and by a growing number of overseas retailers targeting the Australian market, offering a greater variety and choice of goods at lower costs. This is coupled with the lack of consumer foot traffic into brick and mortar stores, as well as the high operating costs retailers must absorb."

Dougan said the study also indicated that the increasing usage of mobile devices was stimulating online shopping in Australia, with 30% of online shoppers using smartphones or tablets for online transactions.

“This ability to shop online in a greater range of locations and situations is increasing the propensity of Australian consumers to use the online channel.”

According to the study, about one-third of retailers also now have a social media presence, using platforms such as Facebook, Twitter and YouTube, to communicate with consumers, with the total global value of social commerce estimated at almost $15 billion in 2013, and likely to reach $30 billion by 2015.

With over two-thirds of Australians now using social media online, Dougan says it is increasingly important as a way to search for products, to obtain peer recommendations on products and to communicate with retailers or other businesses. “This indicates a significant opportunity for retailers to leverage another channel to interact with consumers.”

"Australian retailers are recognising the opportunities that the web offers to interact with their customers in new ways, and to deepen and broaden these relationships, but making the web an integral part of the retailer's approach involves more than just setting up a website or Facebook page.

"There are operational challenges that need to be overcome to make the web the centrepiece of a retail organisation. Retailers' existing business software and systems can be an impediment to implementing an omnichannel experience. Successfully providing a consistent experience through whatever channel the customer uses to engage requires an integrated IT infrastructure that can link data from all channels."

And, Dougan points out that, according to the research, a major challenge faced by many retailers with a web presence is a “lack of integration between their web front-end and back-end fulfillment systems.”

According to Dougan, only 24% of Australian retailers with a web presence currently have software that integrates web orders with their inventory management system and, without a unified software solution, he says retailers face difficulties in maintaining a consistent brand experience in areas such as customer support, pricing and promotions, as well as increased operational costs to run and maintain each channel.

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Peter Dinham

Peter Dinham - retired in 2020. He is a veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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