How e-commerce is disrupting the traditional retail landscape in AustraliaAugust 18, 2021 / By
The significance of omnichannel operations for retailers has never been more important. The integration of both online-offline channels is vital for retailer success in the current environment due to changing consumption patterns. Prior to the COVID-19 pandemic, many retailers focused on investing in e-commerce as a strategic means to increase their profitability and remain competitive. It turned out to be a timely decision, as it kept a line of revenue open during lockdown restrictions. Since the COVID-19 pandemic, retailers have continued to expand their online platforms, including IT infrastructure, processes, customer analytics and supply chains.
Figure 1: Australian retail sales (online & offline)
Source: NAB Online Retail Sales Index, ABS, JLL Research
Lockdown restrictions have shifted consumer spending habits to online channels. In the period May 2020 – to 2021, Australians spent AUD 48.1 billion on online retail, accounting for around 13.2% of the total retail sales (NAB). As shown on the chart, online sales are becoming an increasingly significant source of retail spending in Australia, especially since April 2020. Globally, the online share of total retail sales increased from 16-19% in 2019-2020, according to a report issued in May 2021 by United Nations Conference on Trade and Development (UNCTAD).
Regulatory uncertainties arising from lockdown restrictions and competitive pressures have resulted in retailers downsizing bricks-and-mortar stores and migrating more sales online. The vacancy rates across CBD, regional and sub-regional sub-sectors have significantly increased since 1H20 in Australia. While the downsizing plans were in place before the pandemic, lockdowns and the associated impact on cash flow has exacerbated the trend for some retailers.
This observation seems to be consistent globally as many global fashion retailers announced store rationalisation plans in 2020. Inditex, one of the world’s largest clothing retailers and the parent company of Zara, reported a 28% y-o-y decrease in its net sales in 2020 and announced plans to close as many as 1,200 stores worldwide. During this period. Similarly, H&M announced its plans to close 250 stores around the world. Within Australia, H&M closed four stores in 2021 while shifting consumers towards the online store, which first launched in October 2020 in Australia.
Whilst e-commerce is becoming a more significant part of consumer shopping behaviour, brick-and-mortar stores remain integral for delivering the ‘retail experience’. Although online sale growth was rapid during 2020, in-store sales were 5.6% higher than they were pre-pandemic (as of May-2021) suggesting physical retail can rebound quickly from lockdowns because it allows consumers to have a sensory experience as well as social interaction. Furthermore, according to JLL’s ‘Importance of brick and mortar stores for online sales’, a study found that 73% of consumers now use multiple shopping channels. In the future, the integration between offline and online channels will be crucial in the changing retail landscape.
More on 'Retail' in 'Australia'
- Retail spending outlook in AustraliaJune 15, 2023
- Brisbane Olympics offers a golden retail opportunityFebruary 14, 2023
- The changing role of supermarkets in AustraliaJanuary 26, 2023
- South Australia’s Rundle Mall attracts global retailersSeptember 2, 2022
- Experiential retail evolving in AustraliaMarch 8, 2022