Weak electronics sales slow online retail spending

Domestic retail spending still makes up the majority of online sales in Australia

Consumers are easing back on their online spending, according to a recent report by National Australia Bank (NAB).

The report said online sales dropped 15.5 per cent for the year to April 2012 to $11.1 billion. However, the report stated it is still unclear whether the slowdown is a continuing trend or an outlier.

A slowdown in purchases of electronics and household goods has primarily driven the fall, with a negative growth rate of 5 per cent. This compares to growth in other sectors of 20 per cent or more.

“Weakening in domestic demand and consumer behaviour regarding recent tablet sales may have contributed to this trend,” wrote Alan Oster, group chief economist at NAB, in the report.

Online retail sales still outpace traditional retail growth, with online retail growing 15.5 per cent for the 12 months to April 2012, compared to 4.1 per cent in traditional retail. However, traditional retail still clearly dominates, totalling $218 billion in sales for the year to March 2012, with online sales accounting for only 5.1 per cent of all retail sales.

“Central to many of the conversations I’m having with our retail clients is the need to adapt their businesses as consumer preferences and spending habits change by considering a multi-channel approach,” said David Thorn, managing director, head of consumer sectors, NAB Institutional Banking.

“Consequently, it is important for the sector to understand what is happening across online and the traditional bricks and mortar footprint.”

While growth in domestic sales fell 16 per cent for the year to April 2012, the report stated domestic retailers still dominate online retail sales at 73 per cent.

However, international sales are catching up, increasing by 13 per cent for the year to April 2012. The report noted, though, that growth rates for international retailers in the first half of 2011 reflected a one-off surge in international sales in late 2010.

“The volatility in both the index level and growth rate for [home, furniture, appliances and electronics] may reflect a weakening in domestic demand as well as unusual consumer behaviour, particularly surrounding the launch of the latest generation of tablets,” the report said.

“This contributed to the spike upwards in the index for March. The comparative weakness for [these sectors] in April may reflect the success of the previous generation of tablets for the same period in 2011.”

Follow Stephanie McDonald on Twitter: @stephmcdonald0

Follow Computerworld Australia on Twitter: @ComputerworldAU

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