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Australia’s love affair with online retail continues, but growth is slowing

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Australians love affair with online retail has continued but the pace of growth has slowed and the value of the transactions has shrunk considerably.

Figures in the latest National Australia Bank Online Retail Sales Index showed that Australians spent $14.4 billion in on retailing in the year to October 2013 – up $2 billion on the same period last year. But sales growth slowed considerably over the past three months, with month to month growth of just 0.3% in October, and the year-on-year rate at 10.6% – the second lowest after August 2013.

However, it was the analysis beyond the headline number which was the most compelling and the findings are significant as we head into the crucial Christmas trading period.

NAB’s analysis revealed that almost 90% of all online transactions in the past year were for products under $100. That compares to less than 3% of transactions with values of over $250 and just 0.2% of online sales were for purchases over $1,000.

NAB Chief Economist Alan Oster said “retailers cutting prices to build sales volume, changes to shipping arrangements and a significant increase in people purchasing low cost media products like e-books, movies and music online are factors driving the lower transaction sizes.”

“While areas like homes and appliances and fashion have seen declines in the average transaction size, the groceries and liquor, and personal and recreational goods sectors have experienced an upward trend since early 2010.”

Since January 2010, the average online transaction size has also fallen from $64 to $41 in October 2013.

On what all this means for the GST debate around lowering the threshold, the NAB report found that in the year to October 2013, international online retail sales were around $3.9 billion, with almost 90% of those transactions below $100 in value.

“Our calculations show that had a lower GST threshold been set over the past year, it would have yielded additional revenue of $42 million at a $500 limit, $210 million at a $100 limit, and $309 million if the threshold was $25”, it said.

Mr Oster said that the special report demonstrated that not only were the majority of online purchases in the very low value range, in fact 49% of all online purchases were below $10. “Transaction sizes for international retailers in particular have fallen quite dramatically over the last three years. Between January 2010 and October 2013 average purchase size dropped from $74 to $38.”

But he emphasised that the drop wasn’t equal across all sectors.

Looking at the spending pattern of the various states, it said that on a per capita basis, the ACT, Northern Territory and Western Australia continue to record stronger levels of consumption, while South Australia, Victoria and Queensland lag behind.

The biggest spenders were aged between 35 to 44.

This article first appeared on Property Observer.

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