Over the past 12 months, Australian consumers have endured 12 interest rate rises. Due to the lag in how these increases filter through to homeowners, it’s only in the past few months we’ve started to really feel their impact – both for homeowners and for renters having their rents increased to cover higher mortgage repayments.
That in itself is enough to put a dampener on consumer spending, but with inflation at record high-levels (which is the catalyst for the rate hikes), we wanted to explore what the impact has been on Australian eCommerce traffic.
After measuring the traffic to Australia’s 650 largest eCommerce stores in the first half of 2022 and comparing that to the first six months of this year, we immediately saw there was a 3% decline in average monthly visits.
Each month, that equates to around 17 million fewer visits. Not only were traffic numbers down, but we also saw a downward trend in conversion rates which fell by 7%.
These numbers might seem arbitrary but together they can tell us a lot about Australian consumers. First, we know they are browsing eCommerce sites less often than a year ago. Secondly, those who are still browsing are being more judicious with their spending.
With fewer shoppers converting less frequently, there is much greater competition among retailers to attract people to their websites.
As consumers tighten their wallets, they become more calculating in how they spend their money. In other words, they start hunting for bargains.
That behaviour is on full display in this data.
In the first half of this year, there was an almost 5% increase in Australians including ‘Sales’, ‘Discount’, or ‘Clearance’ in their search engine queries. This shows that deals are increasingly front-of-mind as shoppers look to make their money go further.
Going a step further, we analysed traffic to the Sales/Discount pages of Australia’s major eCommerce brands and found 50% more traffic ended up on these pages in the first six months of this year compared to the same period last year.
With this in mind, when your brand is planning a sales event this year, this data suggests it would be wise to double-down on your ad-spend ahead of the event.
But that’s the high-level view of Australia’s eCommerce industry as a whole. What happens when we zoom in – are there different trends playing out in different retail sectors?
Here we can see that some sectors have remained resilient, and are even seeing traffic grow, while others are going backwards.
The fastest growing sector was ‘Marketplace’. This growth was driven predominately by the arrival and rapid expansion of the Chinese discount retailer, Temu, earlier this year.
Temu only launched in March this year. By June, it was already attracting more monthly visitors than established local players like Catch, MyDeal, and Target (and it wasn’t far behind the category leaders Kmart and Big W).
Some other notable results here are the declines in traffic to Consumer Electronics, Furniture and Homeware, and Pharmacies.
These declines appear to be a normalisation now that the COVID-era need for home office equipment and furniture, along with masks and hand sanitiser, have largely disappeared.
Fashion and Apparel remained relatively consistent with a decline of only 1.9% while traffic to Australia’s Beauty and Cosmetics sector increased 2.85%.
But the biggest local eCommerce story of the year has been Temu.
Temu’s growth in Australia has been extraordinary. In just six months, it has gone from launching to attracting more than 10 million monthly visits (10,438,545 Australian visits in September to be precise).
In an environment where consumers are tightening their wallets and the eCommerce traffic trend is in decline, how is Temu outperforming and what can other retailers learn from its growth?
The first thing to understand about Temu is that it is a massive discounted marketplace. Not only does it contain an extremely wide range of products, they are available at incredibly low prices.
We’ve already uncovered an increased prevalence in consumers looking for bargains, so it makes sense shoppers would gravitate towards Temu’s low prices as cost-of-living pressures bite.
With this in mind, a key takeaway for Australian eCommerce brands is to double down on advertising their sales, discounts, or clearance items. With Black Friday just around the corner, this is the perfect time to put this into practice.
The second takeaway is to use data to invest strategically in the channels you choose to reach consumers. With fewer shoppers converting less frequently, every click counts.
Using the Similarweb platform, we analysed Temu’s marketing spend in the US. We found Temu was splashing more cash in paid marketing than its competitors – in fact, over the three months ending in September 2023, the company had the second-highest PPC spend estimated at $242.4 million, versus $171 million for Walmart.
While that is a marketing budget many would struggle to compete with, by understanding the engagement trends with each channel, eCommerce retailers can get an outsized return on their investment.
Here we can see that Paid Search (particularly Google Shopping ads) and Social Media advertisements are striking a chord with consumers, with Australian traffic acquisition from these channels growing 5.7% and 16% respectively. If these two channels aren’t part of your marketing mix, they need to be.
That is the power of data. It can uncover emerging consumer trends and help you stand out from the competition by knowing where consumers are interacting, and what topics they’re engaging with.
Until interest rates and inflation return to more manageable levels, Australian consumers will continue to feel the cost-of-living squeeze. With every click more important than ever, data-driven decisions will help ensure every marketing dollar you invest gets the most bang for buck.
Scott Rogers-Jones is enterprise sales manager at Similarweb Australia & New Zealand.