Online retail sales up $2 billion on last year, with majority of purchases under $100
Tuesday, 3 December 2013
National Australia Bank's (NAB) latest Online Retail Sales Index released today shows Australians spent $14.4 billion in the year to October 2013, up $2 billion on the same period last year.
However, online sales growth has slowed considerably over the past 3 months – with month-on-month growth of just +0.3% in October. Media, Groceries & Liquor and Homewares & Appliances were stronger, while sales in Daily Deals, Recreational & Personal Goods, Fashion and Toys & Electronic Games contracted.
NAB analysis has also revealed almost 90% of all online transactions in the past year were for products under $100.
By comparison, less than 3% of transactions were for values over $250 and just 0.2% of online sales were for purchases over $1,000.
The average online transaction size has also fallen from $64 in January 2010 to $41 in October 2013.
The research continues to show domestic retailers control the largest share of online sales, at around 73% of the market.
Commenting on the findings, NAB Chief Economist Alan Oster said that while Australians were shopping online more, they were spending less on each individual transaction.
“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,” he said.
“While areas like Homes & Appliances and Fashion have seen declines in the average transaction size, the Groceries & Liquor and Personal & Recreational Goods sectors have experienced an upward trend since early 2010.”
NAB’s Retail Sector Head, Tiernan White, said: “As we continue to see businesses develop an online presence alongside a traditional storefront, online sales growth rates remain varied at a sub sector level.
“For example, the Department & Variety Store, Media and Grocery & Liquor segments were responsible for 67% of online sales growth in the year to October.”
Online sales were equivalent to 6.4% of traditional retail spending (for the year to September), up from 5.6% for the same time last year.
What have been the growth trends for online retail?
There has been a marked slowing in the growth in online retail sales over the past few months – in stark contrast to the trends between 2010 and 2012. Monthly growth was just +0.3% (seasonally adjusted) in October, with the year-on-year rate at 10.6% - the second lowest after August 2013.
What are consumers spending on? Department & Variety Stores, Media and Groceries & Liquor combined accounted for 67% of total online growth in the year to October. Daily Deals, Toys & Electronic Games and Personal & Recreational Goods provided the smallest contributions to growth – with sales in these sectors contracting over the past three months.
What are the implications of transaction sizes for any changes to the GST threshold? In the year to October 2013, international online retail sales were around $3.9 billion, with almost 90% of these 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.
Who are the big spenders?
Online shopping continues to be dominated by Australians aged 35 to 44, at around a quarter of all purchases. Those aged 25 to 34 and 45 to 54 each represent around 20% of all online sales. People over 65 spend the least online, at less than half the national average.
Spending by age - Under 25s spend comparatively more than average on Fashion, Media and Toys & Electronic Games and comparatively less on Groceries & Liquor. Those aged over 65 spend comparatively less on Fashion and Department & Variety Stores and comparatively more on Groceries & Liquor.
Transaction sizes - The size of the average online retail transaction has fallen from $64 in January 2010 to $41 in October 2013 (seasonally adjusted). This fall has been more pronounced amongst international retailers, down from $74 in January 2010 to $38 in October 2013. Domestic online retail transactions fell from $61 to $42 in the same period.
Transaction sizes between sectors - The largest average transactions occur in Homewares & Appliances, with an average $173 in October 2013. In contrast, Media transactions averaged $9 in the same period – reflecting the comparatively low cost of smartphone apps, music, video content and e-books.
Domestic retailers control the dominant share - Domestic retailers remain the dominant force in online retail sales, accounting for 73% of sales at October 2013. Trends in the growth rates for both international and domestic sales have been broadly similar since the start of 2012.
Regional to metro sales - Metropolitan residents are spending 2% more online than the national average and regional residents almost 5% less. However, regional Western Australia continues to outperform – with spending 26% above the national average.
Share of state spending - 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.
Based on two million non-cash transactions per day, scaled up to replicate the broad economy, the NAB Online Retail Sales Index tracks online retail spending across sectors, demographics, locations and the breakdown of goods bought from domestic and international online retailers. The index is produced monthly and analysis is provided on a quarterly basis.
Quantium is Australia’s leading data analytics and marketing strategy firm. Quantium has worked with NAB for more than 4 years, assessing de-identified transaction data to derive insights, trends and shopping habits of different customer groups. The resulting analysis forms Market Blueprint and is used by NAB and other businesses to drive innovation and business performance through customer, distribution and marketing strategies.