By Aimee Chanthadavong
Despite a slow start to the year, Australians have already spent $14.1 billion on online shopping for the full year to July 2013, National Australia Bank’s (NAB) latest Online Retail Index shows.
This number is equivalent to 6.3 per cent of traditional retail sales. This growth was mainly driven by consumers who were spending majority of their money with department and variety stores (34 per cent), followed by homewares and appliances (18 per cent) and groceries and liquor (14 per cent) segment.
NAB chief economist Alan Oster said that following a flat start to the year, monthly growth rates had accelerated during the past three months, and there was a strong up-tick in July.
But of those online purchases, domestic online retailers still accounted for a majority (73 per cent) of total online spending, indicating consumers still enjoy buying local.
Dig a little deeper and the Index reveals sales are currently dominated by pureplay retailers where in the 12 months to July 2012, they controlled 70 per cent of online retail sales. But this is slightly lower than the high 73 per cent that was recorded in 2010, driven mainly by lack of new tablet and smartphone releases in the homewares and appliances category.
To feed this urge, Oster noted that traditional retailers have made some inroads in the online space and are evolving to ‘bricks and clicks’ operations.
Tierman White, retail sector head and head of NAB Corporate (NSW) agrees saying the decline illustrates that bricks and mortar retailers are succeeding in growing their online activity through developing their multi-channel business model.
“We think the previous dominance in pureplay retail may continue to slowly diminish,” he said.
“Businesses need to consider many issues when developing their own online approach, but most importantly the offering must complement the existing bricks and mortar offering and avoid the potential to cannibalise their existing store offering.
“We also see a clear contrast in how the pureplay versus bricks and clicks plays out in the domestic versus international arenas. International bricks and clicks have been slowly and steadily declining since 2010, reflecting the constraints imposed by overseas retailers in shipping to Australia and the establishment of an Australian online presence by some of those retailers."
But the share of sales varies when broken into various sub-categories of the online retail sector. For instance, department and variety stores is dominated by pureplay retailers, accounting for 95 per cent of sales, in comparison to a majority of homewares and appliances and groceries and liquor are controlled by bricks and clicks.
At a state level, the figures showed growth in Western Australia has slowed considerably. Across 2011 and the first half of 2012 the state outperformed the rest of the country, but it experienced weaker than average growth in July. The ACT, Northern Territory and Western Australia recorded the strongest spending on a per capita basis.
“The results for Western Australia appear to support broader economic commentary around the state and the slowing rate of growth,” Oster said.