Three ways to get a slice of Australia’s $16 billion online retail market

Start-ups can carve a slice of Australia’s $16 billion retail industry, a new report suggests, by focusing their efforts on online discounts and deals, mobile apps and group buying.

The report, by technology analyst firm Telsyte, is based on a survey of more than 1,100 consumers and covered more than 350 local online retailers across 18 categories of online retail.

According to the report, Australian consumers spent $15.9 billion online in 2011, representing 64% growth over 2010, with the main driver of growth being demand for discounted offerings.

In 2011, the top digital retail categories were travel, groceries and fashion, with a combined share of 73% of the total online retail industry revenue.

Telsyte expects the online retail market to continue growing, exceeding $30 billion by 2016.

According to Telsyte senior research manager Sam Yip, technological changes and economic conditions have accelerated the concept of discount online shopping.

“It is now evident that offering discounts is the main lever to get Australians to spend,” Yip says.

Yip explains how start-ups can get in on the action:

Online discounts and deals

“What we’ve seen in the past few months is a lot of businesses have changed their homepages to reflect the discounting trend, either through a dedicated clearance page, daily deals section, factory seconds list or pre-owned goods,” Yip says.

“It’s the way of trading at the moment.”

“While we’re expecting this trend to continue, what we will see with these sites are… the different business models coming out.”

Mobile apps

“At the moment, when it comes to applications, it’s about working out whether your customer wants a mobile app or a mobile website. Once that’s up, look at what you can offer them.”

“We’re expecting mobile-only offers to increase. For example, Groupon in the US has stated they want 50% of their vouchers to be sold via a mobile device.”

“Substantiate your targets and your customers’ usage of mobile.”

“The other big one is range. Ranges can be quite large and navigation is always a factor, so prioritise your best-selling items.”

Group buying

“With regard to us versus the US, the US is approximately 18 months ahead of us. Group buying is growing very strongly here… Products will increasingly be sold on group buying services.”

“In the next 12 months, products will start to become the main category for group buying. There will also be a convergence of group buying and daily deals sites.”

“If you have a good backend and you’re able to deliver product, you’re in the best position in this market.”