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  • Analysis, Industry, Internet - Written by on Monday, November 18, 2013 16:42 - 6 Comments

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


    This article is by Kai Riemer, Associate Professor, Chair of Business Information Systems at University of Sydney. It originally appeared on The Conversation.

    analysis 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. 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.

    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.

    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.

    The research named in this article has been undertaken as part of the Australian Digital Transformation Lab, which is jointly funded by The University of Sydney Business School and Capgemini Australia. This article was originally published at The Conversation. Read the original article.

    Image credit: Jo Fothergill, Creative Commons

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    1. Peter Kelley
      Posted 18/11/2013 at 4:57 pm | Permalink |

      DJs USED to have an online commerce platform back around 2001 (I helped build it) but they closed it down apart from processing their hamper sales. At the time they didn’t have much idea how to run eCommerce (CDs in the top 20 had a price INCREASE), hopefully they can do it better now.

    2. The12thMan
      Posted 18/11/2013 at 9:27 pm | Permalink |

      Nah, why bother trying to innovate and provide value when you can just lobby the Government to add massive taxes onto anything bought from overseas, while also getting geoblocking enshrined in various international laws.

    3. RichyRoo
      Posted 18/11/2013 at 10:51 pm | Permalink |

      Hi Renai,

      I clicked on this article but then saw it was Conversation dross; so I am not going to read it.
      I really used to like your site but its essentially just an aggregator now :(
      At least get a higher quality source than some lame charity site.

    4. grump3
      Posted 19/11/2013 at 12:59 pm | Permalink |

      Australian online retailers complain about their 10% GST disadvantage compared to overseas purchases then slug me with a $10 Postage & Handling fee for a micro SD card sent in a 60C envelope.
      Not only can I purchase the same item at a lower list price overseas, it also mostly comes with free Postage.

      Twice in the past week I had proceeded to checkout on Oz sites only to cancel upon finding the final price had more than doubled due to P&H charges on small lightweight items.

      • SMEMatt
        Posted 19/11/2013 at 2:51 pm | Permalink |

        Actually the big issue that isn’t mentioned when competing with China is the Chinese government cover the postage.

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