Published on 30/11/2016 by Punchmedia

Online Sales to Explode as Xmas Approaches

Consumers across the world pumped more than $US6 billion ($8 billion) into the retail sector, of which Australia played its part, during the frenzied shopping days known as Black Friday and extending into Cyber Monday. While it's an American tradition, it marks the start of the lead-up to the busy Christmas period in Australia and evidence suggests that more buyers are going online for bargains and convenience, which could force more discounting to entice shoppers back to traditional bricks and mortar shops. The Online Shopping industry has performed strongly over the past five years, with its continued popularity expected to boost industry revenue by 14.9% in 2016-17, to total $18.0 billion. Online sales growth has been supported by rising consumer confidence in online shopping, the large variety of good-value items available and further growth in internet use across the population. That rate of sales indicates that online spending is the equivalent to 7.3 per cent of spending at traditional bricks and mortar retailers as measured by the Australian Bureau of Statistics. Specialist retailers initially dominated online retailing, but e-commerce platforms are quickly becoming common for multichannel delivery.

Participation

A significant influx of online retail stores has occurred over the past five years, as new entrants have recognised the industry’s growth potential. New entrants are either online-only retailers or existing bricks-and-mortar stores with multichannel strategies. The number of online establishments is expected to increase by an annualised 7.5% over the five years through 2016-17, with industry employment growing at a slightly faster pace. While online retailers typically rely less on labour compared with bricks-and-mortar stores, employees are still required for various functions such as setting up, maintaining and upgrading web content; processing orders; performing warehouse functions; and providing customer service.

Online Sales Profit

Industry profit margins have increased slightly over the past five years, and are expected to account for 4.0% of revenue in 2016-17. Online stores typically attract lower profit margins than traditional retailers due to fierce internal and external competition, and the potential costs incurred through mistakes in website design and functionality. Furthermore, many online retailers attract consumer demand by selling products at a substantial discount compared with bricks-and-mortar stores, which keeps profitability low. Despite this trend, falling purchase costs have given some support to profit margins over the period. Industry players are increasingly sourcing products from low-cost manufacturers overseas, lowering final costs for imported consumer goods.

Multichannel Retailing

Online shopping can only be undertaken through devices connected to the internet, which means that digital technology is an essential aspect of the industry. The rapidly increasing use of smartphones and tablets for online sales has prompted many industry firms to develop mobile-optimised websites and applications. This allows retailers to sell products to consumers anywhere and at any time, enhancing the convenience of online shopping. Industry Report Specialist IBISWorld estimates that almost 20% of all online orders globally are made via a mobile device. M-commerce enables retailers to connect and interact with customers on many levels, including through social media, messaging and marketplace platforms.

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Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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