COVID-19 restrictions accelerate Australia's ecommerce growth
There is plenty of speculation as to what post-pandemic behavioural changes will stick, and what shape the economic recovery will take in each market. One trend we expect to perpetuate in Australia, despite the impacts from job and income loss in the country, is the massive uptick in ecommerce. Ecommerce spending has seen a consistent 29% increase month over month since lockdowns began in March. The same trend has been seen across the globe to varying degrees. In the UK, online shopping as a percent of all retail reached 30.7% in April, and ecommerce orders in the US and Canada saw 129% YOY growth as of April 21st. And while much of that shopping includes groceries and household essentials, a recent survey from Australia’s largest publisher reported that 70% of Australians 18-34 are still shopping online for non-essential items, accelerating Australia’s comfort with ecommerce.
Over the past four years, Australians have been dispelling the myth that they don’t shop online. In fact, 71% of Australians have purchased something online. However while most are comfortable shopping online, it hasn’t represented a large share of retail purchases—ecommerce only accounts for 10% of total retail spend. This is what makes the 29% increase month over month so telling. In truth, Australians have a different relationship with online shopping than the rest of the world. Any Aussie can attest that there are few things more Australian than going to Bunnings, the country's leading hardware store, for a Sunday sausage sizzle (look it up!). Going in-store is more than just a transaction, it’s an experience. Which is why it’s not surprising that Amazon, the ecommerce giant, struggles in Australia with only 26% of Australians saying they would purchase from the site despite being in the market since 2017.
The recent growth in ecommerce is another example of an underlying trend accelerated by the novel coronavirus. Australia’s pre-pandemic ecommerce growth was driven by two key factors: ease of delivery and payment incentives. Unlike local retailers, Amazon and others have struggled due to the country's wide geographic distribution which has made same or next day delivery sound like talk of flying cars. Many Australians find it easier to go to brick and mortar stores than wait ages for delivery. Still, physical retailers wisely saw the value in ecommerce as a way to attract younger audiences and some, including Kmart, JBHiFi, and others, have taken a note from the buying behavior of popular marketplaces (Gumtree, Facebook Marketplace, etc.) by embracing a convergence of the digital and physical purchase journey. They’ve allowed shoppers to “Click & Collect,” purchasing online, and picking up the item in a nearby store. Additionally, they’ve allowed for free and speedy delivery when ordering within a certain radius of a local store. Treating physical stores as fulfillment centers allowed retailers to grow their ecommerce presence in response to the consumer need for instant gratification, but also easy returns when those glitter boots don’t quite match your suit.
After delivery, payment incentives have been the biggest cultural driver of ecommerce adoption in Australia. New services such as “BuyNow, PayLater” (BNPL) and digital wallets make online shopping more appealing and easier to justify. Digital wallets have allowed consumers of all ages to consolidate their loyalty points from grocery to department retailers and access them with a click. BNPL services like AfterPay have built integrations with retailers allowing customers to purchase anything no matter the price and pay it off in installments of their choice—a boon to department and luxury retailers seeking to acquire new customers who may have found their price points out of reach. What’s most interesting is the impact that BNPL and other global influences have had on the market. Typically, “purchase peaks” were reserved for traditional holiday events such as Christmas or Boxing Day; however 15% of online sales in 2018 came from a single week due to new digital shopping holidays—Click Frenzy, Black Friday, and Cyber Monday. The excitement for these digital-only holidays signaled a shift in Australia’s acceptance of ecommerce as way of shopping without the physical retail safety net.
Although Australia’s embrace of ecommerce was growing, nothing could’ve prepared retailers for the reality of the COVID-19 lockdown. The classic behavior of going to your nearest store was no longer an option as restrictions closed all shopping centers and non-essential stores. There’s a saying that “necessity is the mother of all invention,” but in this case it was the mother of all adoption. Australia’s BNPL uptake created an opportunity for those affected financially by COVID-19 to maintain some normalcy in their purchase behavior. Many categories often underrepresented in online purchases have been booming in expected financially conservative times. In 2018, sporting goods weren’t on the list of top five online purchases, but data shows that the category has seen a 600% increase in spending since restrictions were in place. Other categories related to health and home have also experienced increases from March to April including consumer electronics (+108%), home improvement (+71%), and beauty and personal care (+45%). Already, industries like apparel are seeing signs of growth and recovery.
If there’s anything we’ve learned from the coronavirus, it is that the future is unpredictable. However, studies have shown that new habits can take on average 66 days to become automatic. Although Australia's restrictions begin to loosen and physical stores begin to open, the 80+ days in lockdown have likely normalized ecommerce as the primary shopping habit for Australians. Despite a focus on economic recovery, this presents an exciting time for business as the growth in ecommerce has introduced an influx of new customers, new product category insights, and new purchase behavior data. The COVID-19 response has helped businesses with decreased media spending still acquire new prospects. This means they can extract more value from budgets when they start spending again as they’ll have a well spring of data to enrich their media buying. With an eye on efficiencies, it’s time for retailers to invest time understanding these new consumers and building CDP/CRM strategies for retention and re-engagement in the new normal. Smart retailers should be rebalancing the role ecommerce and in-store touchpoints serve in their road to recovery. Perhaps, there’s a future with an Australiana ecommerce experience similar to the Bunnings Sunday sausage sizzle. No matter how retailers return, ecommerce will have more value for businesses and consumers post lockdown than before.