Julian Prior: Bigger and better....expanding world of the cyber-store

By Julian Prior

Julian Prior looks at the growth in online shopping and examines the trends in New Zealand and Australia.

The main drivers for online shoppers are seeking lower prices and the convenience of being able to shop at any time and from anywhere. Photo / Thinkstock
The main drivers for online shoppers are seeking lower prices and the convenience of being able to shop at any time and from anywhere. Photo / Thinkstock

What are the main trends in online retailing in New Zealand and Australia?
We see continued strong growth in the online sales channel, which we estimate at just over 14 per cent a year.

At the moment, total online expenditure in New Zealand is $3.2 billion with 1.9 million New Zealanders shopping online and each spending $1659 on average a year on goods. By 2016, expect online spending to increase to $5.4 billion.

The main drivers are shoppers seeking lower prices, the convenience of being able to shop at any time and from anywhere - in part driven by continued growth in smart-phone and tablet use - as well as more product choice.

Popular online purchases are clothing, footwear, electronics, fashion accessories, cosmetics, books, sporting items, furniture and homewares.

As well, travel, accommodation and music downloads, excluded from the numbers above, are increasingly being bought online or are available only through an online channel.

Overseas websites are also increasing in popularity, with an estimated 35 per cent of online shoppers buying products from international websites. Again, the main drivers are cheaper prices and wider product choice.

With a number of overseas retailers focusing on winning New Zealand shoppers, some international websites (for example, ASOS) are now offering free delivery and shopper confidence has grown in using them.

Yet we still see a strong preference by shoppers to buy from local retailers if the combination of product, price and convenience is right.

There is no doubt the customers' journey from making a decision to buying a product has become far more complex. Customers will research their products using search engines, social media, price comparison websites, word of mouth as well as browsing stores and then buying online or in store.

Is the number of New Zealand and Australian online retailers growing?
Online competition amongst retailers has grown substantially in recent years. Many store-based retailers are now offering their products online and are investing heavily in online channels.

We are also seeing increased competition from overseas retailers offering products to New Zealand shoppers.

On top of this, a large number of "one day sale", "daily deal" and other "group buying" websites have been established offering discounted products and services - an online equivalent to the traditional "factory outlet" concept.

What tips would you have for companies wanting to try online retailing?Online is no different from any other form of retailing - it is just another channel to a potential customer.

It's all about knowing who your customers are, what they want to buy and how they want to buy it. If your customers want to research your products and/or buy online, you need an online strategy and offering.

The cost can be significant, particularly when customers want to use social media, navigate to products quickly, view the product and its specifications, buy online, either pick up the product or have it delivered and also deal with any product returns and exchanges.

There are lower cost options, for example, in using a "storefront" on Trade Me.

What are the advantages of online retailing rather than having a physical store?
The main advantages are the ability to reach a greater number of customers and offer a greater product range at a lower price.

Being online means you can avoid the high rent and staff-related costs associated with having a physical store as well as the lease commitment to pay rent for a long time.

www.pwc.co.nz/retail-consumer-industry-sector/services

Julian Prior is a PwC Partner and retail industry spokesman.

- NZ Herald

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