New debit and credit card data from the Commonwealth Bank suggests that while overall e-commerce in Australia is still growing at a substantially faster rate than traditional bricks-and-mortar retail, mainstream retailers are beginning to bare their fangs and bite back. The signs are promising that after a couple of years of strict adherence to a "wake-me-when-it's-over" technology strategy, Big Retail is finally coming to terms with the fact that this is now the 21st century.
The new CBA study, authored by retail analysts Andrew McLennan and Sam Teeger, estimates that online spending in Australia grew by 30 per cent in the year to July compared with 2.2 per cent for discretionary retail trade as a whole.
Pure-play online retailers enjoyed growth of 34 per cent, which looks like a lot and is, but still represents a slowdown from the 100+ per cent growth rates they had achieved throughout most of 2011 when deal sites were having a field day.
This downshift of the growth rate of sales of pure-play online retailers toward that of online sales overall implies that mainstream bricks-and-mortar retailers are now becoming players in the online channel. It doesn't mean they are gaining online market share, but it does suggest they are nibbling away with better appetite at a growing e-commerce pie.
The CBA data also suggests that a greater share of online spending is now being done at sites belonging to Australian retailers. The CBA analysts reckon that the domestic/offshore mix of spending is now about 60 per cent/40 per cent in favour of domestic compared with 55 per cent/45 per cent in 2011. This may also be a reflection of a stronger online presence on the part of Australia's bricks-and-mortar retailers, keeping more dollars from being sucked out of the country.
The CBA report also cites the recent findings of the colourfully named Low Value Parcel Processing Taskforce. The taskforce concluded that the cost of collecting GST on offshore internet purchases valued at less than $100 would exceed the revenue generated. Although lowering the GST threshold would be budgetarily negative, the CBA reiterates that it would "level the playing field" between domestic and overseas retailers.
But given that domestic bricks-and-mortar retailers have now clearly moved from the dime and followed in the footsteps of their overseas counterparts - that is to say, become players in the technology revolution rather than disinterested bystanders - it's hard to argue that a tax advantage in favour of offshore retailers has been such a bad thing.
It's amazing what serious competition can do to lift retailing standards and consumer satisfaction.
In any event, one could plausibly argue that the cherished assumption of a playing field tilted against local retailers is and has always been false. A full 180 degrees opposite is the real truth.
After all, Australian retailers have been mollycoddled since time immemorial by extraordinarily high barriers to entry to their cozy protected market. Geographic isolation, entrenched domestic oligopolies, planning regimes that thwart site acquisition and high labour costs that are inconsistent with the business models of global retailers have all helped tilt the playing field against foreigners.
International retailers are now learning how to overcome these challenges and in this way the playing field is flattening.
So the key message from the CBA report could be the one that remained unstated by its authors: that the only way Big Retail in Australia has finally learned how to compete is through the steady dismantling of barriers to international competition, both on land and via the internet.
It's a little premature to suggest that Australia's retail empire is striking back, but it is certainly looking readier for a fight that it was six months ago.
Michael Baker is principal of Baker Consulting and can be reached at firstname.lastname@example.org and www.mbaker-retail.com.