Online business is nothing new so what is all the fuss
about? A recent report by Access Economics compared the impact of
the internet to the roll out of electricity because both are
enabling technologies that change all industries in their wake, not
just a few.
We explore why online vs instore is a bigger issue than
The high Australian dollar is giving Australian consumers
'more bang for their retail buck' globally. Not only do
Australian consumers benefit from a currency driven discount but
they can also take advantage of heavy discounts offered by
retailers domiciled in underperforming economies.
Australian instore retail is suffering more from consumer
cautiousness than as a result of international ecommerce. Instore
and locally based online retailers are simply competing for
'share of wallet' in an environment where consumers are
looking for the best available deal. Economic conditions have given
consumers a reason to go global – particularly for
The Communications Report (No. 1) released last year by the Australian Media
and Communications Authority (ACMA) showed that overseas
websites have attracted an increasing proportion of online
shoppers. In the six months to April 2011 the number of shoppers
mostly purchasing from overseas sites increased by 7% to 19%,
however, the number of shoppers purchasing equally from Australian
and overseas sites increased by 10% to 29%. So, online does not
necessarily mean overseas.
Fear of online shopping has diminished
The ACMA Communications Report (No. 3) states that the
proportion of people reporting 'lack of trust' in the
internet declined from 25% of non-internet shoppers in November
2009 to 19% in April 2011.
Technology is a part of our life
The Access Economics report
The Connected Continent states that, "The direct
contribution of the internet ?to the Australian economy is worth
approximately $50 billion or 3.6% of Australia's Gross Domestic
Product (GDP) in 2010. This contribution is of similar value to the
retail sector or Australia's iron ore exports." The report
also predicts that over the next 5 years, this contribution will
increase by 7% to $70 billion – twice as fast as that
forecasted for the rest of the economy.
Internet use, and in particular smartphones are an integral part
of our lives. As access speeds increase, the integration of
technology into the way we live and act will only become more
The ACMA Communications Report shows that at April 2011,
approximately 58% of adult mobile phone users in Australia had a 3G
mobile handset, with 37% of mobile users owning a smartphone.
During June 2011:
1.55 million people in Australia aged 14 years and over used
social networking services via their mobile phone
751,000 went online via their mobile phone to use banking and
bill payment services
Just over 100,000 purchased a good or service. That's in
one month – almost a year ago.
The internet and online shopping is just for the young
The ACMA Communications Report (No. 3) states that "in the
six months to April 2011, approximately 62% of adult internet users
purchased a good or service online" with the 35 to 44 year
olds most likely to have made a purchase. This age group also
reported 'convenience' as the primary reason for shopping
online whereas the 25 to 34 age group reported 'price' as
Online vs instore – is it fair?
In Australia much of the debate has been around the Low Value
Import Threshold (LVIT) that exempts goods under $1000 from GST and
duty. The Productivity Commission recommended that the Government
lower the LVIT to promote tax neutrality but not until it is cost
effective to do so.
In reality, there are many businesses trading online as part of
their overall strategy – not as their complete model.
Think Apple – they have a strong online presence and
invest heavily in their shop fronts. And, according to PayPal, over
Christmas 2011 Toys 'R' Us and Dan Murphy's experienced
their largest ever online sales during the Christmas trading
Competing with a global online business whose customers do not
need to pay GST is not fair. But neither is the bargaining power
and price differential exercised by big retailers playing on the
same field as small retailers. It's just a fact of business
In Australia, according to the Access Economics all SMEs they
surveyed had internet access but only half have a website and only
30% use the internet for marketing, sales and procurement. There is
a lot of room to move. The internet is only one facet of a broader
picture of your business strategy.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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