Online sales growth continues to slow amid “saturation” warnings

Online retail growth in Australia continued its slowdown in the 12 months to May 2012, expanding by 14% year-on-year, according to NAB’s most recent Online Retail Sales Index.

This level of growth is down on the 19% and 15% year-on-year levels seen in March and April 2012 respectively.

In May last year, the sector was growing considerably faster, at 41% year-on-year.

The index found that for the 12 months ending May 2012, Australia’s total online spending was around $11.3 billion – equivalent to 5.2% of traditional bricks and mortar retail spending (excluding cafes, restaurants and takeaway food) for the year ending April 2012.

But growth in online spending is still outstripping traditional retail, which grew only 0.2% year-on-year in April.

NAB economist Gerard Burg says it’s too early to draw firm conclusions about the reasons for the slowing.

“It may well be linked to increasingly cautious consumers, or the fact that jobs are softening, but there’s insufficient data at this point to indicate the extent to which those factors may have contributed,” he says.

“It’s important to note that these figures aren’t seasonally adjusted, and that we’ve only been running the online sales index since early 2010.”

But Burg says a “saturation point” will be reached, where online retail will have to plateau, but he says the market is currently too volatile to be able to say whether or not we’re nearing that point.

Retail Doctor Group managing director Brian Walker agrees that online retail will eventually reach a physical limit, but that there’s currently “no good opinion” on how close that limit is.

“A saturation point will arise, if only because online retail will never be able to deliver that physical, tactile, human experience, and the immediate reward that over-the-counter retail offers,” Walker says.

Walker’s colleague, Katharina Kuehn, the strategic branding and consumer insights director for Retail Doctor Group, says online purchasing satisfies some consumer needs but not others.

“We’ve done research which shows that 53% of consumers would prefer to see, feel and touch a product before buying,” she says.