Miranda Kerr at David Jones yesterday. Photo: Danielle Smith
Shoppers opt for clicks over bricks
The following article is highlighted as it gives a very clear indication of the state of Australian Online Retail, as of mid 2011, drawn from the Commonwealth Bank’s analysis of it’s internal credit and debit card data. It shows that nearly half of the money spent online is being sent offshore to international retailers, and for some sectors like Sporting and Outdoor, the total is closer to 90%.
With Online spending forecast to grow at nearly 20% annually, Australian Retailers must act decisively to develop an effective online strategy, to capture their share of this revenue, or face an inevitable and increasing loss of business to the channel.
Read on for more…
AUSTRALIAN shoppers, especially those aged under 21 and armed with a credit card, are sending $4.2 billion a year to overseas online retailers, robbing local bricks-and-mortar shops of business.
Worse is expected to come, thanks to the high Australian dollar slashing prices.
The recent explosion in online retailing, with spending estimated to have hit $9.5 billion in 2010, has already cut a swath through the local sector, with David Jones issuing a shock profit downgrade and closures hitting booksellers Borders and Angus & Robertson, fashion retailer the Just Group and the DFO group.
Almost half of online sales are from overseas, and the federal government signalled strongly on Wednesday that it would not lower the $1000 threshold at which GST becomes payable on goods bought overseas online.
Yesterday, the Commonwealth Bank released a study of the online shopping habits of its credit and debit card customers, showing sites offering group-buying deals and fashion sites had the most aggressive sales growth, while Generation Y (aged 21 to 29) and Generation Z (under 21) were the most prolific online shoppers.
According to the bank, of the $9.5 billion spent online in 2010, $5.3 billion was on domestic retailers, meaning almost half was flying offshore electronically into the bank accounts of US, European and other international retailers.
For shops spread across the nation’s suburbs, malls and retail strips, the internet still represents only a small proportion of overall spending – 3.8 per cent of total retail spending and 5.2 per cent of discretionary retail spending, according to CBA research.
”There remains plenty of growth potential online,” said CBA analyst Andrew McLennan, ”with 59 per cent of online consumers using the medium just once in the past year for an online retail purchase”.
Australia still has relatively low penetration rates compared with other markets, including the US at 7.3 per cent and Britain at 9.2 per cent. ”Given the high penetration rate of smartphone technology in this country – Australia has the third highest 3G phone penetration globally – we expect mobile commerce to help drive the next wave of online spending.”
Mr McLennan said the largest category of spending from CBA customers was at online department stores such as eBay and Amazon, with 32 per cent of online spending, and relatively modest volume growth of 75 per cent. ”In contrast, deals/group-buying sites are the second largest category of spending in total, with 16 per cent of online spending, but the growth has been spectacular – up 557 per cent by volume.”
The second fastest growing category was fashion, rising by 230 per cent in volume terms and 146 per cent in value. ”If you are a bricks-and-mortar Australian fashion business, you have got a big job ahead of you because your customers are very keen and capable of shopping online.”
David Jones yesterday unveiled its strategy to win over customers for the launch next month of its spring and summer collection, which includes 60 new brands and a new slogan: ”Was. Is. Always. David Jones.” The face of DJs, Miranda Kerr turned out in Sydney – for the first time in six months since becoming a mother – to promote those very brands, while wearing a red lace dress by Australian designer Lover.