According to data analytics firm Quantium, if Australia’s top 15 online retailers were combined, they’d be larger than Myer and David Jones, or roughly equivalent in size with Big W, the department store leader.
In the last year, online retail has grown by around 29 percent, roughly ten times the rate that traditional bricks-and-mortar retail is growing. Sales from the largest online merchants have now reached the point that they are turning over nearly as much stock as the largest Australian department stores (if the sales data from the largest online sellers were combined).
The findings are revealed in Quantium‘s ‘Market Blueprint’ analysis, which utilises credit data from NAB card holders. The report also shows that online shopping accounted for 4.9 percent of total retail sales in 2011, equating to $10.5 billion. The top 15 online stores account for $3.9 billion of that, which is more than Myer ($3.15 billion) and just shy of Big W ($4.15 billion).
Of the top 15 online retailers, only two have been found to have a bricks-and-mortar offering, indicating that Australian businesses are yet to embrace the omni-channel stratagem. In the US, by comparison, 13 of the top 15 online retailers also had physical retail outlets.
“The strength of the pureplay retailers in Australia is very profound and raises the more significant question about the ability for the bricks-and-mortar retailers struggling to work out what their online strategy would be,” said Quantium Director Tony Davis, who presented the analysis at the Group Buying Summit in Sydney last week.
Davis also revealed that, contrary to popular opinion, the share of online retail being taken by overseas operators is actually relatively small. Local retailers still accounted for three-quarters of online market share last year, even though overseas players did record growth of 40 percent year-on-year.
“Despite the wailing of many in retail, such as Gerry Harvey, suggesting that online retail is mainly going overseas, we don’t see that in our data,” Davis said. “Clearly overseas online is a threat, both because of the Australian dollar, but also because of the strength of and sophistication and service back up of overseas online propositions compared to the competitors in the Australian market.”
However, Davis points out that Australian retailers can’t expect consumer buying behaviour to change radically should the dollar slip below parity significantly. According to Davis, anyone hoping this will occur is “being very optimistic”.
“Consumers have been taught to trade online, part of it has been the overseas opportunity, and they’ve clearly become accustomed to and comfortable with trading overseas.”
On the other hand, perhaps local online retailers could be justified in optimistically looking forward to a drop in Australia’s dollar, as this would represent a better cross-border trade environment that would be otherwise impossible.
Quantium’s findings are consistent with the hard data that is produced on the online sector on a regular basis, however Davis has drawn a hard line when it comes to buying into the spin that traditional retailers tend to put on the figures.
These vested interests do regularly complain about the ‘pressure’ their business is put under by overseas online retailers. Last week, a collective of fashion retailers (including the notoriously recalcitrant International Fashion Group) went so far as to wrangle an agreement with their suppliers to restrict the sale of products to online retailers that are able to discount their product.
Even disregarding the fact that the action these groups are taking is blatant price protectionism (and therefore contravening ACCC ruling on anti-competitive behaviour), to continue to point the finger is simply absurd. There is no data to suggest the action is necessary, as foreign online retailers aren’t cutting into the market as much as local pureplay retailers are.
Will these traditionalist stalwarts then move to curb online sales in general? Their brands’ reputations are already taking enough of a hit over previous GST furores, followed by lobbying to lower staff wages. How much further will certain bricks-and-mortar brands sink before facing up to the fact that they got it wrong?
The fact is that these retailers have had a host of opportunities to create successful online businesses and the only factors that have prevented them are their own lack of knowledge and intestinal fortitude. Were these parties to continue complaining about online, then we can only assume they are hoping to slow the market down just enough to provide them the time they (desperately) need in order to get their respective businesses up to speed.
The future of retail is omni-channel, there’s simply no fighting it.