Australia facing surge in online sales as shoppers embrace digital. Circana, the world’s leading advisor on consumer behaviour, has released its groundbreaking Industry Insights report into the state of e-commerce in Australia. The report entitled, Unlocking The Next Wave Of E-Commerce Growth, identifies the breadth of opportunity available to the retail sector to drive growth through the embrace and revolution of e-commerce.
The report identifies three important areas of focus for the retail sector: continue enhancing e-commerce capability, view e-commerce as more than online sales; and execute across omni-channel touchpoints. Specifically, the report explores seven themes to guide decision-making to assist businesses across the sector to leverage the benefits of e-commerce to optimise growth.
Circana’s Head of Product and Solutions, APAC, Alistair Leathwood has a number of comments on current insights and strategies for online retailers.
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Pandemic Peak
Leathwood says, “ABS research and Circana’s Shopper Panel show that Australia hit an online sales ceiling in 2022. Removal of lockdowns saw households step out to shop again and not surprisingly this resulted in a post-pandemic online shopping dip. Under one-third of Australians expect to do most of their grocery shopping online moving forward. Panel shoppers continue to express a low intent to do more online grocery shopping.
“Aldi’s resurgence, despite not having an online presence, demonstrates that shoppers enjoy shopping in-store and look forward to the experience of being out amongst the products. The opportunity for the sector is to entice shoppers back online through innovation, convenience, personalisation and value.
“Circana research shows there is a clear preference to buy FMCG in person. The vast majority of FMCG sales will not be digital anytime soon. Omni-channel and omni-category leadership is key. There is a need to invest in capabilities that enable a better online customer experience and this starts with creating a consistent omni-experience in store and online and bringing to life the latent benefits of digital commerce: speed, reliability, assortment and flexibility.”
Revenue Reversion and Recovery
The report outlines that while the online retail market moderated in the 2023 financial year, the outlook for 2024 is improving. Like the total market, online grocery is back in growth.
Leathwood says, “going forward online retail will continue to grow share amid a digitisation of society. The most recent quarter indicates a reversion to growth, although below pre-pandemic run rates. Clearly, as Australians increase their engagement with the online environment, businesses across the retail sector must equip themselves to capitalise on this growth.
Penetration Plateau and Pick-Up
The pandemic virtually forced shoppers into buying online due to lockdowns and a fear of going outside. Largely, online customers were created through pandemic circumstances, not clever acquisition.
Leathwood says, “enticing more shoppers online and encouraging increased online shopping frequency is now the new challenge for the retail sector. Circana research shows that post-pandemic customer acquisition is proving to be much more challenging. It is also proving more costly.
“Our Circana Shopper Panel identified the top five grocery shopping common annoyances; not getting the products ordered and receiving different replacement items, delivery costs, issues with food freshness, lack of delivery flexibility and minimum spend were the key issues for shoppers.
Online Outliers
Circana’s research shows that households with higher incomes and kids and pets have a higher propensity to buy online which has helped to drive the resurgence in online shopping.
Leathwood says, “as the sector searches for ways to drive growth through online, retailers and manufacturers will quickly need to identify untapped and emerging customer segments and gain a rapid understanding of their needs and preferences. Online shopping provides significant benefits for households especially those with kids who are time-poor and enjoy the convenience, ease and accessibility of online shopping. Households with kids significantly over-index online. We are also seeing this across households with pets.
“Younger households are also driving online shopping growth. Households where the main shopper is aged younger than 40 years of age are driving online growth. 46 percent of household shoppers rate the online shopping experience as being either ‘very’ or ‘quite’ important when choosing which supermarket to shop with compared to 18 percent of 65-plus-year-olds.
Flexing Fulfilment
Improved online customer experiences will be crucial to ensuring digital investments are a future industry tailwind. This applies to growing and maintaining a loyal online customer base with more experienced buyers prepared to shop around for a better service. The same goes for reengaging lapsed and hesitant buyers, the recruitment of whom remains vital.
Leathwood says, “E-commerce feels old school to many across the retail sector but the reality is we are just scratching the surface in terms of where we are headed. The majority of digital transformation and associated benefits for industry and customers are still to come. As more shoppers buy online, the speed of order fulfilment will increase in importance.
“Already AI, robotics and blockchain-based smart technology are being incorporated into logistics operations to increase capacity, improve speed and support micro warehousing to increase the efficiency of operations including last-mile delivery.
“When choosing where to shop, 87 percent of shoppers feel outlets that offer a wide range of products is important/quite important, versus only 32 percent that place importance on the online shopping experience. Immediacy is a key priority for shoppers. Eighty percent of Woolworths’ e-commerce sales are fulfilled within 24 hours of order. Logistics is a critical aspect of online success and it must include transparency for shoppers so they can see the transit journey of their items.”
Engaging Environments
Growth will be achieved in the online space by getting the basics right. Leathwood emphasises the need for businesses to invest in basic omni capabilities by leveraging the currency of content and placement.
Leathwood says, “the Circana report not only covers key areas of focus for the sector but also reminds brands to do obvious and basic things well – things that are often taken for granted. Simply displaying a product in a visually pleasing way can make a major impact towards winning in e-commerce. Brands need to bring data together to create powerful insights. Integrate digital shelf data with online sales. Just because you are winning in search doesn’t mean that you are winning online. Businesses across the sector need to look at best-of-breed examples globally and then adapt and improve them again. Pursue partnerships with other offline and online sellers too. Online shoppers have become even more hardworking online looking for deals and value offers in the face of cost of living pressures. Brands must ensure value and benefits stand out online.
