Almost half of the New Zealand population will shop online in 2011 with each shopper spending an average of almost NZ$1,400. Total country online shopping expenditure for the year is expected to reach $2.68 billion, representing an increase of 12 per cent over 2010. Of this total amount, an estimated $910 million or 34 per cent will be spent with offshore online retailers according to a new report published by PwC and Frost & Sullivan.
Online retail expenditure now accounts for 5.1 per cent of all retail sales. This puts New Zealand on a par with Australia, but still well behind markets such as the USA and UK, where online now accounts for 7.5% and 9% respectively of retail sales.
Frost & Sullivan senior research manager Phil Harpur says “Online shopping, both locally and offshore, is expected to show strong growth over the next four years, reaching $4.22 billion by 2015. This represents a compound annual growth rate (CAGR) of around 12 per cent.”
According to PwC’s Global Retail & Consumer Advisory Leader, Stuart Harker, “New Zealand's retail landscape is commencing a structural shift as more consumers start to spend a greater share of their wallet online.”
“Large and small retailers alike are facing stronger than ever competition from digital channels, both here and overseas. Lower prices, convenience, greater product range and a growth in mobile devices are all factors fuelling online shopping.”
Over the next 12 months, 82 per cent of online shoppers surveyed indicated they would increase or at least maintain their current level of online expenditure. More than one third (38 per cent) of participants stated they were using smartphone or mobile device such as a tablet to buy products online.
“Mobile shopping has been one of the key drivers of online retail sales in the last 12 months and will continue to drive sales in the next year as new products are introduced into the market.” Mr Harker says.
NZ particularly strong in social media
The report notes that New Zealanders have displayed particularly high adoption rates of social media with 81 per cent of online shoppers in New Zealand – compared to 76 per cent in Australia - using Facebook within the last 12 months. This has helped social media to become an integral tool in the online shopping process as evidenced by the fact that more than one third (34 per cent) of all online shoppers in New Zealand currently follow an online shopping site on Facebook. This compares to 26 per cent in Australia.
Group buying sites are also becoming increasingly popular in New Zealand, with over 40% of online shoppers having used a group buying site in the previous 12 months
Challenges and opportunities for New Zealand retailers
PwC New Zealand Retail Partner Julian Prior says digital channels are changing the way New Zealanders shop, thereby creating both challenges and opportunities for retailers.
“The attraction of lower prices, convenience and broader product ranges is swelling the ranks of consumers choosing to shop online both locally and on international websites.
“New Zealand's retailers are now competing on the global stage and need to embrace the fundamental shift in underlying business models caused by the digital revolution.
“The general lack of an online presence by the large retail chains in New Zealand and in Australia over the last decade has been a significant factor for a relatively poor up take of online shopping within this region,” Mr Prior says.
“Engaging and retaining customers in the digital era requires a rethink of the role of the store and importantly how retailers engage with their current and target customers.
“Because customers can buy anything they want any time on any device, the store becomes more about brand and customer engagement, merchandise and the overall store experience.
“Retailers that are able to engage customers through multiple channels will build a deeper relationship than through a single traditional store channel,” Mr Prior says.