Australian online retailers are increasingly optimistic about the year ahead despite the difficult trading environment, but are finding themselves at odds with suppliers who don’t want to upset their larger clients by dealing with smaller, online-based shops, new eBay research has found.
The second annual eBay Online Business Index, which surveys over 3,000 of the company’s largest traders, has found 69% of respondents are optimistic about the their business outlook – and they intend to increase staff from 4.4 paid employees to an average of six this year.
But eBay communications manager Jenny Thomas says the survey clearly shows there is some concern around how major suppliers are wary of working with online companies because of pressure from larger, more traditional retailers.
The survey shows 35% of respondents had issues with manufacturers and suppliers trying to prevent them from selling goods on the internet or other websites, while 25% were required to sell products either at or around a particular price.
A further 22% said they experienced “unexplained problems” from manufacturers or suppliers which they believe to be because they were selling over the internet – a finding that Thomas says was one of the more unexpected revelations.
“These suppliers are also working with big-name brands, and these companies know that online brands can undercut them. And so they don’t want to supply to those businesses and upset their larger clients,” she says.
Thomas says this doesn’t apply to just smaller retailers – even the larger businesses are reporting being stuck by suppliers who feel online retail is hurting their business.
“This is what the large clients are saying – you can understand why there is this perception around online retail and why it’s a challenge.”
She argues this will only change as large brands embrace online. Already in the past year, several department stores including Myer and David Jones have boosted their offerings, and Thomas says this will help relieve pressure from suppliers as “they continue to do well online”.
One respondent, Kirsty Chapman-Smith – who is a co-owner of Adelaide-based party supplies company Deals4Kids – said she has encountered suppliers who won’t deal with online because they don’t want to “lose the business of long-standing partners”.
Thomas says the growth of bigger brands online should help suppliers, but there are other issues – many respondents said postage was a concern, as international retailers offer more competitive shipping packages.
“If you buy from an international online retailer, you can potentially have something within three days. There are numerous offerings overseas, along with things like tracking so you can see where it is. This is industry standard now, and we need it in Australia.”
“It costs a lot for an international retailer to post an item from the US into Australia, but they do it within three days and do it for free many times. We need to meet the consumer expectations in this area.”
The survey found 50% list postage costs as a “major disadvantage”.
“It’s one of the biggest pain points with our sellers, and we’ve been working Australia Post to offer deals like discounted fees and so on to encourage more selling and trading online.”
The survey revealed a number of Australian retailers are revelling in the high Australian dollar, with 49% using the high dollar to import more products into Australia, while 42% said they experienced higher demand as a result.
Mobile is another big area of growth, with 72% of respondents saying the growth of mobile commerce would have a positive impact on their business.
“We expect that area to be another big mover for 2011, as people don’t want to just shop in front of their computer anymore.”
Overall, the eBay Index found online retailers are optimistic about the next 12 months, with most intending to increase staff. Thomas says this is evident on eBay, where 13% more sellers reported revenue of over $1 million compared to last year.
“We see that nearly 70% of sellers are optimistic, and when you look at ABS retail figures, it’s interesting to see those operating online who are more confident about the future.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
