Online start-ups face challenge of delivery expectations

Meeting delivery expectations will be the main challenge for online retailers in the coming years, according to new research.

Online payment system provider PayPal, via commissioned market research company Forrester Research, found that Australians are projected to spend $26.86 billion online this year, up from $24.02 billion in 2009.

PayPal commissioned a second market research firm, The Leading Edge, to conduct a survey of 1,500 online shoppers.

It revealed 23% of respondents shop only from Australian websites, while one third of those surveyed believe it is safer to shop domestically.

PayPal managing director Frerk-Malte Feller says if local businesses can master their online strategies, they can compete with international rivals for the growing online dollar.

“Our research paints a positive picture for domestic retailers,” he says.

According to Feller, delivery is the main challenge for online retailers, but he predicts many businesses will be investing in distribution networks in the coming years in order to capitalise on the growing online market.

Forrester Research senior analyst Steven Noble says the delivery expectations of online shoppers shouldn’t prove more challenging for start-ups.

“A start-up would have an advantage in the sense they have fewer stock-keeping units so they get the opportunity to learn as they grow,” Noble says.

“The disadvantage is that they’ve not yet reaped the advantages of emerging complex supply chains in the way that many established [online] retailers have.”

According to Forrester Research, travel is the most popular online shopping segment at $6.5 billion in 2010, followed by groceries at $5 billion, and home appliances at $2.7 billion.

“I don’t see any reason why any of those categories cannot be disrupted by a new entrant if they’ve got something new or different to offer,” Noble says.

“I would not describe any category as being safe from future disruption or future innovation from start-ups.”

“Ecommerce has stretched into every branch of retail… You can buy art online, you can buy hardware online, you can buy furniture online, etc.”

“Obviously the larger, more unusually-shaped, more fragile the product, the more complicated it is to deliver and the most costly the delivery process is.”