Experts suggest online sales slowdown is only a "blip"
Online retail spending growth is slowing, as sales in the past month increased by only 0.3%, according to the latest NAB figures.
The low growth rate for the past three month is likely to have been caused by the lower Australian dollar, but experts suggest it’s only a “blip” in the broader scheme of online retail growth.
The NAB Online Retail Sales Index for October 2013 reveals online sales have increased by only 16% to $14.4 billion for the past 12 months, notably lower than the 26% year-on-year growth rate recorded this time last year.
Since this time last year, NAB figures reveal the value of online sales has increased by $2 billion.
The past three months have been particularly poor for online sales growth, with sales growth from traditional bricks-and-mortar retailers exceeding online retailers in October, recording rates of 0.5% and 0.3% respectively.
Growth of 0.3% was also recorded in September and in August NAB figures show online retail sales actually contracted by 0.2%
Retail Oasis director Nerida Jenkins told SmartCompany the slowdown in growth in the past few months has been influenced by the lower exchange rate.
“According to the RBA daily exchange rates, the dollar dropped below 90 in the first month of the last quarter, so the level of sensitivity around that currency drop kicked off the level of conservatism in online sales,” she says.
“Daily deals, fashion and electronic goods fared worst in this period, showing the more discretionary retail goods and international retailers were most affected by the lower exchange rate.”
Spend on international online retail goods contracted by 0.5% in October.
As the growth in online spending dips, so is the value of purchases consumers are making.
NAB analysis found 90% of all transactions made in the past year were for products under $100, with less than 3% of transactions to the value of $250 and just 0.2% of purchases were over $1000.
The average value of an online purchase has dropped from $64 in January 2010 to $41 in October 2013.
NAB chief economist Alan Oster said in a statement more people are looking to purchase low-cost goods online.
“Retailers are cutting prices to build sales volume, changes to shipping arrangements and a significant increase in people purchasing low-cost media products like eBooks, movies and music online are factors driving the lower transaction sizes,” he says.
“While areas like homes, 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.”
NAB analysis also reveals domestic retailers now make up the dominant force in the online retail scape, accounting for 73% of businesses, up from around 50% three years ago.
Jenkins says online spend should pick up again in the next few months.
“People have started to settle into the lower exchange rate now. Consumer behaviour toward online is now maturing, but it’s not at an end,” she says.
“It will continue to grow in double digit figures, although perhaps at slower rates. Forces like the exchange rate and taxes will continue to act as short-term stimulants and detractors, but will not have much impact in the long term.”
This year online retailers have been pushing for the GST levy on overseas online goods to be lowered from $1000 to $20.Based on NAB’s retail figures, should the GST threshold be lowered to $25, this would yield revenue of $309 million.
Jenkins says this amount will not be enough to cover the administration costs.
“The level of administration to collect the tax will be higher,” she says.
National Online Retailers Association chief executive Paul Greenberg toldSmartCompany retailers need to “stop holding their breath about the GST and stop using it as a smokescreen for not innovating”.
“As an industry we’ve been waiting for some act of God which will give us some relief by levelling the playing field or a lower Australian dollar, but we’re deluding ourselves,” he says.
“We should stick to the three key pillars improving the technology of our business, looking at global opportunities and being customer-centric.”
This article first appeared on SmartCompany.