In Australia, shopping at brick and mortar outlets such as Bunnings for their regular barbeques has always been a big part of one's routine in Australia. But with the challenges that 2020 has been bringing, more and more Australians are seeing the need for online shopping.
In We Are Social and Hootsuite's Digital 2020 report[1], Australia in 2019 had:
17.90 million online shoppers
USD 20.68 Market value for online consumer goods purchased
USD 1157 Average Annual Revenue Per Online Consumer Goods Shopper (AARPU)
Prior to 2020, Australia Post mentioned that the share of total retail belonging to online shopping in Australia would reach 12 percent only in 2021[2]. In April 2020, about a month after COVID-19 was announced as a pandemic, online shopping reached 12 per cent.
How else is Australian eCommerce changing in 2020? What are they buying online and how are they doing it? What does cross-border eCommerce have to do with it? This Australia eCommerce snapshot looks to provide an overview for all of these questions.
How do Australians make online purchases?
Staying at home has changed the times they purchase on online and accelerated Australians’ adoption of eCommerce
November is the hottest month for online shopping sales
Australians love bargains and are frequent cross-border shoppers
Cards are the top payment method but Buy Now Pay Later (BNPL) is gaining traction
Staying at home has changed the times they purchase online and accelerated the shift online
In 2019, Australians shopped online primarily during lunch and after office hours in the mid evening.
However, in April 2020, the need to stay at home more meant that the time they spend shopping online was more spread out during the day. Australia Posts' graph above shows that while online shopping activity in the evenings declined, there is a bump up in online shopping activity in the morning and afternoon. If the need to stay home extends to the rest of this year and even to 2021, Australians' buying patterns could match those in April 2020.
Another thing to note is that Australians who were staying home more during that time were not necessarily shopping online with their smartphones. Those who were staying at home bought more via their desktops and laptops. Smartphones still made up 25.7% of all purchases online by Australians according to Australia Post so a smooth mobile experience should still be prioritised.
With brick and mortar stores being harder to access during the early parts of 2020, many Australians started turning to online shopping. April 2020 saw 200,000 more Australians shopping online for the first time, with some of them being older generations who previously saw no need to purchase through this channel.
Initial purchases were concentrated around essential items like groceries with demand for other items suffering initially. However, as time went on, demand for other product categories began recovering. Australians began purchasing more fashion and apparel, notably casual and leisurewear and also started spending on other entertainment items like books.
November is the hottest month for online shopping sales
Previously, Christmas was known as THE season for large holiday-season expenditure. Recent years have seen this shift earlier to late-November/early December with the rise of shopping events like Black Friday, Cyber Monday, Click Frenzy (Australian Black Friday equivalent that occurs in May and then October or November) and even Singles Day according to JP Morgan in their eCommerce payment trends report 2019[3].
Australia Post mentions that they see peak volumes for online shopping until the second week of December. Sales closer to Christmas day itself slows down.
2020 could shake things up. however. As noted above, the 2021 estimate for online shopping making up 12 per cent of total Australian retail was hit as early as April 2020. This huge acceleration can be clearly seen when total online sales during Easter month in 2020 was higher than in the month of November 2019.
What this means for merchants selling to Australia is that demand is likely to spike at the Black Friday period all the way to the second week of December. Here are some dates worth considering:
Singles Day (11th November 2020)
Click Frenzy (2 times a year: May and then 17th November 2020)
Black Friday (27th November 2020)
Cyber Monday (30th November 2020)
Coupled with more Australians shopping online and their love of discounts, you may have to stock more inventory and prepare sufficient cross-border freight service capacity to serve this upcoming demand.
Australians love bargains and are frequent cross-border shoppers
In 2018, Ipsos and Paypal released a report on global cross-border consumer research. Cross-border shoppers from around the world, including Australians, were surveyed and the findings released in their report[4].
In this report, shoppers around the world mentioned that some of their key reasons for cross-border online shopping include:
Better prices - 72%
Access to items not available in my country - 49%
I can discover new and interesting products - 34%
Higher product quality - 29%
Shipping is more affordable - 24%
JP Morgan also mentioned that Australians really love good bargains. They mention that while Australians have been making more online purchases, the value of their purchases in decreasing, pointing to seeking out better prices.
