New research from PwC and Frost & Sullivan indicates that as online shopping reaches record levels it is forcing retailers to rethink their strategy.
Record shows 53 per cent of Australian consumers aged over 15 are now buying online with expectations online spend will grow to $26.9 billion 2016. The report found that in 201 2 online shopping in Australia will increase 17.9 per cent to $16 billion and will grow at a compound rate of 14.1 per cent.
Offshore online shopping has increased by 20 per cent in the last year to $7.2 billion, and represents 45 per cent of Australia's total online shopping spend.
While these numbers differ slightly from competitions.com.au’s infographic, both still point to the same idea that e-commerce sales will continue to grow.
According to Stuart Harker, PwC global retail & consumer advisory leader, online shopping is mainstream and Australian retailers are under significant pressure to reset their business models in response to the new retail environment.
"Like retailers in the US and UK are doing, Australian retailers must fundamentally rethink their strategy, particularly in relation to their real estate and store portfolio. The days of growing by simply opening more stores are long gone," he said.
The study found the main motivation for this shift is 55 per cent of consumers are finding that prices are lower online, up from 50 per cent last year.
"With online shopping becoming increasingly all about price, and less about convenience and range, retailers are under greater pressure than ever to give consumers a compelling reason to shop with them," Harker said.
The report also found growth in online shopping is being driven by evolving digital tools and increasingly sophisticated and connected consumers, who have high expectations of the retail experience.
John Riccio, PwC national digital leader, said retail businesses now need to be structured so they can adapt to the evolving needs of increasingly tech savvy consumers, what we call a ‘consumer adaptive approach'.
"Adapting to the new retail environment means firstly re-evaluating the role and size of the store. These days for many retailers a number one ranking on Google is as important as a flagship store on Melbourne's Bourke Street or Sydney's Pitt Street Mall.
"The store will stay but it will continue to change, with retailers having to consider reducing store networks, cutting the size of in-store displays and subletting to other businesses, and in some cases converting under-performing stores into fulfilment centres for online channels.
"Retailers must also invest in better understanding the purchasing intent of their customers. This means recognising the role of price, online service and personalising offers based on an individual customer's interests and broader ecosystem rather than purely buying history.
"Retailers need to be integrated across all their channels. No longer is the store the physical door that customers enter and leave from. Now your door is just as likely to be an e-commerce site, a mobile app, an interactive billboard, through a friend's Facebook page or a video on YouTube.
"The retail industry is at a critical juncture and retail businesses that continue to operate in a traditional retail model run the risk of disruption and will not take full advantage of the opportunity that exists in this rapidly changing digital era," Riccio said.
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