Online retail to reach $13.6 billion in 2011, but expert says it’s not too late for major players

It is not too late for larger retailers to expand their online presence and catch up to those smaller companies that have beaten them to the punch in the online retailing world, one expert has predicted.

The prediction comes as a new report from PricewaterhouseCoopers predicts online shopping will grow 13% this year to be worth $13.6 billion by the end of 2011, with 44% of total online sales being spent on offshore shops.

The issue is especially prudent after the Premier Investments announced yesterday it would close 50 stores, combating falling consumer sentiment and a growing number of customers that are saving instead of spending.

“There are examples of companies that have transformed themselves quickly that have made herculean efforts in online retailing, and have gone from ‘go’ to ‘whoa’. It’s not too late for any company,” says Forrester Research analyst Steven Noble.

Many large retailers including David Jones and Myer have said they are continuing to invest in online operations, with the former having fully upgraded and launched a new online portal within the last 12 months.

Noble says the problem is that internet retailing requires a quick response. When online SMEs feel the winds are changing with regard to customer wants and needs, they are able to react, while Noble says larger organisations have a harder time in doing so.

“It’s not too late for larger companies to commit itself to a new future in which it is nimble, and adjusting to market conditions and focusing on customer needs. But I also don’t think the simple step of setting up an online store in and of itself will fix things; it’s an important step but not the only one.”

Noble says all retailers, both small and large, will need to prepare for an environment in which shopping is not seen as a dedicated entertainment activity.

“Younger shoppers are likely to think that shopping isn’t necessarily a form of entertainment as others did in the 1980s or 1990s.”

Instead, shopping is seen of more of a duty that is increasingly heading online. According to the PWC report, shoppers have said they will increase or at least maintaining their current level of online expenditure.

One third of survey respondents also said they will be using a smartphone or tablet to buy products online.

“The tablet device has been one of the key drivers of online retail sales in the last 12 months and will continue to drive sales in the next year as new products are introduced into the market,” PwC global retail and consumer advisory leader Stuart Harker said in a statement.

Each Australian will spend more than $600 online in 2011, up from $536 in 2010, the survey reveals.

But this also means that Australians aren’t necessarily concerned with the current debate over the GST threshold. Harker points to findings which show that while price and product range are key drivers of growth for shopping online, less than 1% said they did so to avoid GST.

“The fact Australians can securely purchase a product from halfway across the world, and have it delivered to their doorstep quickly and for a very competitive price, highlights the challenges that overseas online shopping presents to local retailers.”

PwC national digital leader Jon Riccio says lower prices, convenience and product ranges are pushing more customers online and as a result, Australian retailers are “now competing on the global stage”.

“The general lack of an online presence by the large retail chains in Australia over the last decade has been a significant factor for a relatively poor uptake of online shopping in Australia and New Zealand to date.”

But the survey shows 65% of purchases are started on the internet, highlighting the importance of having a multi-channel operation.

Noble says retailers need to start thinking about the consumer instead of the platform on which they shop.

“Australian retailers have been the slowest to embrace new retail practices, and they are going to have to move quickly to position themselves for the next era.”

That is going to be centred around the customer, rather than specific channels or infrastructure assets.”