Jamarr Mills is head of business planning, Australia at Essence, a global data and measurement-driven media agency which is part of GroupM.
There is plenty of speculation as to what post-pandemic behavioural changes will stick, and what shape the economic recovery will take in each market. One trend we expect to perpetuate in Australia, despite the impacts from job and income loss in the country, is the massive uptick in ecommerce. Ecommerce spending has seen a 29% month-on-month increase from March to April this year when lockdowns began. The same trend has been seen across the globe to varying degrees. In the UK, online shopping as a percentage of all retail reached over 30% in April, and ecommerce orders in the US and Canada saw 129% year-on-year growth as of 21 April. And while much of that shopping includes groceries and household essential items, a recent survey by Australia’s largest publisher reported that 66% of Australians are still shopping online for non-essential items, accelerating Australia’s comfort with ecommerce.
Over the past years, Australians have been dispelling the myth that they do not shop online. In fact, more than 73% of Australian households shopped online in 2018. However, while most are comfortable shopping online, it has not represented a large share of retail purchases - ecommerce only accounted for 10% of total retail spend at the end of 2018. This is what makes the 29% increase month-over-month so telling. In truth, Australians have a different relationship with online shopping compared to many other countries in the world. Many Aussies can attest that there are few things more Australian than going to Bunnings, the country’s leading hardware store, for a weekend sausage sizzle. Going instore is more than just a transaction; it is an experience. Which is why it is not surprising that Amazon, the ecommerce giant, remains challenged in Australia with only 26% of Australians saying they would consider purchasing from the site in 2019 (ahead of COVID-19), despite being in the market since 2017.
Australia’s pre-pandemic ecommerce growth was likely driven by two key factors: ease of delivery and payment incentives. Unlike local retailers, international players have struggled due to the country’s wide geographic distribution which has made same or next-day delivery sound like talk of flying cars. Many Australians find it easier to go to brick-and-mortar stores than wait ages for delivery. Still, physical retailers wisely saw the value in ecommerce as a way to attract younger audiences. Some retailers, including Kmart and JB Hi-Fi, have taken a leaf from the buying behaviour of popular marketplaces like Gumtree and Facebook Marketplace, and are embracing a convergence of the digital and physical purchase journeys. They have allowed shoppers to ‘click & collect’, in which purchases can be made online and picked up in a nearby store. Additionally, free and speedy delivery is provided when orders are made within a certain radius of a local store. Treating physical stores as fulfilment centres enabled retailers to grow their ecommerce presence in response to consumers’ need for instant gratification, while ensuring easy returns when those glitter boots did not quite match your suit.
After delivery, payment incentives may have been the biggest cultural driver of ecommerce adoption in Australia. New services such as ‘buy now, pay later’ (BNPL) and digital wallets made online shopping more appealing and easier to justify. Digital wallets have allowed consumers of all ages to consolidate their loyalty points from grocery to department retailers and access them with a click. BNPL services like AfterPay have built integrations with retailers, allowing customers to purchase anything no matter the price and pay it off in instalments of their choice - a boon to department stores and luxury retailers seeking to acquire new customers who may have found their price points out of reach. What is most interesting is the impact that Buy Now, Pay Later, and other global influences have had on the market - ‘purchase peaks’ were typically reserved for traditional holiday events such as Christmas or Boxing Day, but digital shopping holidays like Black Friday and Cyber Monday saw a 34.4% year-on-year growth in online purchases in 2019. The excitement for these digital holidays signaled a shift in Australia’s acceptance of ecommerce as a way of shopping without the physical retail safety net.
Although Australia’s embrace of ecommerce was growing, nothing could have prepared retailers for the reality of the COVID-19 lockdowns. The classic behaviour of going to the nearest store was no longer an option as restrictions closed all shopping centres and non-essential stores. There is a saying that “necessity is the mother of all invention”, but in this case, it was the mother of all adoption. Australia’s Buy Now Pay Later uptake created an opportunity for those affected financially by COVID-19 to maintain some normalcy in their purchase behaviour. Many categories often underrepresented in online purchases have been booming in these understandably financially-conservative times. In 2018, sporting goods were not on the list of top five online purchases, but data shows that the category has seen a 600% month-on-month increase in spending from February to March 2020 as isolation measures started. Other categories related to health and home have also experienced month-on-month increases from March to April including consumer electronics (+108%), home improvement (+76%), and beauty and personal care (+45%). Already, industries like apparel are seeing signs of growth and recovery.
If there is anything we have learned from the coronavirus, it is that the future is unpredictable. However, a study has shown that new habits take on average 66 days to become automatic. Although Australia’s restrictions have loosened, allowing for physical stores to open in some states, there are still restrictions in many areas facing lockdown, meaning the many days in lockdown have likely normalised ecommerce as the primary shopping habit for Australians. In fact, April 2020 welcomed over 200,000 new online shoppers and over a third of them made an online purchase more than once. Despite a focus on economic recovery, this presents an exciting time for business as the growth in ecommerce has introduced an influx of new customers, new product category insights and new purchase behaviour data. The COVID-19 response has helped businesses with decreased media spending still acquire new prospects. This means businesses can extract more value from budgets when they start spending again, as they will have a wellspring of data to enrich their media buying. With an eye on efficiencies, it is time for retailers to invest time to understand these new consumers, build customer data platforms and customer relationship management strategies for retention and re-engagement in the next normal. Smart retailers should be rebalancing the role ecommerce and instore touchpoints serve in their road to recovery. Perhaps, there is a future with an Australian ecommerce experience similar to Bunnings’ weekend sausage sizzle. No matter how retailers return, ecommerce will have more value for businesses and consumers post-lockdown than before.