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Online sales growth slows to bricks-and-mortar pace

Australians spent an estimated $22.74 billion online in the 12 months to June 2017, or about 7.4 per cent of the traditional bricks and mortar retail sector, according to data from NAB.

Month-on-month online sales growth slowed to 0.7 per cent in seasonally adjusted terms in June, on par with month-on-month sales growth seen in bricks-and-mortar retail.

In year-on year-terms, online sales were up 7.6 per cent in June 2017 compared to June 2016, much slower than the growth recorded when the index was established. In June 2011 for example, year-on-year growth was around 34 per cent.

Some categories of online retail are doing better than others, Richard Coath, NAB’s general manager of consumer, health, agri & TMI global institutional banking wrote in the report.

“From our latest figures it’s clear that games and toys enjoyed strong growth in June, as did media – thanks in part to continued buoyancy in streaming video and music services. Context is everything however. For instance, while SME monthly sales contracted in June, it’s worth knowing that they are still outpacing corporate sales year on year,” he said.

“This month’s negative growth in fashion – the first since the index began – also benefits from further insight. We believe this apparent slump may not be a fair representation of the sector. In all likelihood the emergence of ‘buy now pay later’ brands is temporarily skewing the numbers,” he added.

“Certainly we will monitor this development going forward with a view to establishing what is driving performance in this sector.”

Each quarter NAB produces an in-depth report on the Australian e-commerce sector, with data on top-performing categories, regions, age groups and businesses.

Key findings from this quarter’s report include:

  • Fastest-growing category: Media saw the fastest annual growth of any category in June, at 16.7 per cent. This category, which represents things like streaming services, generally has higher, less volatile monthly growth than other categories. Meanwhile, Australians continue to spend the most online on homewares and appliances, which accounts for over 20 per cent of Australians’ total spending online, followed by media, groceries and fashion.
  • International vs domestic performance: Both domestic and international online sales slowed in June, while the gap between domestic and international retailers continues to close. Year-on-year sales growth in June 2017 was 7.6 per cent for Aussie retailers and 7.7 per cent for foreign ones, compared to this time last year, when Aussie retailers saw 19.9 per cent year-on-year growth and foreign ones only 6.8 per cent growth. However, 80 per cent of online spending in Australia is with domestic retailers.
  • By age of consumer: Online spending remains dominated by those aged between 35 and 44, who make up 24 per cent of total online spending in Australia even though they’re just 17 per cent of the adult population. Spending by all age groups slowed in June, except for those aged 45-54. Those aged 18-34 spend the most on fashion, media and homewares and appliances, while those aged 35 and up favour homeware and appliances and groceries and liquor.
  • By state: Almost 77 per cent of total online spending in the past year was made by residents from the three largest states (NSW, VIC and QLD), whose combined population accounts for a little over 77 per cent of the Australian total. Residents in ACT, NT, WA and NSW spent more than the national average on a per capita basis.
  • Metropolitan vs regional performance: Online spending contracted in regional areas in June, although metro residents spent around 17.3 per cent more on average.
  • SME online retailers: While smaller online retail sales contracted in June (-1.6 per cent) after an unseasonably rapid expansion in May (11 per cent), NAB estimates that online sales from SMEs are now 17.6 per cent higher compared to a year ago. Smaller online retailers – with revenue of less than $2.5 million – made up about 36 per cent of all online retail sales in the past 12 months.
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