Online retailers thought they might have a chance to relax after 2020. Clean up the mess created by an unanticipated online shopping attack. Take the upper hand. Breathe and be strategic.
Instead, a new tidal wave of online shopping hit them.
As the following graph shows, Australians’ fervor for online shopping only waned very briefly after 2020. After a small hiatus, it doubled and hit a new high. We shop online in a way and in volumes never seen before. No wonder the country’s delivery systems are a stressful mess.
A graph like the one above shouldn’t even be possible.
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High growth rates should be possible in small numbers, of course. But high growth rates in large numbers? Rare. It should not be possible to take a massive industry as everything bought by all Australians and transform it completely in the space of a year and nine months. But that’s what happened.
Online shopping accounts for well over 10% of all retail businesses, up from just over 5% at the start of 2020.
Large retailers that had a limited online presence in 2019 are now in the trenches of e-commerce.
Coles has increased its online sales by 132% in two years. There’s a reason you see those red trucks parked on your street a lot more often these days: 9% of all sales are online. Coles sells food and drink, so it’s in the green line in the graph above. When you go beyond food, you find even more incredible growth.
JB Hi-Fi made $ 258 million in online sales in 2019. Today, it’s $ 1.1 billion. A cheeky quadruple in the space of two years.
Even Bunnings, which did not have an online sales platform until recently, has significant online sales volumes. Its share has more than doubled, from 0.9% in fiscal year 2019-20 to 2.3% in 2020-2021. It may not look like a big to share but that’s 2.3% of the $ 17 billion in sales. And that’s a large number.
Different companies have different shares of online sales. The portfolio of retail brands owned by Wesfarmers gives us a way to look at this phenomenon, with an online share spanning more than an order of magnitude, from 2.3% at Bunnings to over 35% at Officeworks – as shown in the following graphic. There are a few factors here – the harder it is to deliver, the more likely it is to be purchased in person. And the same goes for the more measurements and reviews they need before buying.
As well-known brands in Australia have jumped headlong into e-commerce, the fate of online specialists deserves to be watched. Amazon and eBay have done well. The case of Kogan is particularly interesting. The pandemic turned into a boom time for Kogan, with people buying more goods and fewer services. This should have been the time to make good hay. Instead, the ASX-listed online retailer saw its stock price fall after a series of missteps.
Part of Kogan’s problems has been overstocking and inventory management, but renewed competition from big, trusted brands can’t help.
The story that Australia was lagging behind the rest of the world in online shopping penetration was true. This is no longer true. The US Census Bureau reports that 13% of all retail sales in this country were made online during the most recent period. The data for Australia puts us at 13.2%.
Much like our progress in immunization, we started behind America, but eventually passed it. Now we are among the world leaders, and the question is: where is it from here?
This article was first published by Crykey.