Eli Greenblat
March 6, 2012
The Age
The Commonwealth Bank has predicted another tough year for bricks-and-mortar retail with an increasing number of customers to shift their purchasing online, adding to the current headwinds pummeling the sector including price deflation and the appreciating dollar.
A new report on the size and expected growth in online sales by Australian consumers forecasts the trend towards online retail consumption will continue to grow at rapid rates over the next five years, reaching 9.1 per cent penetration by 2018 against roughly 5.1 per cent presently.
The new research from CBA is based on transactions recorded on its credit cards by customers.
”Online retail sales knocked 1.3 percentage points off bricks-and-mortar retail’s top-line growth in 2011, according to CBA’s cards data,” the report released this morning said.
”Based on our modelling, a similar impact should be expected in 2012 (around 1.1 percentage point).”
The report predicts another tough year ahead for bricks-and-mortar discretionary retail.
”Increasing online customer penetration is likely to lead to continued headwinds for discretionary retail (along with continued price deflation) over the next year.
”The impact of online on the listed retail sector will be a function of retailers’ ability to respond to a change in consumer and external factors such as the Australian dollar.”
The CBA report said over the year to December 2011, the total overall retail market for Australian consumers was $248.5 billion, according to the Australian Bureau of Statistics.
”However, we believe this data is missing our estimate of the international online sales – roughly $5.4 billion.”
Based on the adjusted ABS data, the total retail market in 2011 grew at 2.9 per cent compared to 2.4 per cent quoted by ABS. The bricks-and-mortar retailers struggled to grow the top line, with just 1.6 per cent growth over the year, CBA said.
CBA’s cards data indicates that over 2011, approximately two-thirds of total online spending growth came from growth in customer penetration (new online customers). The remainder came from increased spending from existing customers.
”Based on the information from CBA cards data and our preliminary modelling, we expect total online retail penetration to rise from 5.1 per cent in 2011 to 9.1 per cent in 2018.
However the news is not all bad with the impact of online sales on stores tipped to begin to decline in 2014.
”We assume per capita online spending demonstrates a gradual slowdown in growth, while the conversion rate of consumers to being regular online transactors maintains a high rate, but its impact on spending growth follows the familiar ‘S’ shape logistics function.
”This results in just a 0.3 percentage point reduction in bricks-and-mortar sales because of online retail by 2018.”
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