In December 2015 overall online retail spend in Australia was estimated to be $19.1bn which is equivalent to 6.5% of spending in physical stores. Online retail grew at an impressive 11.2% in 2015, outstripping bricks and mortar growth, which grew by 4.7%. This growth was almost universal with only Daily Deals seeing year on year decline. In this post we've highlighted a few of the key growth areas as well as noting some interesting trends in shopper behaviour.Key TakeawaysTakeaway food saw the continuation of huge year of growth, which has year on year of more than 40% for the past 12 months. The category saw a 42% year change for December thanks to the continued popularity of takeaway services like Suppertime and Deliveroo. Key categories like Fashion, Homewares and Media (that’s film, books and music) all saw growth slip for 12 months to December 2015 when comparing the 12 months to November 2015. These are all important categories to the overall mix of online retail, making up 57.7% of total spend. While growth slowed, it still remains healthy with an average growth rate across all three categories of 12%.
Demographic differences18-24 year olds had the highest share of international shopping spend in comparison to their share of overall spending online. The reason for this might be a lack of the availability or range of the goods and services 18-24 years buy online. We see this with ASOS and their domestic competitor, The Iconic. ASOS has a breadth of choice (850+ brands compared to 700+ at The Iconic) and it has competitive delivery (free with a $40 spend, compared to The Iconic’s which is free with a $50 spend). It’s a very compelling proposition for value conscious young people.That said, NAB found that the annual growth in spending domestically by this age group was up 19.6% compared to a slovenly 1.8% for international retail. Yes, younger consumers are shopping for fashion outside Australia but their spending domestically is growing rapidly. With a continued weak Australian dollar domestic growth here will continue in 2016 and overall international spending will continue to slip with a contraction of 4.1% in 2015.Those same 18-24 year olds were the most aggressive spenders on takeaway food in December which is somewhat predictable, with demand as a percentage of spend decreasing over time. We see almost the opposite pattern with personal and recreational goods (up until the 65+ age bracket) indicating the change in lifestyle from buying late night takeaways to the MAMIL-hood (middle aged men in Lycra). A similar trend is declining spend is in Fashion as a proportion of wealth. It would appear that consumers in Australia stop giving a sartorial care and become more interested in furnishing their abodes.
Is small the new big?There was strong growth in spending at Australian SMEs (firms with revenue of less than $2.5m per year) in November (13.6%) and December (12.3%). This outstripped corporate growth in December. While the big companies duke it out, smaller firms are certainly able to make inroads and become viable alternatives. Smaller firms have the advantage to pick their battles both in terms of range, audience and channel marketing in an agile way which might escape larger retailers. One great threat to them that remains are competitive delivery costs, which remain a leading cause of cart abandonment.In Summary2015 was clearly an encouraging year for Aussie online retail, it saw growth for retailers large and small, as well as seeing an increase in spending online domestically. I suspect that, based on NAB’s data, 2016 should start brightly for Australian online retail. Retailers should continue investment, on site through activities like improving load times (check out this piece as to why) and a host of other optimisation activities. Brands should once again consider how they’re reaching their audiences effectively using a full range of paid and organic digital media if such growth figures are to be maintained in the long term.*Statistics, graphs and tables have been produced or reproduced from: http://business.nab.com.au/wp-content/uploads/2016/02/NAB-Online-Retail-Sales-Index-December-2015.pdf
