Online retail sales are expected to reach more than $18 billion in 2013 and are forecasted to grow 39 percent to $25 billion by 2015, including purchases by Australian consumers on local and overseas websites, a new report has found. 
The Frost & Sullivan study, which survey 219 Australian retail managers in July, revealed that almost 50 per cent of Australian retailers believe instore trading conditions in 2013 are worse than the first half of 2012, while only 35 per cent view conditions as better. With overall retail sales in Australia expected to continue to grow by only two percent in 2013, smaller chains in particular are finding retail conditions particularly challenging.
“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,” said Mark Dougan, MD for Australia and New Zealand for Frost & Sullivan.
“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,” Dougan said.
“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.”
According to the report, although online sales have grown strongly in recent years, penetration in Australia is still only around seven percent of total retail sales, which is behind comparable markets such as the UK and the USA, where online sales are now around 10 percent of total retail sales.
The largest online expenditure is on clothing, footwear and personal accessories, followed by electrical and electronic items. Despite lagging other markets, online sales in Australia are expected to grow strongly to reach ten per cent ($25 billion) by 2015.
“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,” said Mark Dougan.
“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 indicates that the increasing usage of mobile devices is stimulating online shopping in Australia, with 30 per cent 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.
About one-third of retailers also now have a social media presence, using platforms such as Facebook, Twitter and YouTube, to communicate with consumers. The total global value of social commerce is estimated at almost $15 billion in 2013, and is likely to reach $30 billion by 2015.
With over two-thirds of Australians now using social media online, 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,” added Dougan.
“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 omni-channel 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.”
