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April 6, 2017

Australia lags other major economies for online sales – but that is changing, and retail property will change with it.

The NAB Online Retail Sales Index shows Australian total online retail spending reached AU$21.7 billion in the year to December 2016, representing close to 7.1 percent of total retail sales (of AU$303 billion). However, according to eMarketer, Australia is yet to catch up to some other major economies – online represents approximately 20 percent of retail sales in China, 16 percent in the United Kingdom and 8 percent in the United States.

By the definitions set by the Centre for Retail Research, Australia would be classified as having “mid-range maturity” for the proportion of retail sales that occur online. ‘Mature’ is considered to be 9.5 percent and above, while ‘immature’ is below 6.5 percent.

Currency exchange rates may have had a significant impact in slowing the enthusiasm of Australians for online shopping in recent years according to JLL’s latest Australian Shopping Centre Investment Review & Outlook report which examines, amongst other factors, online purchasing, and how Australia compares to other countries.

“Growth in online retail spending in Australia gained significant momentum in 2011, peaking at approximately 40 percent year-on-year, but has gradually slowed since that time,” says Peter Turner, JLL’s Head of Retail in New South Wales. “The appreciation of the Australian dollar between 2009 and 2012 was one of the key reasons for the rapid growth in online retail spending in 2011.”

“When the Australian dollar reached parity with its U.S. counterpart, it firmly highlighted the wide price differential for products between Australia and the United States, even despite the improvement in relative purchasing power at that time.”

Sales in value terms have doubled since 2011, from AU$10.5 billion to AU$21.7 billion as at December 2016. However, with the Aussie dollar trading at a discount to the U.S. Dollar since May 2013, online retail sales growth has slowed, and at December 2016 was 10.4 percent y-o-y.

Turner argues that Australian online retailing will accelerate in time, and bricks-and-mortar retailing will continue to evolve to accommodate the changing environment.

“Online retail spending evolved from PC’s to mobiles, then became integrated with social media apps and is now enabled by speech recognition,” Turner says.

“Customers can now order products directly through voice-activated devices, so retailers must be critically aware of new technologies and changing selling/purchasing methods in order to capture sales.”

“Most national retailers have embraced the need to ensure a strong online presence for their products, and have appropriate distribution of their products for those who purchase online, as well as depth of stock and range.”

“International brands who have recently come to Australia – such as H&M, Zara, Topshop / Topman, Forever21 and Uniqlo – have made the fashion sector highly competitive, both in-store and online.”
Just as the retail sector has evolved to embrace online shopping, bricks-and-mortar shopping centres will also evolve in order to continue luring shoppers.

“There is a shift toward casual dining, service retailers and place-making style tenancy mixes to give reason for consumers to utilise local centres, not only as shopping destinations but entertainment hubs and precincts,” Turner says, adding that ‘click-and-collect’ and parcel pick-up options are more ways retailers are keeping their physical stores relevant.

“Consumers will still always have a need to touch, smell and experience products – it may simply be in a different store experience or environment.”

As technology and electronic media advance even further into ways of targeting consumer habits these, too, will be absorbed into the bricks-and-mortar retail experience.

Peter Turner
Head of Retail in New South Wales. JLL

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