Australians are rapidly embracing online retailing – but almost half the money spent is going offshore.
But before anyone rushes to use such data to renew calls for GST to be collected on all overseas online purchases, consider this: GST is “not an issue” for local consumers.
These are amongst conclusions of a watershed report from PwC and Frost & Sullivan into Australians’ online shopping behaviour, released overnight.
The research clearly confirms online retailing is already an entrenched part of Australia’s retail landscape and here to stay.
The report shows 95 per cent of consumers search the web for product information, price comparisons and peer reviews before making a purchase online and over 65 per cent of in-store purchases are initiated on the web.
This calendar year, Australians will spend more than $13.6 billion online, an increase of over 13 per cent on last year’s $12 billion – or twice the previously projected growth rate.
Of that amount, the report’s authors estimate $6 billion will be spent with offshore online retailers, an increase of 25 per cent on the $4.8 billion spent last year. This equates to 44 per cent of all online retail sales going offshore in 2011, up from 40 per cent in 2010.
Australians will each spend more than an estimated $600 online in 2011, compared to $536 in 2010.
Frost & Sullivan senior research manager Phil Harpur says online shopping, both locally and offshore, is expected to grow at least twice as fast as compared to the total retail market in Australia over the next four years.
“Online spending by Australians will reach $21.7 billion by 2015, representing a compound annual growth rate (CAGR) of 12.6 per cent,” Harpur says.
According to PwC’s global retail & consumer advisory leader, Stuart Harker, “Australia’s retail landscape is commencing a structural shift as more consumers start to spend a greater share of their wallet online”.
“Large and small retailers alike are facing stronger than ever competition from digital channels, both here and overseas. Lower prices, convenience, greater product range and a growth in mobile devices are all factors fuelling online shopping.”
But not GST.
“Less than one per cent of consumers surveyed said they shopped overseas online to avoid GST,” the report found.
In fact, a significant driver of offshore online shopping appears to be the poor standards of service, delivery times and local shipping charges from local sites. These are undermining local online retail growth, Harker says.
“If this year’s estimated offshore online sales of $6 billion were directed to Australian retailers instead, the forecast retail sales growth in Australia for 2011 would be approximately 4.5 per cent, as opposed to the current forecast growth rate of only two per cent.
“The fact Australians can securely purchase a product from half way across the world, and have it delivered to their doorstep quickly and for a very competitive price, highlights the challenges that overseas online shopping presents to local retailers – traditional and online alike,” says Harker.
Price and product range remain the key drivers of growth in overseas shopping online – a significant challenge for local competitors.
The study found that during the next 12 months, 86 per cent of online shoppers surveyed indicated they would increase or at least maintain their current level of online expenditure. In Australia, more than one third of survey participants indicated they were using a smartphone or a tablet device to buy products online.
“The tablet device has been one of the key drivers of online retail sales in the last 12 months and will continue to drive sales in the next year as new products are introduced into the market,” Harker says.
PwC national digital leader John Riccio says digital channels are changing the way Australians shop, thereby creating both challenges and opportunities for Australian retailers.
“The attraction of lower prices, convenience and broader product ranges is swelling the ranks of Australian consumers choosing to shop online both locally and on international websites.
“Australian retailers are now competing on the global stage and need to embrace the fundamental shift in underlying business models caused by the digital revolution.
“The general lack of an online presence by the large retail chains in Australia over the last decade has been a significant factor for a relatively poor up take of online shopping in Australia and New Zealand to date,” Riccio says.
The high proportion of shoppers who research price and product information online before purchasing underlines the importance of having an online offer that is integrated with the in-store experience, the researchers concluded.
“Engaging and retaining customers in the digital era requires a rethink of the role of the store and importantly how retailers engage with their current and target customers.
“Because customers can buy anything they want any time on any device, the store becomes more about brand and customer engagement, merchandise and the overall store experience.
“Retailers that are able to engage customers through multiple channels will build a deeper relationship than through a single traditional store channel,” Riccio says.