JP Morgan also pointed out that China is a popular country for Australians to buy from. Australia has a fairly high de minimis value at AUD 1,000 which means that items imported via courier below this amount are charged fewer customs taxes. On the other hand, in 2018 the Australian government imposed a sales tax that eCommerce merchants must charge when customers are checking out.
Word of mouth, social media and search - How Australians discover brands
We Are Social and Hootsuite's research uncovered the top ways that Australians discover brands:
Search engines - 42%
Ads on Television - 42%
Word-of-mouth recommendations - 38%
Ads in Social Media - 26%
In-store displays or Promotions - 25%
Product Brochures or Catalogues - 24%
Brand or Product Websites - 24%
Ads on Websites - 22%
TV Shows or Films - 22%
Direct Mail or Email - 18%
This shows a mixture of both inbound and outbound marketing techniques, with customers finding you naturally via search engines or word of mouth or receiving push marketing via ads on television, social media or on websites.
For merchants in Southeast Asia, ads on television is likely to be out of the question for many, so inbound techniques are likely a better bet. Working on your website's search engine optimisation ranking on sites like Google or gaining a strong following on social media can complement your paid digital campaigns.
Another thing to add is that with Australians likely to be staying home more, they're likely to spend more time on social media and online, so online channels are worth investing more in during this period.
Cards are the top payment method but Buy Now Pay Later is gaining traction
JP Morgan reports that cards (debit, credit, etc) were used in 52% of all online purchases in 2019. Digital wallets made up 22 per cent of that. JP Morgan mentions that debit cards are in higher circulation than credit cards, with Visa and payment options being the expected standard.
However, there is also increasing concern among Australian shoppers about credit card fraud. For online businesses, getting positive user reviews could help out in building trust for your online store and helping to allay these concerns potential Australian customers may have.
Buy Now Pay Later (BNPL) is also gaining traction as a payment method in Australia. JP Morgan defines this as customers purchasing an item immediately then repaying the cost in instalments. This is facilitated by a credit-providing intermediary between the shopper and the merchant, with schemes accepting payment via the customer's bank account or card. The BNPL has the BNPL intermediary assume more of the risk in the transaction.
According to Australia Post, fashion and apparel is a big beneficiary of this method with nearly half of 2019's BNPL transactions used to buy fashion items. Other product categories such as health and beauty, home and garden and the like also see purchases conducted using this payment method.
What are they buying?
JP Morgan's 2019 report on eCommerce payment trends broke down the top eCommerce segments by total eCommerce value:
Consumer electronics - 22.9%
Clothes and apparel - 17.3%
Household goods - 7.3%
Health and beauty - 4.8%
Groceries - 3.7%
Travel - 24.6%
Others - 19.4%
Australia Post on the other hand, had a different set of categories and their respective market share for 2019. These cover sites specialised to different product categories, which also includes variety stores. Variety stores sell fashion, health & beauty, home & garden products and other items as well):
Fashion and Apparel - 35.9%
Variety Stores - 35.5%
Health & Beauty - 11.2%
Home & Garden (includes consumer electronics, garden and other household products) - 21.9%
The numbers add up to more than 100 per cent because variety stores' contributions to other categories are also counted in the percentages. Variety stores include department stores and discount stores, with examples including the Reject Shop and Miniso.
To gain a fuller picture of how Australian eCommerce is evolving, we'll be using the findings from both Australia Posts' 2020 eCommerce Industry Report and JP Morgan.
Groceries saw a huge spike in the early days of the pandemic's announcement, but after a while, online shopping demand picked up for non-essential goods too. Considering that we're focused more on consumer goods, we won't be covering Travel and Others. Only the categories most relevant to cross-border eCommerce will be covered here.
The following graph shows the online purchases year-on-year growth for different product categories put together by Australia Post. Worth noting is that eCommerce sales growth began rising in March before hitting highs around the Easter period in April 2020.
Source: Australia Post 2020 eCommerce Industry Report[2]
Clothes and Apparel
According to Australia Post's 2020 report, fashion and apparel items made up over a third (35.9%) of online purchases in 2019. Most took place on fashion specific retailers while the rest were from variety store channels. In 2019, 44% of households in Australia purchased from an online fashion retailer.
