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Online sales up, but still small fry


Trevor Clarke

Minor part ... online sales climbed to $12.3 billion by the end of October but they make up only 5.6 per cent of total ...

Minor part ... online sales climbed to $12.3 billion by the end of October but they make up only 5.6 per cent of total spending. Photo: Phil Carrick

Australian retailers aren't expecting a boon of online sales this Christmas. More than 65 per cent of retailers think less than 2 per cent of their Christmas sales will come from online channels despite optimism that 2012 results will surpass those of 2011.

The results of the Deloitte Christmas Retailers' Survey also show that while online sales may be the talk of the town as a result of Click Frenzy and the GST debate, for the next 12 months 73 per cent of retailers expect to increase their physical store numbers and 33 per cent nominate new stores as their biggest growth driver.

While many observers focus on the tech failures surrounding Click Frenzy and the general ineptitude of many Australian retail online offerings, for most retailers (60 per cent) the biggest expected competition in the next 12 months is from both local and overseas bricks and mortar stores. Only 25 per cent see their greatest competition as coming from overseas online retailers and just 6 per cent nominate local online retail.

The Deloitte results contrast with an Ernst & Young survey of online shopping views that found Australians will do 35 per cent of their Christmas shopping online and about 25 per cent of us will increase that spend.

However, Ernst & Young also found that two thirds would rather go to a store than buy online and more than half sometimes won't shop online because of delivery times.

National Australia Bank's latest Online Retail Sales index shows this year's online sales had climbed to $12.3 billion by the end of October. The same index, however, found online sales still make up only 5.6 per cent of total spending.

So while everyone agrees that Australia's bricks and mortar retailers must develop a more reliable and engaging online presence, the retail landscape demands a broader focus, especially with regards to the technology supporting operations.

The fact that the retail sector – which according to IDC statistics spent close to $3.4 billion in 2012 on technology – still makes the vast majority of its revenue from in-store purchases and is growing, albeit laggardly and marginally, is often overlooked or played down due to the popularity of the online channel.

Indeed, Deloitte says while retailers should be investing in online and offline capabilities in the next 12 months with a strategic vision for 2020, they may only have a year or two before they suffer another digital disruption – and the next one may not be just about online stores.

“Australian retailers need to consider new ways to improve both their online capacity as well as their in-store consumer retail experience to meet demands in 2013 and beyond,” the HP's enterprise security services chief technology officer, Stephen Singam, said. “Although the market has seen considerable growth in online retailing, forward-looking retailers recognise that consumers still want the option of an in-store experience and are now investing in omni-channel solutions to seamlessly unify the online, out-of-store and in-store shopping experience.”

The omni-channel approach, however, demands a far greater information and communication technology (ICT) transformation – especially for large retailers with long-established systems and processes from the register to the suppliers' gate – than simply setting up an online shop front or “going to the cloud”.

“The days of the linear buying process – where customers search, evaluate, buy, amend, receive and return a purchase all in a single channel, whether that is bricks and mortar, online, mobile, kiosk, catalogue – are well and truly over,” Infosys Australia's retail practice associate vice president, Reggie George, said.

“The linear pattern has given way to a much more complex, intertwined pattern of touchpoints. Each touchpoint may not be completing the transaction but is enabling the sale in one way or the other.

“This shift has technology and larger organisational implications for retailers – online and offline. The store is no longer just a place of purchase but also a place to inform, engage, communicate and fulfil other channels.”

PricewaterhouseCoopers partner Stuart Harker noted that major retailers in Australia were now rapidly trying to create a new omni-channel operating model towards 2020, resetting the volume of real estate they have, redefining sourcing models and merchandise propositions, and striving for greater customer insights.

Harker said “retailers will and are spending increasing amounts of money on IT to ensure they are relevant to their target customers”.

“Capabilities such as digital interaction channels including web, mobile and social; integrated cross-channel digital production; customer centric marketing, and integrated cross-channel order management and fulfilment are the capabilities that need to be developed in the next 12-36 months as foundational elements to a 2020 strategic retail experience roadmap,” IBM's retail and consumer products industry lead partner, Ian Wong, said.

Whether the retailers are spending enough and fast enough to get these capabilities, however, is yet to be seen.

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6 comments so far

  • So online sales are a tiny proportion of sales ... I assume that means in Australia. otherwise why are Gerry Harvey and others wittering on about GST on online sales from overseas? Or is it merely a smokescreen for their ineptitude?

    Date and time
    December 18, 2012, 10:56AM
    • Yeah, well, online sales may be a small % of total sales but those who buy online do so because savings are HUGE. I get my prescription glasses from for half the price I have to pay here. I am not being ripped off for frames anymore.

      Rogan Josh
      Date and time
      December 18, 2012, 12:18PM
  • I've already bought all my Xmas presents - and more.

    As soon as I know of something someone wants I do a quick search and then store the search so I remember the items. Then as time progresses I can get a really unique one at a really killer price.

    BTW - its not just Gerry. I'm searching for a shopping trolley for an elderly lady and guess what? Kmart, Target etc couldn't be bothered selling a decent trolley anymore! There is another store that sells one for about $150! but you can get the same item on line for about $30 delivered!

    Think smart - buy ahead and then forget the delivery time! Chances are you could get the item in an auction for next to nothing!

    Already stocked up
    Outer West
    Date and time
    December 18, 2012, 6:34PM
    • It may not be booming for others, but it's certainly been a big year for our online toy store, 40% up on last year with a huge increase from the iPad crowd.

      Date and time
      December 19, 2012, 7:31AM
      • Harvey Normans online selling strategy is buy online and pick up in store, they, like many other Aussie retailers simply don't get it.
        Gerry the reasons for shopping online are lower prices and convenience, I, and I imagine many others don't want to visit you store.
        I ordered most of my Christmas gifts from US online retailers weeks ago, they were all promptly delivered to my door, the process is simple, fast, convenient and the savings are substantial.

        Date and time
        December 19, 2012, 9:16AM
        • Meanwhile the leading online retailers overseas, be it Amazon, Next or Ocado are investing millions in warehouse automation, essentially making their warehouses fulfillment factories to bring the cost of order fulfillment to a fraction of what a typical Australian warehouse delivers. As a result they are optimally placed to compete in what is now a global retail marketplace. Little wonder Australians are shopping increasingly overseas for the best prices.

          Global shopper
          Date and time
          December 25, 2012, 2:30PM

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