Australians are buying up big online, spending more than $2000 each per year, but continue to lavish much of their spend on overseas retailers who are drawing further ahead with more sophisticated online stores.
The findings from research group Forrester warn that consumers are unlikely to shift all their spending to domestic retailers, even as the offerings of these retailers improve. With Australian ecommerce efforts still developing, more sophisticated overseas online stores may continue to take the lion’s share of spend, having delivered a better shopping experience and product range, and developed trust.
The overseas threat is not going away, says senior analyst at Forrester, Steven Noble, who fears the head start overseas retailers have gained may be difficult for local operators to peg back.
“Price is a factor and the GST-free threshold helps with that, but there are other factors too such as product availability and feature completeness of certain leading online stores compared to stores in Australia,” Noble told Marketing.
“The shopping experience on ASOS for example is unsurpassed. You can have a very exact sense of the size of product, how tightly it will fit, how to size it to the body… all that sort of content and features that help you make a good shopping decision are there and you may not always find a similar a range of content and shopping tools on a local site.”
A large percentage of Australian online shoppers spend their dollars on overseas websites, according to another recent study from Experian Market Services, which found half of the online department store retailers that Australians visit are based outside of Australia, while 31 of the top 100 apparel and accessories websites were also based abroad.
Online retail is expected to rake in AU$22.5 billion in Australia in 2012, a figure forecast to increase to AU$34.3 billion by 2016. Forrester classifies the online retail sector in Australia as developed, with buyers having expanded into multiple categories. The grocery category however, one of the top 10 categories for online spend, failed to grow as quickly as expected prompting Forrester to downgrade its online retail numbers downward slightly.
Strong growth is expected for the video category, driven both by the controlled piracy market in Australia, as well as by increased digital downloads, especially as online retailers in Australia prepare for the rollout of the National Broadband Network.
Despite a large portion of spend going to overseas retailers, no one name dominates the landscape. eBay remains one of the few well-known international online retailers with a strong presence through a localised Australian offering. However, many are vying to strengthen their name, including ASOS which has appointed an Australian country manager.
Across the region, China shows remarkable growth as the market matures and consumers expand their buying to multiple categories. It has taken over from Japan as the largest ecommerce market in Asia and is poised to grow from US$118 billion in 2011 to US$356 billion in 2016. India is also expected to grow rapidly, forecast to increase tenfold over the next five years, but off a small base, with the market still in its early stages. Japan and South Korea, are forecast to grow but at a more measured pace on par with Australia, the US and the markets of Western Europe.
Noble adds that big Australian retailers looking to consolidate their online presence cannot rely on the strength of their offline brands alone, with product brand and other factors preventing offline retail brand strength translating online.
“In the abstract, the product brand is far more powerful than the retailer brand,” Noble says. “Consumers will often end up just buying from whatever store that sells the product brand in a way you can navigate effectively and in a way that passes at a competitive price.
“There is a lot of talk about the larger retail brands, like Myer and David Jones, and how they feel like they must have some sort of natural advantage in the online world. They do have an incredible asset, which is the trust that some people have in them and in terms of their warehousing and physical retail footprint. But they can’t assume that simply translates into the online world in an automatic way. They need to earn their stripes in the space just as they have done over decades in the offline space.”