Clothes and apparel demand is driven by Australia's social media savvy millennial and Generation Z population, according to JP Morgan. Australia's 18 to 36 age demographic has increased by around 500,000 people based on the latest Australia census, which means this group makes up 26% of the population. Not to mention that Australians are highly connected with an average of 3.1 devices per person[5].
According to Australia Post, Buy Now Pay Later was also a major payment method being used for fashion purchases in 2019. Fashion purchases made up 48.2% of all of 2019's Buy Now Pay Later purchases.
Price is a key consideration for online shopping, and with Australia's proximity to China and de minimis value of AUD 1,000, China is a hot place to buy fashion items from for young Australians. While Australians still need to pay 10 per cent GST on shipments even below AUD 1,000 these orders are still not charged customs duties.
Like most other categories, clothes and apparel demand dipped in the early days of the pandemic in 2020. In April however, demand for fashion started picking up again. With most people spending more time at home, casual wear and leisurewear were starting to see higher demand.
Health and Beauty
In 2019, Health and beauty made up 11.2 percent of online purchases according to Australia Post. Around a quarter of all Australian households bought a health and beauty item online in 2019. Buy Now Pay Later (BNPL) is also a popular payment method for Health and Beauty purchases, with 13.6% of all BNPL purchases being health and beauty related.
In a report by Kiri Masters in Forbes, Swisse's marketing director for Australia and New Zealand Stuart Diamond noted customer behaviour changes during the period.6 Customers are spending longer on Swisse's product pages on their eCommerce site, which shows that Australian customers are seeking out important information to make the most informed decision.
Stuart Diamond also noted that some Australians still want to connect with a principle of trust, so two-way communication with older and more experienced members of the community like health care practitioners is increasing. Australians are also increasingly shifting to proactive health management rather than being reactive, which can provide an opportunity for businesses to share genuine, helpful content.
Home and Garden (inclusive of Consumer Electronics)
According to Australia Post’s report, homewares and appliances represented more than half of the revenue generated by the home and garden category. Consumer electronics had the next largest share at 29.3 per cent but grew at a slower rate. Pet products notably were seeing strong growth in 2019 with purchases growing by 12.6 year on year.
One thing to note for eCommerce merchants is that Australians may have a preference for buying home and garden products from local enterprises like Bunnings and Kogan.
JP Morgan reports a slightly different story with regards to consumer electronics. Consumer electronics made up 22.9% of all eCommerce purchases according to JP Morgan’s 2019 data and is the largest consumer goods category based on its share of total eCommerce value. According to Statista, around a third of consumer electronics purchases are done via eCommerce, with an estimated 42% of total consumer electronics revenue being generated online by 2023.
Statista also mentions that the top online stores by net sales for consumer electronics in Australia are Apple, Dell, Kogan (an Australian department store), JB Hi-Fi (home entertainment retailer), and Amazon.com.
Summing it up for Southeast Asian merchants
2020 has brought many challenges which have changed consumer behaviour globally. With Australians likely to stay home more in 2020 and with more online shoppers now shopping more regularly, cross-border eCommerce merchants in Southeast Asia may be able to make use of a much larger Australian eCommerce market.
Australians love bargains, and providing great deals and savings on product price and shipping can go a long way to building your market share in the land down under. Speaking of bargains, you'll also want to get enough of a following to update them of your upcoming Q4 promotions, particularly during the big days:
Singles Day (11th November 2020)
Click Frenzy (2 times a year: May and then 17th November 2020)
Black Friday (27th November 2020)
Cyber Monday (30th November 2020)
The 18 - 36 year old demographic makes up around 26 per cent of Australia's population who drive the purchases of product categories like fashion and apparel.3 With the average number of devices per user standing at 3.1, social media is a key channel to reach this audience.
According to We Are Social and Hootsuite's 2020 report, the most used social media platforms based on percentage of internet users aged 16 to 64 are:
Youtube - 80%
Facebook - 90%
Instagram - 65%
Twitter - 29%
Pinterest - 28%
Snapchat - 27%
Tiktok is also on the list, but has an 8 percent share in Australia.
Depending on your product vertical, human interaction can also play a big role. As discussed by Swisse above, many want to check in with experienced members of society when it comes to vital purchases like health and beauty. If you are able to open channels to trusted experts via your store or brand, it may go a long way to helping out your business.
***This article was originally posted on Janio Asia 's blog.
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