Australia’s Online Shopping Shift
Written by Paul Zahra, Chief Executive Officer at Australian Retailers Association
The surge of online marketplaces particularly, the entry of overseas discount retailers (such as Shein and Temu) haven’t just changed the game; they’ve completely redefined it, creating the most intensely competitive environment our industry has yet faced.
Traditional retail tactics are no longer sufficient; to succeed, businesses must become agile and forward-thinking.
What’s driving the changes in shopper behaviours?
The rising cost of living is influencing shopper behaviour, but the online retail sector still offers significant potential for growth. In fact, Australian online retail sales saw an increase of $2.9b (6.4%) in the 12 months to August 2024, compared to the 12 months to Aug 2023.
While high interest rates heavily impact certain groups (particularly young families) the effects vary across different demographics. Roy Morgan research reveals that half of Australians aged 18–29 live with their parents, and 34% own their homes outright. Both cohorts continue to spend, with retailers competing for their wallets.
Not surprisingly, shoppers are particularly drawn to ultra-cheap prices, especially after the string of interest rate hikes that started in mid-2022. Online platforms like Shein, Temu, and Amazon have capitalised on these trends, disrupting retail to the tune of $8 billion.
Demonstrating how convenience and value can shift consumer behaviour, Amazon has solidified its position in Australia. By providing a frictionless and efficient shopping experience coupled with a wide range of items on offer, the retail giant has enhanced customer satisfaction and loyalty. Many Australian retailers have enhanced their own online presence to compete with this model.
The rapid rise of ultra-cheap retail platforms like Shein and Temu has introduced a new element of price competition into the market.?Their aggressive marketing, strong social media presence and low prices entice two million Australian shoppers to spend with them every month. It’s interesting to note that while this platform caters primarily to budget-conscious shoppers, wealthier Australians are also exploring their offering.
Roy Morgan reports that 91% of Australian online shoppers are aware of Temu, and 29% have already made a purchase – surpassing some long-established retailers. Competing with global disruptors isn’t new for local retailers, but the speed at which Shein and Temu have gained a foothold in Australia is remarkable.
The long-term success of these ultra-cheap retail platforms remains to be seen, particularly as their ethical credentials will continue to face scrutiny.
The counter trend
While Australians embrace cheap and fast retail offerings, it’s impossible to ignore the counter trend that is gaining significant momentum: The circular economy.
According to Roy Morgan research, approximately 34% of Australians are participating in the circular economy, with 57% buying second hand items and 44% selling items they no longer need. Of these, 29% do so because it is more sustainable, whilst 67% do it to get higher quality items at cheaper prices.
Lessons for local retailers
In this fast-changing and complex retail environment, Australian retailers can differentiate themselves by developing their credentials around authenticity, quality and ethics. In addition, by leveraging technology, they can enhance their operational efficiencies and marketing strategies, streamlining operations, improving customer engagement and expanding their digital footprint.
Those who are willing to embrace change, drive innovation and get the consumer proposition right will be rewarded.
