Online sales reach a trillion

Michael Baker
April 11, 2013
The Age

It’s official. In 2012, business-to-consumer e-commerce passed a trillion dollars US in a single year for the first time, according to a report from US-based research firm eMarketer.

Australia’s share of this was US$36.2 billion.

More than 10 million people, or almost half the population, bought something online in 2012, spending an average of $3,547 per person.

What is extraordinary, though, is how much Australian consumers are ‘in for a penny, in for a pound.’ More than 10 million people, or almost half the population, bought something online in 2012, spending an average of US$3,547 per person. This average expenditure per online buyer is 54 per cent higher than the US and the highest in the world bar one country – the UK.

eMarketer forecasts the average for Australia will grow by 7.2 per cent to more than US$3,800 per online buyer this year.

There are different ways you can interpret the very high online spending propensity in Australia and the UK.

First and most obviously it may reflect a relatively high level of dissatisfaction with the shopping experience in physical stores. Key elements of the shopping experience are price, availability of brands, service and visual merchandising.

Second, it may also have partly to do with the inconvenience of shopping at traditional stores in Australia and the UK. The planning fraternities in both countries did not become big and important by acting like shrinking violets. Rather, they have enjoyed fat budgets year in year out, enabling them to play extremely hands-on roles in shaping our cities and dictating tight limits on the supply and quality of retail space.

A third possible reason for the high levels of per capita online spending eMarketer reported for Australia is the amount of travelling Australians do. Since the country is geographically isolated much of the online travel spending is relatively pricey.

Should retailers with stores or shopping centre operators in Australia be particularly concerned by these ballooning e-commerce numbers?

Opinion on this question is sharply divided. On the one side are those who point to the high percentage of sales still made in stores. They think stores will be fine so long as the government keeps the playing field level by ensuring equal taxation of sales sold on- and off-line.

On the other side are a large and growing number of mainstream retailers and shopping centre operators who think they need to do more than hang back and rely on lobbying the regulators.

They realise they need to figure out fast how to connect with today’s and tomorrow’s consumers rather than yesterday’s. Beneath all the public bravado about the vibrancy of the physical store they are genuinely worried about the quality of the shopping experience they provide. Strangely though, some retailers in categories with very high e-commerce penetration, such as computer equipment, home entertainment, auto parts and furniture, are not doing an awful lot.

Australia’s so-called “bulky goods” centres are particularly exposed to these categories. These centres generally offer the most threadbare of shopping amenities, with design, construction, food catering and service among the least attractive in the industry.

The stores that populate them have justified their low-service models by claiming a price advantage that is now in many cases illusory. Such centres will need more than just cosmetic makeovers to remain viable as e-commerce options continue to multiply and consumers become ever more demanding of the shopping experience.

Operators of many mainstream shopping centres are already well aware of the danger of inaction and have a busy agenda for shoring up their futures. Numbers like those coming from eMarketer will serve as a useful reminder of how much they need to hurry up.

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