Australia's retailers are facing the prospect of having to work a lot harder for online sales, a new analysis by advisory firm BDO Australia shows.
The firm's 2015 revision of Changing Tides, which tracks the growth fortunes of retailers' e-commerce and bricks-and-mortar operations, shows the high growth margins experienced online until now are becoming a thing of the past.
That is not to say that online still isn't growing at a much faster than corresponding bricks-and-mortar operations.
But growth margins for FY15 and beyond are forecast to be largely in the 10-16 percent range and dipping, rather than the 20 percent-plus to which retailers have become accustomed.
John Bresolin, a partner with BDO Australia, told Information Age that the "deceleration" in retail growth rates for online "is just natural curbing".
"As online sub-sectors expand over time, they appear to be easing towards more moderate and perhaps sustainable growth," he said.
"This does not mean the bubble will burst, but growth in the 20-30 percent range experienced over the last few years is unlikely to continue."
Bresolin put the declining growth rates down to "intensifying competition" and said that retailers would have to work much harder to attract online spending.
"Players will be racing to bring to market the superior shopping experience," he said.
However, he urged retailers not to rush systems to market to stem the impact of declining online sales growth.
"Retailers need to be very thorough in their roll out strategies when implementing new technologies into the consumer experience, as a flawed or noticeable barrier in transacting will have the opposite effect on customer loyalty," Bresolin said.
Bright spots
There remain bright spots for online. Furniture sales is the only e-tail area forecast to exceed 20 percent growth in FY15.
"Online household furniture is a standout example of how goods traditionally bought in-store are now experiencing a sales surge online," Bresolin said. "[This] is a fundamental shift in the way people shop."
Groceries and sporting goods are also expected to bring strong margins for online sellers over the next year.
There also remains an opportunity to grow online as a total percentage of the Australian retail market.
"Online-only [sales] account for roughly eight percent of total sector revenue in Australia," Bresolin said.
"There's definitely room for online to grow, and it will be interesting to see how much bigger online gets relative to its more mature bricks and mortar counterpart."
