Welcome to the first of our Amazon in Australia series! This series of articles explores e-commerce in Australia, and how Amazon will affect Australian wholesalers and distributors. This article explores the current Australian e-commerce landscape and what drives Australian consumers.
E-commerce is immature
Australia’s e-commerce landscape is still immature compared to the rest of the world. According to a report by Fung Global Retail Tech, only 7.6% of Australia’s retail sales were made online in 2016; this is compared to 10.5% and 14.7% in the US and UK respectively. Australia’s low e-commerce penetration rates are also reflected on a company level. For instance, e-commerce contributed only 3% of sales at Australian electronics specialist JB Hi-Fi, compared to 25% at UK’s equivalent, Dixons Carphone.
There’s no denying that online spending is on the rise. Aussies are not only spending more online, but they are also purchasing higher value items such as electronics. This is a great opportunity for retailers to leverage the power of digital sales to drive online sales.
E-commerce retailers are fragmented
In 2016 the market share for Australia was fragmented. The top 10 e-retailers accounted for approximately one-third of online sales for Australia, versus two-thirds for the top 10 e-retailers in the US and UK; Germany ranks the highest for total market share. A possible reason for this fragmentation was the absence of Amazon in Australia.
Although online retail has been slow to win shares in Australia, it is finally gaining momentum. According to a report by CommBank, retailers are optimistic that their online sales will grow 20% over the years to come. This growth is likely to come from the digital natives. This under 30s category accounts for 29% of online spend – the highest share of online spending.
Australians are more likely to shop internationally
With the market so fragmented, it is no surprise that Australians prefer to shop from overseas sites when they buy online. With the presence of Amazon in Australia, experts suggest that international purchases will experience a dampening effect.
Australians are also skewed towards international shopping because of the tax advantages to buying from international businesses – purchases under $1,000 are tax-free. With that great an advantage, it’s not wonder that Aussies are preferential to buying from abroad.
Unfortunately, Australians won’t be enjoying tax-free shopping for much longer. On July 1, 2018, the government will begin applying GST to low-value imported goods, meaning that they won’t enjoy tax-free shopping on purchases less than $1,000. Furthermore, GST will also apply to digital products and services, including video streaming and audio downloads. Perhaps this will be an advantage for local brick-and-mortar retailers and e-retailers alike?
Australian shoppers feel that incumbent brick-and-mortar retailers do not offer good value for money. They feel that they pay higher prices for similar products than consumers do in countries like the US and UK. This perception is further stressed by the launch of new international lower-price chain stores such as Aldi, H&M and TK Maxx.
With everything searchable at a click of a button, the internet has allowed consumers to have greater price transparency. This has helped to drive Australian consumers’ perception of unfavourable pricing. Did you know pricing can affect your customers’ perception of quality?