Online retail spending continues to grow, albeit modestly

Online retail shopping fills an important void in the market but will never take the place of the human connection people seek and want to enjoy as part of their in-store shopping experience.

Australia Post has just released its 2024 eCommerce Industry Report  Inside Australian Online Shopping, which reveals Australians spent $361B on retail goods, an increase of just 2% on 2022, according to the report.

For perspective, spending on retail goods in 2022 increased by “an exceptional” 9.3% from the previous year.

Of the total retail spend, $63.6B was spent online, with cash-strapped shoppers seeking better deals, resulting in a “surge” in spending at variety stores and online marketplaces.

The Australia Post report notes the only other store type to see growth in 2023 was food and liquor “mostly because more people were buying groceries online”.

Online home and garden spending dropped 7.6% with fashion falling 8.7%, hobbies and health and beauty decreased by 2%.

Also of interest in the report was the finding that 8 in 10 Australian households shopped online in 2023, or 9.5 million households, an increase of 1.4% year-on-year, while around 1 in 7 households made weekly online purchases.

Surprisingly, older generations increased their online shopping activity in 2023 while younger generation’s activity dropped. Baby boomer online shopping jumped 7% in 2023 to $12.5B followed by Gen X (up 1% to $17.5B), Gen Y (down 2% to $22.1B) and Gen Z (down 11% to $10.6B).

Online shopping has been embraced by Queenslanders. The top 3 online shopping locations by volume across Australia includes Toowoomba. Two of the top 3 locations by volume per capita are in Queensland – Macleay Island and Mooloolah Valley; while the State also accounts for two of the top three growth suburbs by volume in Waterford West and Woodford.

These figures show there is a need in the market for access to online retail shopping. This is indisputable.

But it must also be kept in perspective. Of the total $361B retail spend by Australians in 2023, $297.4B – or 82% – was in brick and mortar stores.

Human connection at the store level helps to develop and strengthen the bond and the brand between the retailer and the customers. I believe people want that physical experience and connection to touch, smells, visual and audible stimulation.

People also enjoy discovering new items, shops and experiences when they go shopping which is why I believe it is important the smaller entrepreneurial retailers remain an important facet of shopping centres, allowing the centres to create an important point of difference.

It also means physical stores will benefit from making sure they are delivering a quality in-store customer experience which resonates with their customer base.

And, let’s be honest. Not every retailer is interested or inclined to move towards having an online presence, whether it is because of age, scale or lack of social media skills and knowledge.

For those of you who are operating online stores, the  Inside Australian Online Shopping report identified three tips for building a sales strategy in 2024. These are:

  • Strategically time sales by leveraging “data analytics to identify the most opportune times to run promotions, and then tailor the deals to specific audience segments to maximise relevance and engagement during sales events”;
  • Offer early access – “create a sense of exclusivity and urgency by offering personalised invitation or exclusive discounts to loyal customers…this can drive anticipation and encourage sign-ups to your email database”;
  • Leverage influencers – “collaborate with social media influencers to maximise your impact during sales events…tailor your collaborations to specific age groups”.

In good news for all retailers, the Australia Post report forecasts improved growth in retail shopping in “late 2024 and beyond” as the economy is expected to improve. For more on the retail outlook for 2024, click here.