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Australian retailers online: late to the party and much to do

Australian consumers are embracing digital commerce, but Australian retailers are failing to build long-term relationships with their customers online, according to new research. More than 50% of Australians…

David Jones has seen online sales grow 1000% since launching its omnichannel strategy, but online sales still only represent 1% of total sales. AAP/Jeremy Piper

Australian consumers are embracing digital commerce, but Australian retailers are failing to build long-term relationships with their customers online, according to new research.

More than 50% of Australians have been described as “digital buyers” who prefer to “buy online where possible”, a statistic that puts Australians among the top digital consumers in the world.

But the Australian retail sector is late to the party. A recent Deloitte survey found that “Australian retailers are going digital at a snail’s pace”.

More than 50% of respondents expect to generate less than 2% of their Christmas sales online.

And while David Jones’ 1,000% quarterly increase in online sales recently made headlines, this increase comes from a very low base, with digital commerce now accounting for a mere 1% of the retail giant’s total sales figure.

From a warehouse in California

NAB’s Online Retail Sales Index puts the proportion of online retail at 6.3% of bricks and mortar consumer retail spending.

But recent figures from the Australian Bureau of Statistics should worry local retailers: Australian consumers spend more money online with overseas retailers than with their domestic counterparts.

Australian retailers have to come to grips with the new reality of a global marketplace and strong competition from overseas internet giants like Amazon or fashion retailer ASOS.

Easy access, convenience and price transparency of digital commerce are only some factors explaining the trend, others lie in the strong Australian dollar and a relatively high threshold for GST-free overseas purchases, much complained about by the local retail sector.

Motivated by these trends, in a recent study we have investigated the state of play in Australian Digital Commerce. Using a catalogue of 63 single criteria we have evaluated in detail the digital presences of 89 Australian retailers. Taking the consumer point-of-view, for each retailer we recorded if they utilise certain digital commerce tools, techniques or features. This allows us to draw conclusions about the maturity of digital commerce in Australian retail.

The four dimensions of digital commerce

Our evaluation spans four dimensions. The informational dimension is the most basic category. It covers the ways in which retailers provide information about product portfolio and shopping process.

The transactional dimension is what turns websites into e-commerce. It comprises features such as shopping basket, delivery, payment and financing options.

The relational dimension marks the evolution from transaction-focused e-commerce to relationship building with customers. These include personalisation, recommender systems, and features that allow customers to interact with the retailer.

The social dimension is the latest addition to the digital commerce portfolio. It includes integration with various social media platforms and features that allow customers to create and review content, or recommend products to friends.

Most Australian retailers have achieved a reasonable level of maturity in the basics of e-commerce with a good coverage in the informational and transactional dimensions.

Australian retailers have also been quick to embrace social media, where most companies have created some form of presence in various channels such as Twitter, Facebook, Instagram or Youtube, even though this is most often used for driving the company’s marketing message.

Relationships are hard work

The most striking result from our analysis is that retailers across all sectors are slow to embrace the relational dimension. This is a worrying finding. It means that, while many retailers have leaped into social media to promote their services, most have not invested much in building 1-to-1 relationships with their existing customers. This is necessary however for growing a customer base that allows reaping the benefits from repeat purchases, cross selling and up-selling.

In a space where prices become globally transparent and competitors are only a click away, it is all the more important to invest not only in winning new customers, but in keeping them.

Converting banner clicks to paying customers is costly. Investing in measures to keep and develop customers should be a priority. Yet features that aim to create a personalised experience, provide product recommendations, and allow customers to establish a history and relationship with the company are conspicuously absent, according to our analysis.

This means that Australian retailers forgo important opportunities to build loyalty and create switching costs to make customers less likely to defect to the competition.

More importantly, Australian retailers are lagging far behind international market leaders, such as Amazon, that have long invested in sophisticated digital recommender systems, based on the exploitation of what has become known as big data.

Since the US e-commerce giant is likely to already be preparing its Australian market entry, it is time for the local retail sector to evolve its digital commerce offerings beyond the execution of transactions and the creation of social media buzz.

The key to competing successfully online, in a market where matching the lowest price is impossible, is to offer innovative services and to build loyalty and profitable relationships with customers.

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14 Comments sorted by

  1. Dave Hughes

    Safety Consultant

    I'd have to agree that Australian retailers are well behind the times in digital marketing. I make a fair part of my income from promoting other people's products through affiliate marketing. Thus is were I promote an other businesses products and get paid for any sales resulting from visitors sent to the business through my web site. Unfortunately while I deal exclusively with offshore companies both large and small simply because there are no Australian companies using this model. I have relationships with large US companies (Walmart) international companies (Amazon, Alibaba) and small companies overseas.

    There are many Australian affiliate marketers that would love to promote Australian businesses and products but can't because Australian businesses have yet to step up to the plate in respect to digital marketing. Its easier to sit and whinge and whine about their loss of market share rather than invest the time, energy and money in making digital marketing work for them.

  2. Jeremy Culberg

    Electrical Asset Manager at Power Generation

    I've been utilising the ability to order in from the US and UK since 1999. The customer service I've received from the US / UK sites I use have been excellent. Every so often I will go back to Australian suppliers, and unfortunately of the few companies I did have pleasant dealings with, most have either gone bankrupt, or been absorbed by others and had that part of the system assimilated into the larger collective.
    Australia has a lot to work on, as large parts of the established online community…

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  3. robert roeder
    robert roeder is a Friend of The Conversation.


