Being rather active in online retail means we have to keep our eyes on the ball in terms of what’s happening in the industry.
The Big News
- Overseas retailers opening .com.au shops and offering discounted shipping to market to Australians
- Saks, Macy’s Bloomingdales – many big brands
- “Australia is a very modern economy, but there’s been a lack of competition in e-commerce…. There’s definitely a market space that foreign retailers can get into.”
- DHL sending two dedicated 777 flights per week to Sydney for one group of stores.
Australians spent $14 billion online this year through June, according to Commbank. 30% more than the year earlier. That’s just 5.4% of total retail bill, but still more than combined 5 largest street stores (JB Hifi, Harvey Norman, Myer, David Jones, and Super Retail Group).
David Jones in Australia have operated on a 5.6% margin over the last 20 years. Comparable US store Saks has done 3.1% margin over same period.
Less Profit For Aussie Stores On The Way?
(Translated: Aussie stores need to expect less profit margins to compete with overseas retailers).
Possible opportunities to trim the fat – streamline business processes, cut overhead. Websites are perfect tool for this.
Commbank is estimating that $4 out of every $10 spent online in Australia goes overseas.
(I think this conflicts with earlier numbers, which said most online shopping is done locally in Australia)
Myer chief exec Bernie Brooks says that in 3 years, the “Top 10” sites in Australia will be dominated by existing retailers. I read this as: There’s room for newcomers to set up shops now, but eventually, they’ll be beaten out by brand loyalty to existing stores. (Not convinced on this, but they’ll certainly have a decent customer base)
Still a huge price difference between Australia and Overseas. Can often find a product for 1/3 the price, then pay 1/3 that amount in shipping, so still save 30% instead of buying locally.
(Earlier I mentioned a margin of 5.6% vs 3.1% – wonder how that factors in here)
There’s another mention of the GST cap being lowered to $100. I still wonder how the hell this would be collected. It’ll never be collected by overseas retailers – they don’t want to handle that. WAY too much hassle. Better to simply stop shipping to Australia, which wouldn’t be so bad for the Retail Association whatever.
Alternative: have Customs collect the tax before releasing the package – although reports show it would cost more than the tax to collect it. Plus this would surely add huge delays to delivery times.
Takeaways from this article
- It’s still a good time to open an online shop targeting Australians. Growth is still massive, and the marketplace is going to be a lot more crowded in a few years.
- Australian online retailers need to be prepared to either slash prices, or stop competing on price.
- Brick’n’Mortar stores are still getting the lion’s share of sales, but most media is focused on online stores. Wonder if that can be useful in any way?
Also: Exchange rates being what they are, we can shop cheaply from overseas sites. But if the exchange rate comes back down to 70c or whatever, that’ll change. People will still be shopping, but they’ll be shopping online locally. So established stores will have a huge leg-up.
Also: Australia Post really seems to be lifting their game lately with shipping. Automated email updates to customer, better parcel tracking, etc.