Online retail therapy

E-tailing is becoming more popular, even though it is an industry still finding its feet. But the Australian market is providing rich opportunities. By JASON BAKER of IBISWorld.

By Jason Baker of IBISWorld

Australians have already proven their willingness to shop in cyberspace.

The trend to shop online has been increasing over the last five years, and looks set to continue. The growing popularity of this new form of spending has fuelled steady growth in the industry.

Research by ACNielsen recently found that 87% of Australian internet users had made a purchase over the internet, ahead of the global average of 77%.

While e-tailing is still very much a fledgling industry, it has come a long way since it started to really take hold around the turn of this century, growing from less than $5 billion in 2000 to more than $14 billion today.

However, a massive portion of this is spent on bookings for travel and accommodation – 41% – but at least 40% is also spent on items you would expect to buy from traditional retailers, such as music, books, clothes and computer programs.

But it has not all been smooth sailing for start-ups in e-tailing. It has taken up until now, through trial and error, to see the results of e-tailing, what works and what doesn’t.

Some products are more suitable for sale over the internet than others. Items that are a known quantity are the perfect candidates. The early success of e-tailing giant Amazon is a perfect example, as books are a good example.

Everything you need to know about the product can be gained online. As well as the physical attributes, it is also possible to read reviews, a list of authors’ other works, blurbs and find similar titles.

Another excellent example, and one that has proven to work, is music. Online CD and record stores such as sanity.com.au and chaos.com, provide more alternatives and cheaper prices than most actual physical stores.

Even better suited to sale online are things that are essentially digital information. iTunes has set the standard for music in that regard. As the average internet connection speed in Australia improves, it’s inevitable that we will also be getting our movies and other entertainment over the web instead of from a shop.

Items that require a tactile experience have proved more difficult to sell online. Clothes that people generally want to try on before buying, or furniture that people like to see first hand for instance.

However, there will be niches for these items online, but sellers will need to provide their customers with a compelling reason to buy online such as exclusivity or better value.

Online shopping should be, above all, convenient. That, combined with one of the two factors outlined above, should form the basis for all e-tailers’ business. Of course security is also paramount, but that should go without saying. To be successful, e-tailers need to set them selves apart from their bricks-and-mortar counterparts.