UPDATED: Retailers threatened by international online shoppers

Claims that Australian retailers are losing increased levels of customer dollars to offshore online retailers has not dampened local confidence.

According to Forrester Research, Australian online spending is expected to grow to $32 billion by 2012. But according to IBISWorld, Australian online sales represent just 5.5 per cent of the country’s total retail sales.

In addition, research by the Australian Payments Clearing Association (APCA) found that 57 per cent of Australian online spend was domestic in 2008 – down from 86 per cent in 2005.

Managing director of the upcoming Online Retailer Expo & Conference, Mark Harvey, claimed there was a ‘yawning gap’ in local e-commerce best practice. He pointed to a recent US-based Internet Retailer survey, which found 36.8 per cent of Web retailers ranked Australia as one of their top three markets for generating Web sales outside of the United States.

“A whole new generation of consumers have taken control and are changing the game for the retail industry,” Harvey said in a release. However, JB Hi-Fi’s new CEO, Terry Smart, said the threat of offshore online retailers was no greater than any other market competitor.

“They have a presence in marketing, and they’re taking a share of the market, but it’s difficult to ascertain that there has been a real shift in that direction by consumers,” he said.

JB Hi-Fi was one example of a retailer not trying to compete with those international retailers, Smart said, who added its growing online presence was targeted purely at Australian consumers.

Offshore retailers are often winning business without necessarily offering adequate features and functions to cater to Australian consumers.

“We’ve found we rate very highly in consideration from people looking to buy online,” Smart said. “It is, however, a small part of our business. Bricks and mortar stores will always have a presence in the market, but we felt we needed to have an online presence for if or when there is a market shift towards online buying.”

This strategy has, so far, served JB Hi-Fi well. The retailer sailed strongly through the economic crisis to post record profits, and has an aggressive expansion policy to nearly double the number of physical shops from 140 to 210 in the next year.

Online-based City Software is likewise unconcerned with the threat posed by overseas online stores, although managing director, Lorenzo Coppa, admitted there were some product areas people were more willing to buy from overseas.

"We have a large product range, and overall, we're not losing significant business - in fact we've seen substantial growth," Coppa said.

"But something like anti-virus, people are buying renewals directly from the vendor, and there have been a lot of apps that were poorly represented in Australia that people are using overseas Websites to access.

"However, if you look at something like hardware, Australia is competetive in terms of price point, and the costs of freighting hardware into Australia would be prohibitive for the typical consumer."

Bing Lee strongly recommended retailers make the jump online to remain competitive against offshore retailers. Its head of e-commerce, Peter Krideras, said the quicker Australian organisations can embrace the Internet, the better positioned they would be to capitalise on opportunities.

“The delay in Australian retailers embracing online selling has made it easy for overseas ventures to tap into the Australian market,” Krideras said in the release.