    Yesterday I purchased a portable air conditioner for my computer/ entertainment room online. To drive to the retailer would have meant a round trip of 160 klms, the delivery charge was $2. I received 2 emails and 1 phone call advising that delivery would be wednesday, would I be home. The day before I tried to make this purchase got to the checkout and they insisted that I provide a email address, I rang and said no. I was told to use theirs. Later I checked my bank, it showed no debt. The retailers…

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    1. robert roeder
      robert roeder is a Friend of The Conversation.


      In reply to robert roeder

      The above post had a few of errors, chaos rampaged this morning.
      To be fair to our ozzy retailers it should be noted that some are hampered by regional zoning and franchise agreements. Australian agents and the population in general are viewed as fat cash cows lowing to be milked. Because of FTA's our government has accepted trade obligation which expose us to these sorts of predatory practices. Sometimes when trying to buy offshore you get a message saying contact your Australian agent. This happens often in the US. There are proxy purchasing agents in the US who buy and then on forward for a modest commission. If you are lucky the proxy will instruct the wholesaler to ship directly to you, sometimes the seller will enclose the wholesale invoice which can come in handy. Many sites in the US have multiple pricing based on your IP address, again the proxy can save you money or try a VPN. If trade was free we wouldn't need an agreement.

  4. Steven Holland


    More needs to be made of the pricing difference. It was mentioned briefly in the article but only a passing reference, the Australian dollar has been strong enough for long enough that pricing should have been altered. It hasn’t.

    My wife and I are prolific online shoppers, and usually from overseas. The primary reason for us is price.
    More often than not, Australian online retailers (the ones that actually sell things from their websites, rather than show you a fraction of their stock and then…

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  5. Rory Cunningham

    Test Analyst

    I've never understood why the retail industry thinks GST will even the odds between retail/online. Even with 10% on top, the prices are below australian prices

  6. Henry Verberne

    Once in the fossil fuel industry but now free to speak up

    Not only are Aussie retailers well behind OS on marketing and digital marketing, they are generally not price competitive with US/UK retailers.

    I buy contact lenses from the US and despite postage and handling they are about 50-60 % of the local product.

    A friend buys parts for his mountain bike much cheaper from the UK than here and the service is amazingly fast.

    1. Kai Riemer

      Associate Professor, Chair of Business Information Systems at University of Sydney

      In reply to Henry Verberne

      This has certainly been my personal experience, too. The staggering thing is that despite the much higher prices, many Australian retailers do not invest much in offering a superiors online experience. Quite the opposite.
      Also, I was involved in quite a lot of research and projects into early day eCommerce back in Germany around 1998-2001. Many of the topics we discussed back then (such as personalisation, creating switching costs online, or multi-channel management) are only now slowly emerging as issues in Australia now. I find myself going back to my old slide decks which are now quite applicable here.

  7. Jarrod Chestney-Law

    logged in via Facebook

    Most of the time, when I look to purchase something from an Australian online store, they either don't have it in stock (that is, it's not listed on their site) or as another poster wrote, they direct you to their store. Or they have it in some pseudo-catalogue style forcing you to click through 30 pages of slow moving, poorly rendered images of junk mail. Urgh...

  8. Ken Taylor

    Research Scientist at CSIRO

    I've become a fan of purchasing on-line and I wonder what extra value an Australian on-line retailer can bring? Have you considered the possibility that Australian on-line retailing isn't ever going to work well except for niche areas?

    If the product is manufactured in China, an Australian retailer would have to purchase the item, stock it here then incur handling costs to ship it. A Chinese online retailer, sometimes the manufacturer, ships direct and incurs all those costs at source with lower…

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    1. Kai Riemer

      Associate Professor, Chair of Business Information Systems at University of Sydney

      In reply to Ken Taylor

      Hi Ken, I think we shouldn't reduce a retailer to just its logistics function, that is getting products into the country. In order for your model of international dissemination to work, consumers would have to do extensive research and be quite knowledgeable in terms of where products are being produced, how to source form China etc.
      A main function of a good retailer is its aggregation and category management function, in other words the scouting of markets, selecting of products for its target audience, and also offering appropriate after sales service (such as a returns policy).

    2. Ken Taylor

      Research Scientist at CSIRO

      In reply to Kai Riemer

      I assume by "Australian Retailers" you mean the likes of David Jones (pictured), Dick Smith, etc. They have a logistics operation which can't compete and a tiny product range compared to on-line retailers, so to try and fix that with relationship management is like putting lipstick on a pig. What, from their existing operations, do they bring to on-line retailing?

      Aggregation and category management is well managed by eBay, Amazon etc and consumers do not have to do "extensive research" to import from China. The picture hooks were from an eBay store so required negligible effort. The alternative was to drive to Bunnings where the same hooks are $2.98 Two weeks faster but at the cost of spoiling a Saturday morning.

      Getting picture hooks to my door for $1.03 is a paradigm shift.

  9. Sam Smiffe


    As a small business owner in a small country town in NSW... I've been thinking of going online for the last 12 months my business has been open. What prevents me is the additional cost in money and time for a gain that I don't think is worth it - I am a bookseller.

    I'm very interested to hear what comments people would make to me. Should I go online 'for the hell of it'... or are there some businesses - such as my small business - where it really wouldn't make sense comparing advantages to disadvantages?

    1. Ken Taylor

      Research Scientist at CSIRO

      In reply to Sam Smiffe

      You could try opening an Amazon or eBay store with very little effort but you might find the competition is selling your stock for less than you pay for it.