Prices may be rising, but Australia’s e-commerce market is stronger than ever

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Source: Pexels/Negative Space

In the early days of the internet, shoppers were often lured online by the promise of savings, but that is no longer the main attraction of e-commerce. Customers today appreciate the broad selection of goods available online, the convenience of shopping where they want, when they want, and the ease of having purchases delivered to their homes. 

During the lockdowns of the past 18 months, necessity drove many more people to adopt shopping online, and for those who’d already embraced e-commerce, to expand the types of products they consumed — leading, for instance, to a marked increase in online orders for groceries. As we emerge into a post-COVID future, these new digital habits will undoubtedly remain in place, and it has been projected that revenue in Australia’s e-commerce market will exceed US$31.5 billion ($43.7 billion) by year’s end, up 29% on 2020 figures. 

We have reached a tipping point where the consumer has begun to view e-commerce as standard — or at least, an essential option any business must offer. In light of this change in mindset, companies can no longer take a cautious, slow-and-steady approach to digital transformation. Today, the company that refuses to do business online risks going out of business altogether. 

Greater demand highlights tech skills shortage

Recognising that time is of the essence, companies that may once have given an e-commerce development agency six months to get an online shop operational, are now demanding to have a platform built within a matter of mere weeks. However, there is a severe shortage of the tech talent required to deliver these urgent projects for merchants. The problem is particularly acute in Australia at present, largely due to restrictions on movement during the pandemic. 

The Technology Council of Australia, which counts more than 60 leading tech companies in Australia as members, has called on the country’s political leaders to back a plan to deliver 1 million tech jobs by 2025. To meet this goal, nearly 300,000 extra workers will need to join the sector over the next three years.

Realistically, with a lack of skilled tech workers domestically and continuing barriers to immigration, many Australian companies will need to utilise offshore-based talent to supplement local resources. 

Because of increased need for developers, those with in-demand skills command a premium. The costs of fast-tracking e-commerce development with well remunerated developers are generally passed on to the consumer. 

Online prices are rising

Similarly, an imbalance in supply and demand is at root of the rise in prices of merchandise sold via e-commerce, what is known as online inflation. This is a relatively new phenomenon. For many years, the prices of goods online actually dropped as time went by. According to a recent report from Adobe, from 2015 to 2019, online prices fell 3.9% on average annually. The pandemic put an end to that trend. 

With many workers globally confined to their homes, and outbreaks causing disruption to transportation of both finished goods and raw materials, supply chains were constrained, a situation which is only now slowly beginning to be corrected. At the same time, there was a surge in online purchasing. Demand rose, while supply dipped. Naturally, prices increased — and online inflation occurred. To offer just two examples, year-on-year, prices of non-prescription drugs sold online have risen by 5.66%, while groceries were up by 1.28% in 2021, per Adobe’s research.

Consumers appear undeterred by these slightly higher prices and have continued to take to shopping online as never before. Having experienced its many benefits, it is highly unlikely that the widespread adoption of e-commerce will now reverse.

In fact, Facebook and Bain’s research suggests that in Southeast Asia, online spending will grow 60% per shopper this year. Across the Southeast Asian region, approximately 9% of all sales are currently made online, nearly double the rate of a year ago. In China, meanwhile, e-commerce represents a third of total retail, auguring the shape of things to come elsewhere.

The customer relationship becomes key

As e-commerce becomes ubiquitous and the percentage of sales made via a company’s website grow, the problems to be solved on the website only become bigger and more complex. Having tech capability to solve them is vital — for example, personalising becomes more important the more customers you have, but also more complex as you gather greater amounts of data. 

Yet it is precisely factors such as personalisation and its ability to create a stronger relationship with customers that will increase in importance, as e-commerce operators seek to gain the advantage on their competitors. Those that succeed will surprise and delight their customers, create a frictionless buying experience and consistently exceed consumers’ expectations. The challenges are great, but so are the opportunities.

Many middle-class and affluent households in this region possess pent-up savings and are in the midst of ‘revenge spending’ to make up for the lost time during lockdowns. The Australian Retailers Association forecasts that over the 2021 Black Friday and Cyber Monday shopping period (falling on 26 to 29 November this year), $5.4 billion will be spent by Australian consumers. 

In spite of online inflation and continuing COVID-related supply chain and shipping delays, the appetite for online purchasing remains high — even with physical retail having reopened throughout much of the region. Clearly, there exists enormous potential for those businesses that are able to adapt swiftly to the new paradigm, providing the convenience and outstanding online shopping experience customers today demand.

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