The impact of e-commerce on the Australian business landscape

January 30th, 2018 - Get new posts sent straight to your inbox, click here. AussieBB

You’ve probably felt the effect of e-commerce on business – whether you are a business owner or a consumer. With the prevalence of mobile devices and wide availability of fast broadband, Aussies seem to have embraced shopping online, and this is changing how the entire retail sector operates, the services it provides, and how consumers interact with it.

So, how has e-commerce impacted the business sector in Australia? We’ve taken a look at everything from online retail and bricks-and-mortar businesses to driving factors and future trends.

Growth in online sales

Australia is one of the strongest e-commerce markets in the world, with forecasted sales of $32 billion for 2017 and an annual growth rate of 13.5%. E-commerce has come to dominate shopping to the extent it’s now considered part of mainstream retail. The growth in online sales applies to both retail or B2C businesses as well as B2B businesses.

The high-growth potential of Australian e-commerce has attracted the attention of global e-commerce giants. Amazon and Alibaba, for example, have plans to continue expanding their operations in Australia. These multinational, locally based e-commerce distributors could pose a serious threat to retail operators like Myer.

Slowing growth in brick-and-mortar retail

The growth in e-commerce volumes has been at the expense of brick-and-mortar retail, with retail growth rate at its lowest in four years. Former big players like Myer have experienced declining sales and stock prices, and even major chains with a strong online presence like JB Hi-Fi and Harvey Norman are finding the business environment challenging.

Disruptions to the logistics industry

E-commerce and the digital disruption has also impacted other industries, such as the logistics industry. Logistics vendors have felt the impact of shrinking demand for mail and in response adjusted their business strategies to take advantage of the growing e-commerce market. Other industries heavily linked to e-commerce – such as packaging, industrial real estate (and warehousing), and online advertising could be seeing a similar level of disruption.

Changing consumer-business relationship

With the digital disruption and the rise of e-commerce comes a shift in the nature of the consumer-business relationship. Consumers now have more control over how, when and where they shop, whereas much of that control was in the hands of retailers and vendors before the arrival of e-commerce. Consumers are also armed with more information than before, since they can research products and compare prices with a quick online search. With more power shifting to the consumer, it might be now up to vendors to offer more convenience, service, choice, better delivery, and other benefits to boost their competitiveness.

Driving factors and trends

Understanding the driving factors can enable businesses to better understand the new economic landscape. Important driving factors and trends associated with e-commerce disruption include internet usage and the rise of portable devices.

  1. Internet usage

High internet usage is a key driving factor of e-commerce, with 85% of Aussies aged 15 and above accessing the internet. This means Aussie consumers can easily research products, click on e-commerce ads and websites, and do price comparisons.

  1. Smartphones

The ubiquity of smartphones is likely to be another key driving factor. Not only do mobile devices make it easier to shop online wherever you are, but they allow businesses to target customers with apps, social media, and websites in a seamless marketing funnel with offers and content. Research suggests smartphones could become the core tool for e-commerce shopping, with consumers choosing to complete their transactions on their phones.

  1. Changing shopping preferences

Another driving factor could be that Australians enjoy the convenience of shopping online. As consumers get used to buying things over the internet, they might come to see it as trustworthy, convenient, and time saving. Items are delivered to your door, and the range of choice online exceeds what retail stores, with their space limitations, can offer. Without the need for retail shopfronts and staff, e-commerce pricing can be more competitive than brick-and-mortar offers.

What are Australians buying online?

Australians are buying almost anything online. Major categories include homeware & appliances, personal and recreational items, and fashion. Rapidly growing categories are games and toys, food catering, media, daily deals, and grocery and liquor. These categories can even include things like event tickets, books, meals, computers and accessories, and supermarket shopping.

Future trends and opportunities

The e-commerce sector in Australia will likely continue to keep growing in the coming years. For consumers, this means more choice and power, while for vendors and businesses it could pave the way for more opportunities.

  • Omni-channel shopping experience – Brick-and-mortar retailers who successfully leverage their online presence as an extension of their physical stores for a seamless, omni-channel shopping experience could be well placed to succeed in this landscape. A big part of this seamless shopping experience could be showrooming to drive online sales. By meeting consumers wherever they are – in store and online – businesses can ensure their offers stay visible to shoppers.
  • Logistics – E-commerce retailers could even move into logistics themselves, with options like drone deliveries already planned by giants like Amazon. For Australian businesses, the local e-commerce boom could be a stepping stone to targeting overseas markets, especially countries like China where export demand for high-quality health and food products can be high.
  • Personalisation – Since consumers are looking online to find what they want to buy, creating engaging content and offering a more personalised service experience could be key to providing a great shopping experience. Localised targeting, individualised consumer offers, and expert advice could be ways to win over consumers in a competitive e-commerce landscape.

Widespread internet access and smartphone ownership seem be the biggest driving factors behind the rise of e-commerce. This has disrupted industries like the logistics sector, but for businesses it’s also important to recognise e-commerce continues to change the consumer-and-business relationship. With consumers having increasing power over the shopping experience, businesses will need to prepare for the future by finding ways to maintain their competitive advantage.

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