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E-commerce sales slow, tracking retail sector as a whole

The latest data from NAB’s Online Retail Sales Index shows e-commerce sales contracted in September and a general slowing in the trend estimate for sales.

This tracks with the ABS data of the overall retail sector, which has been slowing for May. ABS recently reported flat nominal sales growth at 0.0 per cent in seasonally adjusted terms, a figure that ARA executive director Russell Zimmerman called “extremely frightening”.

Online sales grew by 6 per cent in September 2017 from the same month last year, down from the 10.2 per cent year-on-year growth rate in August.

This is much slower than the growth recorded when the index was established.

NAB estimates the Australian online retail market to be worth $23.4 billion in the 12 months to September 2017.

In terms of categories, media contributed the most to overall growth in the year to September. Homewares and appliances, which retains the largest share of spend, saw a dramatic contraction in growth, both in the month and for the year.

Grocers and liquor also contracted by -1.7 per cent and recreational goods contracted by -.07 per cent. Toy sales grew fastest in the month by 5.4 per cent, but NAB noted that this category represents a relatively small share of online sales and tends to be more variable than other categories, so recent growth may not be sustained.

Media grew in the month by 2.6 per cent, followed by department stores (0.8 per cent) and takeaway food and fashion (both 0.1 per cent), with daily deals flat (0.0 per cent).

Further highlights:

  • International vs domestic

Both domestic and international online sales slowed in the month, with domestic contracting in line with the total index. In September, just under 80 per cent of spending was domestic.

Department stores and electronic game and toy retailing are two categories where a great share of spend is attributed to international retailers over domestic. However, this is by a small margin and these two categories represent only around 12 per cent of overall online spend combined.

  • Age groups

Online spending remains dominated by those aged between 35 and 44. Growth in the month was strongest for the over 65 age group, with sales in every other age group contracting, particularly those under 35.

Spending patterns vary across age groups, but on average, share of online spend is highest for homewares and appliances, especially for those aged 45+. Those aged between 18 and 34 favour fashion, while those over 65s favour groceries and liquor.

Most age groups spend slightly more with online domestic retailers as with online international retails, except for 18 to 24 year olds, who spend more with international online retailers.

  • States and territories

Residents of the bigger eastern states of NSW, VIC and QLD represented just over 77 per cent of total online spending in the past year, which is roughly in line with their proportion of the Australian total population.

However, on a per capita basis, ACT residents have the highest spending, followed by NT, NSW and WA.

  • Metropolitan vs regional

Online spending in regional areas continued to grow in September by 0.3 per cent, albeit at a slower pace compared to August, while growth in metropolitan areas contracted slightly more than the total index, at -0.9 per cent.

Metropolitan residents retain the largest share of spend, and spent on average around 16.9 per cent more than those residing in regional Australia. However, those living in regional WA spent about 4 per cent more than the average Australia.

  • Small online retailers

Small online retailers made up around 36 per cent of all online retail sales in the past 12 months. While SME monthly sales contracted in September, it was more mild than that of their corporate counterparts and growth in annual sales at SMEs are still outpacing corporates.

Small online retailers are overwhelmingly represented by homeware and appliances, personal and recreational and fashion, which make up nearly 85 per cent of spend.

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