Jackie Campbell
Lead Consultant
The year of 2020 has produced numerous shifts in behaviour which have impacted the FMCG industry. Amongst various lifestyle changes, increased in-home consumption, cautious spending and health & safety concerns which have influenced demand we have also seen an increase in e-commerce activity including delivery, click and collect and direct to consumer platforms.
The majority share (84%) of Australians now shop online. From March-June, there was a clear net gain in shoppers doing more online shopping. But broad penetration growth opportunities still exist, especially with older aged buyers. Online accounts for a near double-digit share of total Australian omnichannel retail sales (as of June 2020) after recording share gains in Q2 that broadly matched the strong and consistent gains amassed in the prior 3-4 years. Total annual e-commerce spend in Australia is now approaching $30B, following a 32% increase year on year.
Compared to global averages, where online sales account for about 25% of retail revenues, Australia’s online penetration lags considerably, sitting at around 11%. China’s leading position as an e-commerce powerhouse has been accentuated by COVID-19 and US retailers such as Amazon, Walmart, Target, Costco, Kroger, Ahold Delhaize and Alberton’s have captured increased demand and are accelerating investments in better shopping experiences.
Whilst Woolworths (5.9%) and Coles (5.6%) online household penetration (MAT to 19/7/20) is comparably low vs instore they have both experienced double digit growth in the most recent quarter. The low penetration reflects how getting grocery shoppers to take the initial plunge online has been a core challenge. And because online has centred around larger replenishment occasions, trial and engagement has been harder to drive at a time when Australians have been shopping ‘little and often.’ There is a need to remove the friction that stands in the way of turning occasional buyers into loyal, more frequent buyers. The opportunity is significant as online grocery baskets are far higher than the channel average, with Woolworths online basket ($148) slightly higher than Coles ($145) and both nearly triple the overall instore average.
Penetration varies considerably by FMCG category. Over a third (34%) of Australians claim to buy personal care online, but only 12% use e-commerce for fresh food. Other metrics like inter-purchase intervals (IPI) also differ. Still, over 150K households tried online grocery for the 1st time in the latest QTR to mid-July.
IRI anticipates 4 key trends will shape the future direction of e-commerce:
- Provider Proliferation; new and non-traditional providers, more marketplace integrations, delivery and DTC options and dedicated BTB online platforms.
- Impulse & Immediacy; increased expectation for fast and flexible delivery.
- Experiential Engagement; an engaging, immersive and social experience.
- Sustainably Superior: a spotlight on sustainability, food and packaging waste and carbon footprints.
Sources: IRI Shopper Panel data to 19/7/20, IRI analysis of Ascential & ABS data.
An executive summary of the IRI report is available on IRI’s website, (https://www.iriworldwide.com/en-au/insights/publications/online-shopping-trends-in-australia). To access the full report or for IRI’s department level Pulse Check of Online Shopper Data contact please contact IRI at ask@iriworldwide.com.au
Subscribe to our free mailing list and always be the first to receive the latest news and updates.