Christmas this year big opportunity for online retail

Internet Retailing

11th Oct 2017

New research from IBISWorld suggest bricks-and-mortar retailers will face fierce competition from online retailers this Christmas shopping period, which may also be characterised by heavy discounting and bargain hunters.

While festive shopping overall is expected to remain subdued, with annual retail revenue increasing by just 1.9 per cent over the year to December 2017, online retailers may hold greater appeal for frugal shoppers.

“Despite the season’s importance for shopping centres, growth in Christmas spending has slowed over the past five years,” said IBISWorld senior industry analyst, Kim Do.

“More conservative retail spending can largely be attributed to negative consumer sentiment, along with subdued growth in household consumption expenditure and household discretionary income over the same period,” she said, adding that many consumers have opted to shop online as a result of these trends.

Online operators typically have lower fixed costs than traditional bricks-and-mortar stores, which means they can offer consumers lower prices and better discounts.

In addition, many international retailers, such as Marks & Spencer, River Island, Next, Nordstrom, and Macy’s, have launched online ordering platforms in Australia in recent years, which has put additional pressure on Australian enterprises, IBISWorld found.

“The convenience of online shopping has also attracted time-poor customers. Online stores provide a broad selection of products, higher stock levels, and allow for easy price comparisons. Customers are also able to avoid the inconveniences of making in-store purchases, such as parking and restricted trading hours,” Do said.

Over 10 per cent of all retail spending occurs in December in the lead up to Christmas Day. Over the past five years, it has gained in importance for retailers, with revenues increasing by a substantial 23 per cent on average from November to December.

The increased significance of e-commerce at Christmas is a reflection of the growth in the sector’s overall. While bricks-and-mortar retail is expected to see around one per cent annualised revenue growth over the five years through 2022-23, online shopping is anticipated to see 9.4 per cent growth over the same period.

The shift has already been felt at shopping centres, which have seen reduced footfall, according to IBISWorld. Increasingly shopping centres are embracing, rather than fighting it.

“In addition to expanding tenancy mixes, shopping centre operators are expected to work alongside retailers to enhance customers’ instore shopping experiences through leveraging technology advancements and online platforms,” said Do.