Online Sales Still Growing – NAB Index Report

In the 12 months to June 2017, NAB estimates Australians spent $22.74 billion on online retail, which grew by 7.6%, down slightly from the 8.2% the previous year.

“Sales growth slowed in month-on-month (mom) terms to 0.7% in June, seasonally adjusted after rapid growth in May.” Below is a breakdown of some of the key and noteworthy findings of the online retail landscape in Australia according to the NAB Online Retail Sales Index Report – June 2017.

Categories

Homewares and appliances, electronic games and toys, and media led monthly growth, while fashion, grocery and liquor, and takeaway food contracted, according to the NAB report.

For the first time in the series history, fashion recorded negative year on year growth. This category is being impacted by recent trends in payment methods that mask purchase category identifiers, according to NAB retail analysts. “We believe this apparent slump may not be a fair representation of the sector. In all likelihood, the emergence of ‘buy now pay later’ brands is temporarily skewing the numbers. Certainly, we will monitor this development going forward with a view to establishing what is driving performance in this sector.”

State by State

Annual growth remains strongest in VIC, NSW, and QLD. Online sales in the large eastern states continued to grow, along with the NT. Conversely, sales in TAS, SA, ACT and WA contracted in the month.

SME’s

Small and medium sized enterprises (SMEs) played a key role, representing 36% of all online purchases.

In seasonally adjusted terms, at 0.7%, growth in online retail sales slowed in June. Looking through the month-to-month volatility, however, the trend is still positive according to NAB. After exceptionally strong growth monthly growth in May, online sales for SMEs contracted in June. “While SME monthly sales contracted in June, it’s worth knowing that they are still outpacing corporate sales year on year,” as written in the NAB report.

Domestic Vs International

Both domestic and international online sales slowed in the month of June – just under 80% of spending was domestic.

Domestic online sales growth slowed in June (0.8%,
mom) compared to May (1.4%). International sales also
slowed in the month (0.6%), much slower than
May (2.2%). Looking at the year-on-year growth rates,
domestic online sales growth (7.6%) and International
(7.7%) are much closer than the comparable June result
in 2016 where domestic sales (19.9% yoy) far outpaced 0.6 international (6.8%).

“The relatively unchanged position
of online retail shares has coincided with a relatively unchanged position of the Australian dollar since July 2016.”

The report also found that areas of significant overall online spend such as groceries, personal and homewares are also areas where domestic online retailers dominate.

For international retailers, growth was also strong in homewares and appliances, along with department stores and fashion, both of which contracted for their domestic counterparts.

In terms of spend, category share can be quite revealing. For example, while around 63% of fashion is purchased from domestic online retailers, it only accounts for about 12.1% of domestic online spend, but at 28.6%, is the largest spend category for international retailers.

Age Groups

The NAB report also revealed that online spending remains dominated by those aged between 35 and 44. Growth in the month strongest for this group and the second largest group, the 45 to 54s. Growth was weakest for the small spend share groups of the over 65 year olds and 18-24 year olds.

Those aged 35-44 make up approximately 17.0% of the adult population, but their share of online spend is the highest at 24.0%. In contrast, over 65s make up 19.3% of the population and only 8.5% of online spend

Key takeaways from the report:

  • In seasonally adjusted terms, at 0.7%, growth in online retail sales slowed in June, from a rapid 1.4% in May.
  • The revised estimate for trend online retail sales growth was 0.3%. While this is lower than May  (0.4%), it remains positive.
  • In the 12 months to June, NAB estimates that Australians spent an estimated $22.74 billion on online retail – a level that is equivalent to around 7.4% of the traditional bricks and mortar retail sector (May 2017 – Australian Bureau of Statistics).
  • In year on year terms (June 2017 v June 2016), online sales grew by 7.6%, down from the 8.2% year-on-year growth rate in February.
  • Noteworthy is the annual sales growth of SMEs far beyond their corporate peers in the most recent period, despite a contraction in their sales growth in June.

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