Online sales now 7% of total retail spending, growing at over 10% a year: Report

Online retail spending will explode from $16.9 billion in 2009 to $33.3 billion in 2015, with digital sales now accounting for 7% of all retail spending, a new report from Forrester Research claims.

The report also shows that while computer equipment is the most popular product bought online, more money is being pumped into large appliances, which have traditionally been thought of as having a limited online market.

Forrester Research senior analyst Steven Noble, who authored the report, says the overall penetration of internet sales is now at a time where businesses simply cannot afford to not sell online.

“I would imagine right now there are many businesses that are addressing their tardiness in regards to online,” he says.

The Forrester Research Online Retail Forecast, 2010 To 2015, pins online sales in 2009 at $16.9 billion rising to $33.3 billion in 2015.

It also states that online sales in 2010 will be 14.2% greater than in 2009, and account for 7% of retail sales overall, mostly due to the big brands entering the market.

“Likewise, growth will exceed 10% per annum through 2015, as merchants and consumers increase their embrace of online retail,” the report states.

Noble admits the forecasts are bullish, but points out there are several factors indicating sales will only increase over the next four years.

“We have 2010 as being the highest rate of growth in online sales that we’ve witnessed. If you look at the annual rates of growth, we’re going to see some extraordinary growth. It’s giving everyone in business reason to pause.”

“There are growth trends to keep in mind. The increase in consumer willingness to buy online, and the number of businesses willing to sell online, that’s just constantly growing. You’re also seeing this flow-on effect as more businesses go online, so competitors go online as well.”

The report states the proportion of Australian internet users who shop online will grow at 1% per year until 2015, and that at the same time, the number of Australian adults who are internet users is growing at 1-2% per annum.

Many of these are buying low-priced items, with 32% of adults saying they bought books, 23% saying they used the internet to order consumer electronics and 30% bought goods in the clothing and accessories category.

The report also points out that with the online retail stores of giants like Westfield, David Jones and Big W opening, their competitors will also jump online – Target is set to launch its online store in the first quarter of this year.

The other major aspect of growth is the expansion of the digital economy. Forrester says internet penetration rates will rise from 77% in 2009 to 83% in 2015.

“This is the other big trend here. Internet is becoming much more available to everyone, and as the Government increase potential access through the NBN, that will increase as well.”

“That’s not to say people can’t buy online now, but consumers will be much more comfortable and will buy things, such as digital content like movies, that they wouldn’t have necessarily thought of doing before.”

Indeed, the Forrester report says that appliances come in as the second most popular product bought online, based on value, although fewer Australians actually buy them.

“While fewer Australians buy appliances online than purchase items in some other categories, the high value of some goods that they order in this segment boosts its overall value. “

“For example, home renovators have been known to buy the makings of an entire new kitchen in one order online, including a fridge, an oven, a stove top, a dishwasher and a range hood.”

As a result of these trends, Noble also warns businesses to catch up, and quick – the report says competition will become aggressive in the next five years as average basket sizes grow.

“As new entrants seek their slice of Australia’s growing online retail pie, competition will become more aggressive, and it will become harder than ever to continue to reap these returns.”

“Retailers will have no option but to adopt best practices that so far have eluded many in Australia, including best practices in the use of analytics.”

Noble also says customers will expect more from websites, and won’t tolerate shoddy design or a lack of customer service.

“You have to think of these new opportunities that are becoming available,” he says. “People won’t necessarily think about buying digital content online, it will become more commonplace to them. Consumers are buying in large quantities, and businesses are reaping the rewards.”

“Now is the time for businesses to adapt to the trend.”