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Australia’s online shopping growth: how retailers are keeping up

With 73% of households now shopping online, developing a long-term eCommerce strategy has never been more important. Here are six leading trends to help you capture and keep your customers’ loyalty and attention, and stay ahead of the competition.

With 10% of retail sales now made online in Australia that account for $27.5 billion in eCommerce revenue, competition is intensifying1. So how can retailers capture the attention and loyalty of the 7.6 million households that are now shopping online? These six online shopping trends will help nail your eCommerce strategy.

Plan ahead for sales events

According to Australia Post’s 2019 eCommerce Industry Report, 2018 was officially the ‘year of the sale’. A five-week period between November and December accounted for almost 15% of all eCommerce transactions. Black Friday / Cyber Monday delivered Australia’s biggest week in its eCommerce history.

“Online retailers have a fear of missing out on potential sales if they don’t participate in these events. As more consumers prefer to buy on sale, the discounts continue to deepen,” says Ben Franzi, General Manager, Parcel & Express Services and Intermediaries at Australia Post.

With increased web traffic and fulfilment demands, online retailers need to plan carefully to offset the financial impact of discounting their prices.

Give shoppers the option of fast delivery

With consumers expecting faster service and savvy retailers offering quicker shipment as a point of difference, it’s no surprise that next business-day deliveries grew 31.7% year on year, according to the report.

“Retailers are definitely using speed as a marketing strategy,” says Ben. “Delighting shoppers with next-day delivery will help improve customer satisfaction and build loyalty.”

The report also suggests the demand for time and day-specific delivery is also expected to grow as more retailers offer faster delivery options. In fact, frequent shoppers would shop up to 38% more if a three-hour delivery window was available.

“We are seeing more same business-day delivery within metro areas,” says Ben, suggesting it’s a good opportunity to upsell. “You can manipulate basket size by offering free express shipping for orders over a spend threshold.”

Of course, increased speed also means increased shipping costs, which can erode your margin. “Think about the economics of the offer. Shoppers may be willing to pay a nominal amount extra for express delivery, if free delivery is standard.”

Give shoppers more control

Offer multiple delivery options, and you’ll improve your chance of check out conversion. “We’re finding that more choices for delivery lead to higher conversion rates,” notes Ben. While consumers still prefer home delivery, the report shows that Parcel Locker usage has grown by 63.8% year on year.

‘Click and Collect’ is also now offered by almost half of Australian online retailers, thus providing a more efficient shopping experience for online shoppers.

Managing return preferences well can also give retailers a strong point of difference. “A large network for return parcel drop-off makes returns easier for consumers, and our research indicates this could remove one of the biggest barriers to shopping more online,” says Ben.

Consider ‘Buy Now Pay Later’ payment options

While PayPal is still the preferred online payment method, Australia Post’s market research has found that ‘Buy Now Pay Later’ (BNPL) options like AfterPay and ZipPay grew 16.1% year on year. This accounted for 6.7% of online transactions.

“BNPL has almost full penetration in fashion, both physically and online. It appeals to millennials, who are growing in buying power,” points out Ben. “We don’t see it slowing down, and it has expanded into other categories.”

Consider your marketplace strategy

“Marketplaces are a now a dominant force in Australian eCommerce” says Ben. “While eBay traditionally had a very large market share here, we are now seeing local, large eCommerce players opening up the marketplace such as Catch and Myer.”

An equally dominant force globally, marketplaces also offer Australian retailers access to international markets including Asia and the US.

“If you decide to sell via a marketplace, be careful about the bottom line. It can erode margin if you need to compete on price, and it’s harder to differentiate on the experience.”

Think broad with your product offer

“As consumers get more used to buying fashion and beauty products online, we see retailers expanding into other categories such as homewares, appliances and furniture. According to Ben, these categories are getting traction and growing well online.

One example is JB Hi-Fi moving into appliances with JB Home. Koala’s ‘mattress in a box’ solution is another, with the online retailer increasing its revenue by 91% in FY18 and expanded into bedding, bases and sofas.

According to the report (PDF 6.3MB), homewares and appliances is now the third largest eCommerce category with 22.2% share of online purchases.

“There is also a trend in meal kit delivery, such as Hello Fresh and Marley Spoon,” says Ben, noting that time-poor consumers increasingly prefer the convenience of specialty food delivery.

As with any new opportunities for growth, it’s important to consider the impact on your bottom line. “Many retailers are racing to keep up with customer expectations as well as other retailers. Know your business metrics, know your customer, and know what you need to offer to compete,” advises Ben.

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