Australia set for web boom

07 April 2011

SYDNEY: Online retail could reach a "turning point" in Australia this year, offering major opportunities for brands in various sectors.

Consultancy Bain & Company surveyed over 1,000 people to gain an insight into evolving habits and attitudes.

"It's no secret that Australia lags other countries in making online purchases," the company argued.

"The year 2011 will represent a turning point for Australia's retailers, with dramatic growth in the number of consumers willing to shop online."

At present, the typical Australian net shopper only spends around a third of the amount registered by their American counterparts, and a quarter of the average figure logged in the UK.

One contributor to this trend is that most big Australian retailers have usually made bricks and mortar stores an investment priority, rather than creating strong digital hubs.

This has fuelled, and reinforced, the slightly limited development of ecommerce in Australia, but revenues appear set to "dramatically increase" in 2011, according to Bain & Co.

Its poll revealed the number of buyers using the web to pick up products, and who would "consider" doing so, doubled in many categories across the last year.

Nearly 7% of participants plan to significantly enhance their internet outlay on "general merchandise" in the next two years, 26% expect to lodge a moderate lift on the same measure.

Another 50% intend to maintain existing levels of expenditure, and just 17% are likely to reduce the funds they direct through this medium.

Areas anticipated to see rapid growth include  accessories, furniture and DIY, alongside segments like telecoms, travel and tickets.

Even in the "traditionally unpopular" grocery sector, the number of people acquiring products online has climbed by 50% during the last year.

A majority of Bain's panel have also now bought digital content via this means, aided by the 34% annual improvement recorded here over the last 12 months.

The main factors encouraging increased ecommerce activity were secure payments and low price, trailed by ease of delivery, convenience, and website quality.

Interviewees did express satisfaction regarding price, value for money and convenience, but customer service was viewed in a more critical light.

Among the obstacles dissuading people from making purchases online are a wish to physically hold the product on 31%, delivery concerns with 13%, and payment safety on 9%.

In terms of the geographical location consumers buy from, 77% of transactions were attributable to domestic platforms, and 23% went to overseas operators.

Of the shoppers who obtained items from foreign sites, 53% stated price was the primary motivator, and 40% cited their better performance covering selection and availability.

While the fact firms based in different nations are exempt from the Goods and Service Tax which applies on purchases under A$1,000, Bain's study suggested other forces might be at work.

"A more serious issue may be the prices that the owners of global brands have come to expect that Australian consumers will pay, and the strong gross margins that Australian retailers have come to enjoy," it argued.

"The message to online retailers is unambiguous: Invest in a site that looks good and makes it easy for customers to find what they want, and don't forget the importance of having superior customer service online."

Morgan Stanley has estimated that sales generated by the internet will experience a three-fold increase between now and 2015, hitting A$30bn overall.

Data sourced from Business Spectator; additional content by Warc staff