Retailers adrift as buyers shop in cyberspace

Online shopping is costing thousands of jobs.

Afp August 01, 2011


She wouldn’t call it an addiction, but Australian Emily Spencer has an online shopping habit and auction house eBay was her “gateway drug”.

Spencer, 27, made her first big online purchase in 2004 - spending Aus$140 on two bicycles “in varying states of decay” for her partner to do up. It was a revelation how good it felt to score a bargain.

“eBay was my online equivalent of a gateway drug,” said the Sydney graphic designer, who now shops almost exclusively on the Internet, even bulk-ordering rice crackers.

“I loathe shopping in the real world, particularly clothes shopping. I don’t have to worry about evading pesky shop assistants when I shop online.”

In the past two months, Spencer has spent Aus$640 ($690) online, more than the average Australian spends over the internet in a year, buying a printer, sunglasses, a water bottle, shoes, headphones and a shoulder bag.

For Australia’s embattled retail sector it’s a worrying trend: online shopping surged 13 per cent in 2010 to Aus$13.6 billion and almost half the sales went to offshore vendors, as buyers took advantage of the local dollar’s meteoric rise against the greenback.

Though still a small share of national retail sales - about 5.5 per cent - online trade is booming, according to a study published this week by PricewaterhouseCoopers which estimates sales will reach Aus$21.7 billion by 2015.

“In the last couple of years since the global financial crisis, frugality’s been the new black and people are looking for value,” said study author Stuart Harker.

Leaps in technology were the main driver of online sales, with more than 50 per `cent of Australians owning a smartphone and one-third shopping via a mobile or tablet device “anywhere at any time and buying anything they want”, he said.

Cyber advances had also meant more secure payment systems and streamlined supply chains which meant products would arrive from top markets the US, Britain and Asia within a week, giving consumers unprecedented confidence.

Australia’s largest department store Myer estimates Australians make online purchases worth up to Aus$24 billion annually, and it hopes to tap the lucrative market with the launch of its own foreign website, operating out of Hong Kong, later this year.

But the downside is the Internet boom is hitting “bricks and mortar” stores, with growth in Australian retail spending dropping to levels last seen during the global downturn and no real consumption growth in the past three years.

Top-end department store David Jones rattled the market in July with a drastic profit downgrade, warning of a major slump in sales, and central bank governor Glenn Stevens has cautioned the days of rampant consumption are over.

At least 10 major retail chains have been placed in receivership in the past two years and others, forced to slash prices, have closed stores, while the National Retail Association estimates online shopping has cost 2,000 jobs.

With consumer sentiment sagging 8.3 per cent in July and high inflation raising the prospect of an interest rate hike, cautious Australians are now saving about 11 percent of their income.

“They’re not buying more televisions, they’re buying other things,” said senior ANZ economist Julie Toth, pointing to entertainment, health and travel.

Spencer said it was “only a matter of time” before the old ways of shopping were a novelty and online purchases were king, with an infinitely wider range, lower costs and the convenience and comfort of never having to leave the house.

“What I could spend half a day or more looking for in shops I could find in less than 10 minutes online,” she said.

Published in The Express Tribune, August 1st, 2011.

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