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A$12 Billion Australian Consumer eCommerce Market Underdeveloped and Lags US and UK by Three Years - Consumer domestic online spending accounts for only 3% of total retail sales
A$12 Billion Australian Consumer eCommerce Market Underdeveloped and Lags US and UK by Three Years


NewswireToday - /newswire/ - Sydney, Australia, 2010/07/20 - Consumer domestic online spending accounts for only 3% of total retail sales.

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Australia's consumer eCommerce market is underdeveloped, lagging both the US and UK markets by approximately three years according to the latest eCommerce analysis issued by consulting company, Frost & Sullivan. Online retail consumer spending in Australia in 2010 is expected to account for approximately five per cent of total retail sales, however if spending on overseas sites is excluded, this drops to around three per cent. In contrast, online as a percentage of total retail spend (domestic only) is over five per cent in both the US and UK.

The report, Australian eCommerce Market 2010, analyses consumer online purchasing of tangible products. It includes the results of a survey of more than 1,000 active online consumers to provide purchasing information relating to five product categories: electronics, computers, books and CDs/DVDs, jewellery and fashion accessories, and clothing and footwear.

Total consumer eCommerce expenditure in the 2010 calendar year, excluding online services such online ticketing and events, travel, music downloads and financial services, is forecast to reach A$12 billion. This equates to per capita expenditure of approximately A$536 per year, which is slightly behind the US and UK markets. Expenditure is predicted to show moderate growth over the next four years, rising to A$17.7 billion by 2014 with a compound annual growth rate of 10.2 per cent. While the number of local e-tailers entering the Australian market has increased significantly in the last five years, there has been no corresponding increase in the volume of local transactions. The report notes that a significant proportion of new entrants fail to succeed over the long term.

A key reason for the lag in local activity is the lack of online presence by many of the large retail chains and department stores. Despite moves by stores including Big W, JB HiFi and Dick Smith, the small number of eCommerce participants and a lack of sufficient internal support from senior management continue to inhibit progress in this area. Frost & Sullivan suggests that the Australian market needs to see the online launch of several retail chains within the next 12 to 24 months to provide the catalyst for further expansion.

Other inhibitors to the development of a local eCommerce market include the strong physical store presence in capital cities and metropolitan areas, and Australian consumers' limited acceptance of the typical online precursors - mail order and catalogue sales. Security concerns may also be affecting uptake. One in 40 of the survey respondents (2.5 per cent) indicated that their credit or debit card had been stolen in the last 12 months, suggesting that security remains a fundamental issue that needs to be addressed by the eCommerce industry.

The international retailer tactic of targeting Australian consumers by offering localized web services such as product prices and shipping in Australian dollars is paying off. It is estimated that 40 per cent of Australian online shopping expenditure is now conducted on overseas sites. eBay is the dominant online retail player, having successfully evolved from an auction site into a platform for fixed price overseas sellers. Companies such as which are building marketplaces and tools to power other retailers also pose a threat to some Australian vendors.

Consumer behaviour
Survey responses confirm that price is the key driver for shopping online (nominated by 39 per cent of respondents), followed by the convenience of shopping from home (29 per cent). The majority of consumers (58 per cent) showed no preference as to when they shopped, stating that they split their time evenly between weekends and weekdays.

Just over one-fifth of respondents (21 per cent) plan to spend more on online goods over the next 12 months compared to 16 per cent who indicate they intend to spend less. These results are in line with Frost & Sullivan's forecast for moderate growth over the next four years. The strongest growth is expected in the categories of clothing and footwear, jewellery and fashion accessories, books and CDs/DVDs.

Credit and debit cards are the most popular form of payment method, used for online purchasing by 50 per cent of respondents within the last 12 months. PayPal is the second most preferred method, used by 42 per cent of shoppers.

Most shoppers (64 per cent) will visit a search engine before making a purchasing decision and more than half (57 per cent) seek out product comparison sites, indicating that consumers are increasingly reaching out to specific sites for product research rather than just conducting a general Internet search.

Phil Harpur, Senior Research Manager, Frost & Sullivan, comments, "The number of Australian shoppers using international retail sites confirms that there is a large untapped potential for Australian retailers to develop a local online customer base. However, we are unlikely to see major growth in this sector until more of the big name retailers get online."

Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 40 offices on six continents.

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A$12 Billion Australian Consumer eCommerce Market Underdeveloped and Lags US and UK by Three Years

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