Overseas shoppers to inject $16 billion into Australian online retail by 2018, new research reveals

Businesses not in the online retail sphere will have to move fast if they want a share of a predicted $16 billion spend by international shoppers by 2018, according to new research.

The new study, released yesterday by PayPal and conducted by Nielsen, ranked Australia as one of the world’s six key shopping destinations for cross-border shopping.

The study samples the views of more than 6000 online consumers aged 18 and above across six countries. The respondents have all made purchases on international shopping websites in the previous year, with the research estimating 94 million cross-border shoppers will spend $105 billion online this year.

The study predicts cross-border online shopping will contribute $5 billion to the Australian economy this year, with shoppers in China, the United States and the United Kingdom most interested in buying our products.

Of the six major international destinations surveyed, Chinese shoppers will spend $2.3 billion on Australian products in 2013, US shoppers will buy $2.1 billion of goods and the UK will spend $486 million on Australian good online.

In terms of year-on-year growth in Australian online retail exports, Thailand is the fastest growing market at a rate of 105%, followed by Russia at 67% and Israel at 55%.

In a statement, PayPal president David Marcus says the increasing prominence of online shopping is a “massive opportunity” for all retailers.

“Cross-border trade is nothing new. Our local stores are filled with goods from around the world. What is new is how easy it has now become for consumers to shop online directly from merchants around the world and the massive opportunity that represents.

“The emergence of these ‘modern spice routes’ is great news for businesses the world over. Our message to merchants is if you are looking for new ways to grow your sales, especially in an economic downturn, start selling directly to 94 million cross-border shoppers in these six markets and own a piece of this $105 billion market,” he says.

Many Australian online retailers engage in heavy discounting on goods in an attempt to compete with overseas competitors, but the research indicates this isn’t the most efficient way to maximise sales.

The survey found only 10% of overseas shopping spend comes from people shopping for a bargain online, despite this type of shopper accounting for a quarter of all online consumers.

Retailers offering a unique product were in luck, as people who shop for unique items and look for new places to shop online account for 30% of total spend, while only accounting for 13% of the online shopping population.

The study also finds online retailers must address key concerns for shoppers, including online security.

Nine-out-of-10 consumers place great importance on having buyer protection for their overseas purchases and seven-out-of-10 consumers cited identity theft and fraud as the top reason for not making a cross-border purchase.

While online retail spend is growing, Retail Doctor Group chief executive Brian Walker told SmartCompany it still accounts for only a small percentage of overall retail spending.

“Retailers need to understand and embrace cross-channel shopping. They need to have an online site and use it for research and have a physical store environment where the majority of business will be done, and that store needs to be exceptional.

“Eighteen of the top 20 online retailers in the US have physical stores. You can’t run away with the notion that it’s all about online shopping, but you have to give credence to its value,” he says.

Walker recommends creating a unique product to generate value online for the customer, not focusing on price discounting, and ensuring quality customer service.

Advantage Advisors partner and retail expert David Gordon told SmartCompany going online gives retailers opportunities to research overseas markets.

“The barriers to entry in terms of establishing a market overseas are diminishing because of the web. The added incentive is, once a bricks-and-mortar retailer creates a ‘preach head’ in an overseas territory via the web, it can lead to a bricks-and-mortar extension into that territory,” he says.

In Australia, many popular overseas brands have started to establish a bricks-and-mortar presence as well, such as Top Shop and Zara, with H&M arriving in 2014.

Gordon says one of the greatest challenges for Australian retailers going online is responding to the different seasons.

“How the retailers manage the different seasonal complexities is interesting. It comes down to whether they specifically ensure they have enough stock for overseas customers from the previous season, or whether they position it so they’re selling next seasons stock earlier to overseas,” he says.

“This is something each retailer will need to work through and they need to ensure they understand the range and they’ve got the necessary stock.”

Gordon says brands will also need to learn how to cater for the different sizes and shapes of people around the world.

“One thing a number of Australian retailers have failed to do is recognise the sizing in some countries overseas is totally different. American body-shapes are larger and Asian shapes are smaller, their sizing dimensions need to change between countries,” he says.