Penetration of online retail market by global giants lower in Australia than overseas: study

Local retailers worried about the rise of overseas retailers can take heart from a new study that shows penetration of the Australia’s online retail market by global retail giants remains well below global levels because of our smaller population and geographical isolation.

The study of 323 global retailers by global real estate firm CB Richard Ellis comes as local retailers complain that online retailers are cutting into sales by exploiting a loophole which does not require them to charge GST or customs tax to consumer purchases under $1000.

But CBRE’s executive director of global research and consulting, Kevin Stanley, says Australia’s “geographical isolation” and its “relatively small population means that global retailers are discouraged from establishing supply chain networks within the Pacific region.”

The four-year-old study, called How Global is the Business of Retail?, has found that while 82% of global retailers have some form of online catalogue that can be browsed, only 75% of global retailers working in Australia have an online catalogue.

In addition, Stanley says that the percentage of retailers with the ability to deliver goods bought online is still quite low.

The report found just 19% of retailers able to deliver goods bought online to Australia. The countries with the highest proportion of retailers that can deliver goods bought online were the UK (at 44%), the US (39%) and France (38%).

“The effective distribution of goods bought online is a key challenge for retailers and one that was yet to be resolved,” Stanley says.

Stanley says while global retailers often don’t have the support to deliver the service, but this will likely change.

Another issue for Australia’s attractiveness is its relatively conservative, steady market, as opposed to the high-growth opportunities in Asia and elsewhere.

“The growth [here] is not explosive,” Stanley says.

CBRE’s regional director of retail services, Joshua Loudoun, says online can allow global retailers to enter the market cheaply, and test consumer reaction – a useful tool when consumer spending is fickle around key markets.

“Historically most retailers would have opened a physical store first with the online operation set up to later to help maximise sales. However, an increasing number of retailers are now using their online operation to enter and test new markets before committing to a physical store presence,” Loudoun says.

The survey also ranked Australia 31st out of 73 countries global retailers look at for international retail presence, despite the relative attractiveness of Sydney or Melbourne, which ranked equal 9th in the rankings of cities with the highest US retailer footprint.

Nonetheless, Australia’s relatively expensive rents were noted as disincentive for global retailers to set up shop down under.