While online sales have increased it only accounts for 4.9 per cent of total retail spending in Australia, according to National Australia Bank.

In the launch of the NAB Online Retail Sales Index, in association with data analytics firm Quantium, NAB said the index recorded a 29 per cent growth in online spending in 2011, valuing online sales in Australia at $10.5 billion for the year.

The index, which provides a detailed analysis of trends in online spending by Australian consumers, also found that despite perceptions, almost three-quarters of online sales were made with domestically-based retailers and the remaining 27 per cent with overseas-based online retailers.

The growth rate for international sales though is higher, growing by 40 per cent in 2011 while domestic sales grew by 25 per cent.

NAB head of consumer sectors, David Thorn, said the index provided all retailers with information and insight into consumer behaviours and trends online.

“Changing consumer preferences and spending habits are no doubt causing some structural changes in the retail sector. This index gives an insight into these changes and provides retail businesses with quality information to help them make future decisions.

“Importantly though the index shows that over 95 per cent of retail sales are still made in bricks and mortar stores so whilst online sales are growing strongly, they make up only a small part of total retail sales.

“Things to consider if retailers are making such a decision are the type of goods you sell, who buys your goods and where you are located,” he said.

The index divides online retail goods into four categories. By far the largest in terms of items purchased online was ‘Auctions, Department Stores, Fashion, Cosmetics & Variety Stores’ which accounted for almost 50 per cent of retail goods bought online in 2011.

Traditionally food has the largest share of physical retailing but online the category ‘Groceries, Liquor & Specialised Goods’ is the smallest of the four in the index, accounting for just 13 per cent of online sales in 2011, reflecting the importance of fresh and perishable items within the category.

Demographically the Index finds the bulk of online spending is concentrated among people aged in their 40s, 30s and under 30 with each group accounting for around 23 per cent of total online sales. In per capita terms though, people in their 30s and 40s make the most purchases although those under 30 have shown the strongest growth in purchasing online in the last two years.

Geographically, NSW has the largest total share of online retail spending with 35 per cent followed by Victoria and Queensland. Per capita though, the ACT and NT have the largest share. Western Australia has recorded the strongest growth in online spending over the last two years.

People in metropolitan areas made up 72 per cent of online sales in 2011 although the difference with regional residents is much smaller on a per capita basis. Growth in spending amongst regional areas has also outstripped that of metropolitan areas in the past year.