Online commerce is now set to reach $31.7 billion this year with domestic retail accounting for 70 per cent of online spending, according to PayPal Australia’s bi-annual report Secure Insight: The Future of Shopping.

Australia’s online commerce has slowed down slightly to a growth rate of 7 per cent year-on-year, which will eventually see it hit the forecasted figure of $34.8 billion by 2013, up from a figure of $29.7 billion for 2011.

This is a reflection of more accurate forecasting models applied to the $3.2 billion strong grocery sector, and not an indication of a slowing market. Excluding groceries and travel, Australian eCommerce spend is growing at a rate of 12.4 percent per annum.

Elena Wise, acting managing director and director of merchants services, PayPal Australia, compared the changing retail industry to what was similarly faced by the media industry a few years ago.

“Rather than print versus online for how it was for the media, it’s bricks versus clicks for retailers,” she said.

“Retailers know they need to change to remain relevant. There’s no more complaining but it’s about getting focus. The retail mix has changed and they need to look at their portfolio which involves multi-channelling.

“Getting online is about enjoying a retail growth.”

The strength of domestic online retail in Australia is underpinned by the top two product categories – travel and. Travel will remain the most popular category for Australians purchasing online, forecast to account for 28 per cent of all online spending by 2013.

The second largest category is groceries – including pantry, household items, alcohol and other consumable goods such as pet supplies. Whilst it remains a high spend category, an adjusted forecast in volume over the coming year will see it overtaken by appliances and home improvement, closely followed by computer-related purchases.

Although groceries and travel combine make just over a third of Australian online retail, the strongest growth in Australian online spending year-on-year is fashion –apparel, accessories and footwear – with an expected growth of 24 per cent between 2011 and 2012

While, Australian online retail is driven predominantly by local purchases, the strength of the Australian dollar is allowing consumers to take advantage of shopping with international retailers online. It is also making the Australian online market increasingly attractive to overseas retailers who have identified that Australian consumer demand currently outstrips local market supply.

Andrew Rechtman, PayPal Australia director of product, strategy and new business, said everything old is new again.

“Don’t be sceptical because consumers are ready. It’s already in the life blood of what we’re already doing. It’s just that online has gone from the back office of a store to the board rooms,” he said.