Retailers rage as Australians shop online

By Sid Astbury May 23, 2011, 6:05 GMT

Sydney - Retired Sydney schoolteacher Jeanette Loewensohn is living proof that Australian retailers are rattled by the rise of internet shopping.

The 71-year-old, who has never bought anything online, was ordered out of her local bookshop by a sales assistant who suspected she was jotting down titles she intended to buy over the internet.

'The staff member incorrectly assumed I was computer-literate,' Loewensohn fumed. 'I'm not.'

The times are long gone when internet shopping was the preserve of nerds, and those who started out buying books and plane tickets online are now purchasing electronics, clothes and even groceries.

The Australian office of the international management consultancy Bain and Co reported that half of all shoppers had now bought software and other digital content online and that last year there had been a 50-per-cent increase in the numbers shopping online for everyday items like milk and bread.

Michael Cameron, head of the property trust GPT Group, said the more specialized the retailer, the better able it is to hold out against online rivals.

But bookshops and shoe shops, travel agencies and chemists have been early casualties. 'Mum and dad retailers in suburban shopping centres, I suspect, are doing it very, very tough,' he said.

Australia came late to the retail revolution. Americans spend three times as much online per capita as Australians and Britons spend four times as much.

With the pace picking up, retailers are getting in a rage over their high rents and low sales. A retailer of skiing togs in Sydney is even asking for a deposit before potential customers can try things on.

The massive increase in value of the local currency is spurring the online boom.

'Usually, retailers would be the first to benefit from a rising dollar because it cuts the cost of their goods, but it doesn't reduce the cost of their wages and rent, so stores are being bypassed,' said Gerry Harvey, the boss of the retail chain Harvey Norman.

Harvey, one of Australia's retail success stories, also pointed to what he claims is the unfair advantage conferred on the online sector by the 1,000-Australian-dollar (1,060-US-dollar) tax-free threshold for imported goods.

In Britain, for example, any purchase more than 29 Australian dollars is subject to tax.

Online sales from overseas sites are growing at three or four times the rate as those from local sites. Last year, Australians made 77 per cent of their online purchases on Australian websites.

But talk of the shop-less society is premature. Online sales, excluding travel, represent 3.4 per cent of retailing.

But etailing was expected to grow threefold by 2015 to a value of 30 billion Australian dollars, according to the investment bank Morgan Stanley. How this growth is shared out would depend on how well Australian retailers pick up on the lessons learned in the United States and Europe, where the online world is more advanced.

'The winners will be those who make the most of their substantial investment in physical stores to build online sales and vice versa,' the Bain and Co report said. 'In the US, companies like Sears allow customers to make purchases online and then, after they receive an email that the products are available, pick up the products in the stores within minutes of customer arrival. Many others offer in-store returns of products purchased online.'

Up-market department store Myer Ltd, which currently books online sales of just 5 million Australian dollars, is hoping to raise that figure to 50 million Australian dollars by 2015. Its strategy is to follow Sears and integrate the two retail spaces.

'There'll be a small degree of cannibalization of our bricks-and-mortar stores, but we would rather steal some sales from ourselves than have someone else take our sales,' Myer chief Bernie Brookes said.