Retailers not sold on taking business online: Productivity Commission

Australia’s retail sector must overcome myriad of challenges before its is able to address the growing loss of sales to overseas online outlets, according to the Productivity Commission’s Economic Structure and Performance of the Australian Retail Industry draft report.

Citing Access Economics research, the report claimed a lack of understanding of how e-commerce works along with its potential benefits and negative perceptions about the cost involved in setting up and maintaining Web-based facilities were causes of the apparent slowness of Australian retailers investing in online facilities.

Further, limited or unreliable broadband access and speed, a lack of skills available to track sales online, the inability to compete with overseas competitors online, and the perception by some of the larger retailers that they will lose the impulse buying from customers visiting bricks and mortar establishments were also major inhibitors.

An attitude among larger retailers that the purpose of websites was to [promote retail sales rather than facilitate online sales was also an issue.

“While department stores such as Myer and David Jones and large retailers such as Harvey Norman have had an online presence for some time, their websites appeared designed more to provide information on the range and specifications of goods they sell rather than to aggressively pursue online sales,” the report reads.

“Larger retailers may have been reluctant to invest in fledgling online infrastructure given their already heavy investment in large retail shopping facilities.

According to the report efforts at moving toward online shopping had been undertaken in a way so as to minimise cannibalising sales from traditional retail operations.

“In other words, the move into online retailing by some appears to be an attempt to protect market share from competitive online sellers and other competitors rather than expanding their business,” the report reads.

As a result of this approach online sales accounted for just 0.2 per cent of all retail sales for Myer and 0.1 per cent of sales for David Jones in 2009-10. JB Hi Fi — which has a relatively advanced online retail offering — had just 1.3 per cent over the same period.

Greater online ordering by retail business

Citing Australian Bureau of Statistics data the report however did note that the use of the internet by retail establishments to place and receive orders was growing relative to the wider business sector.

In 2009-10 33.8 per cent of businesses in retail received orders from both consumers and other businesses via the internet in comparison to 24.8 per cent of all businesses.

Some 51.4 per cent placed orders with other businesses compared to 46.5 per cent of all businesses.

“The extent of growth in the use of the internet to undertake business activities is reflected in the finding that just under a fifth (18.9 per cent) of retail establishments received orders via the internet in 2005-06, and 35.7 per cent placed orders,” the report reads.

“[The data] demonstrates the growth in the proportion of businesses who use the internet to expand their sales to both businesses and consumers and improve the efficiency of ordering inputs. “

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