Unwrapping A/NZ’s changing ecommerce landscape

Published on the 20/03/2024 | Written by Heather Wright

Unwrapping A/NZ's changing ecommerce landscape

Online’s new normal…

Rough economic conditions have seen shoppers tightening their belts when it comes to ecommerce – some more so than others – and ecommerce providers are being warned to prepare for a continuing bumpy ride in the year ahead.

The annual ecommerce figures on both sides of the Tasman are being hailed as strong results, despite the declines.

“Consumers are changing what, where and how they shop online.”

Last year marked the first full year since 2019 where physical retail wasn’t restricted by Covid. That return to full competition for the dollar from physical retailers, along with hospitality and travel, made 2023 more competitive for online retailers. Throw in the increasing economic pressures, and it’s little wonder ecommerce spend took a small hit.

In New Zealand, where online shopping makes up just 10 percent of retail spend (well below Australia’s 17 percent) New Zealand Post’s Annual eCommerce Review shows online spend hit NZ$5.8 billion for the year, four percent down on 2022.

Australia Post’s 2024 Inside Australian Online Shopping Report shows a 1.2 percent decrease in online spend, which dropped AU$63.6 billion. Eighty-two percent of all Australian households shopped online during the year.

Paul Graham, Australia Post group chief executive officer and managing director, says the increasing number of households shopping online confirms that behaviours established during the pandemic are here to stay.

“Consumers are changing what, where and how they shop online, leading to a big shift in the Australian retail market,” Australia Post says.

Retailer too, are changing in the face of increasing financial pressures. In order to tackle rising supply chain costs, 43 percent of Australian retailers upped their free shipping thresholds last year, with some implementing return fees – which Australia Post dubbed a ‘bold move to shift the cost of returns to the consumer’.

Final sale items also gained traction, with no returns policies – that trend also saw the rise of ‘recommerce’ as more retailers launched preloved marketplaces to encourage the sale of secondhand or unwanted wares.

So just how did the figures pan out for the year?

In Australia, while the number of online purchases increased, average basket sizes decreased to $98.

That’s a trend also seen in New Zealand, where basket size dropped nine percent to $103.

Both countries had seen a ‘correction’ in 2022, following the Covid-inspired hyper growth of 2020 onwards. Now, both are seeing the impact of cost-of-living pressures driving more cautious spend.

That’s also highlighted a clear generational gap in spending habits in Australia, where millennials may have spent more than any other generation, at $22.1 billion, but, just like most other generations, recorded smaller average basket sizes. The one generation bucking the trend towards smaller basket sizes? Baby boomers. They spent $1 billion more than they did last year, with average shops increasing seven percent to $109 – a figure only beaten by Gen Xers, on $110 (down five percent year on year).

Claire Madden, social researcher and generational expert, says growing confidence is being seen in older generations spending more in each transaction. While Gen Z don’t have the same earning capacity, they’re active, savvy, online shoppers who have a focus on lifestyle spend and search for good value.

Consumers persistently pursued discounts on both sides of the Tasman, with major sales events including Black Friday and Cyber Monday seeing significant growth in sales volumes (up 88 percent and 70 percent respectively in Australia since 2019).

Extended sales periods and increased promotions saw retailers reaping the returns.

NZ Post notes an increased number of retailers are treating the November/December period as an extended sales period, rather than a series of individual sales events. Black Friday sales largely started in early November and carried through to early December when they were relabelled as Christmas sales, it says.

“This was particularly noticeable this year, with many sales carrying through into January as ‘New Year’s’ or ‘Summer’ sales.”

Interestingly, in New Zealand 74 percent of online spend went to local businesses.

When it comes to where we’re spending money online, Aussies spent the most on home and garden ($16 billion), a category which traditionally has more expensive items like furniture.

The two categories showing growth in Australia were variety stores ($15.8 billion, with YoY growth of 9.1 percent) and food and liquor ($13.2 billion, with YoY growth of 2.4 percent), showing consumers aren’t afraid to shop around for a better deal as cost-of-living pressures continue to take effect.

In New Zealand the two largest online sectors of department, variety and miscellaneous (up three percent) and clothing and footwear (up one percent) were the only sectors where online spending grew year on year. In both cases, growth was driven by increased transactions, partially offset by a smaller average basket size.

Declines in instore spending for clothing and footwear suggest online growth has been supported by shoppers switching online to find better value.

NZ Post is warning that the first half of this year will likely see more belt tightening with commentators forecasting household spend to remain weak and consumer confidence low. Homeowners coming off mortgages they locked in three to five years ago is likely to make the economic bite even more of a reality for many Kiwis. 

It’s urging businesses to up their game when it comes to delivering perceived value through bundling products together, offering discounts for bulk, loyalty rewards, more payment offerings and greater value through improved delivery experiences.

But the back half of 2024 offers more promise, NZ Post says, with hopes of increased government spending and tax cuts to provide positive change, or at least confidence.

“Retailers should start getting ready for better times by consistently reinforcing their key points of difference and the reasons, beyond price, why shoppers should choose them over the competitors.”

The low penetration of online spend is also cause for optimism, with NZ Post noting there is still plenty of room to grow online.

Australia Post too, is optimistic, saying it expects significant growth in online retail by 2030.

The convenience and efficiency of eCommerce has fundamentally changed shopping habits, Paul Zahra, CEO of the Australian Retailers Association, says.

Shopping online is easier than it ever has been, with many retailers now offering next-day delivery and simple returns processes.

“We expect the innovation to continue in the years ahead, with technologies like augmented reality and artificial intelligence playing a pivotal role in enhancing the online shopping experience.”

A recent ARA survey of SMBs found even smaller retailers are planning to invest in AI across marketing, stock management, logistics and operations and reaching or engaging customers, this year.

“AI and augmented reality are no longer the future; they are the now. Personalised shopping experiences, predictive analytics and chatbots will become standard in eCommerce,” Zahra says.

“The key takeaway is that retailers must continue to invest in an omnichannel experience. It’s the holy grail of modern-day retail. Customers expect a seamless, integrated experience across all channels, from social media to mobile apps to physical stores.”

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