Insight

Shift Happens: Australian consumers embrace online retail

Luke Ritchie Luke Ritchie

The shift to shopping online was already underway before COVID-19 struck.

But the pandemic has unquestionably increased the pace of retail digital transformation.

Whilst the overall retail industry is on its knees grappling with the impact of the coronavirus, some welcome bright spots have emerged. Retailers that have embraced online have performed startlingly well, even setting new records. Pureplay online retailer Kogan.com achieved its highest sales ever in FY2020, up 39% on last year. Meanwhile, digital-savvy retailers JB Hifi and Baby Bunting both enjoyed double-digit headline sales growth this year, with their online sales soaring 40% as customers voted with their smartphones.

More than 5.2 million Australians shopped online in April, according to Australia Post’s 2020 eCommerce Industry Report. Online sales now represent 11% of total retail sales, up from 7% last year. In markets like Europe and the USA, online penetration was already 15% before the pandemic hit, and have now exceeded 20%.

Supermarket giants Coles and Woolworths were so overwhelmed by online customer demand in April that they were forced to temporarily suspend operations as they scrambled to find ways to fulfil orders. Both retailers are investing hundreds of millions of dollars in automated online fulfilment centres, underlining their confidence that the online revolution is not slowing down anytime soon.

Many retailers we work with at Grant Thornton have seen online sales literally double in the past four months, and they do not expect a retreat once the pandemic subsides. During the COVID-19 restrictions, rapid rollout of free home delivery and contactless click-and-collect have given more customers confidence to shop online.

Meanwhile, traditional retailers are straining to catch up. Where a large store network was once a shining competitive advantage, it can now be noose around a retailer’s neck. There are simply too many stores for what is a shrinking number of physical shoppers. Wesfarmers has announced the closure of dozens of Target stores, with Big W and Myer to follow suit as they seek to reduce their store portfolios. Paradoxically, retailers must shrink to grow.

Large retail shopping centres will respond by further diversifying their tenancies. The shift toward more food outlets and restaurants has been stymied by COVID-19 restrictions. Rather, we should expect to see more entertainment, personal services and even childcare centres within the local Westfield in the not-too-distant future. 

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