The Great E-commerce Opportunity

Originally featured in the Australian Financial Review

The coronavirus pandemic has accelerated many trends that were already under way in the economy, from the widespread adoption of working from home to the digitisation of businesses of all sizes. One notable trend represents a major opportunity for e-commerce entrepreneurs: the dramatic shift to online shopping.

Initially driven by necessity at the height of the economic lockdown and social distancing requirements, consumers have come to develop a lasting taste for buying online.

When Australia Post released its Inside Australian Online Shopping 2020 eCommerce Industry Report in June, it noted that Australian e-commerce grew more than 80 per cent year-on year in the eight weeks after the COVID-19 pandemic was declared by the World Health Organisation in March.

“2020 has been a year like no other for e-commerce,” Ben Franzi, general manager of parcel and express services at Australia Post, writes in the report.

“Though it’s still too early to say how the industry will look post-pandemic, it’s clear this crisis has set a new baseline.”

Franzi adds that “many of the changes we’ve seen are likely here to stay”.

According to National Australia Bank’s latest monthly Online Retail Sales Index, online sales grew 59.3 per cent in the year to October 2020. NAB estimates that Australians spent $42.2 billion on online retail purchases in the 12 months to October or 12.3 per cent of total retail sales.

A report by Deloitte, Digital Consumer Trends 2020, released in October, describes COVID-19 as a catalyst for change. Deloitte surveyed 2000 Australians about their digital consumption habits and found that at the height of the lockdown in June and July, 24 per cent of respondents reported that they had purchased non-grocery items online for the first time. Social distancing was the overriding factor, but 55 per cent stated that they expected the shift to be permanent.

“The devastating impact of COVID-19 and the resulting lockdown has undoubtedly acted as a catalyst: speeding up consumers’ digital adoption and introducing new trends at a rate few could have predicted,” says Deloitte partner and national telecommunications leader Peter Corbett.

A report by ecommerce platform provider Shopify, Future of Commerce 2021, describes 2020 as “one of the most disruptive years for commerce”, adding that the impact of COVID-19 on consumer behaviour “pulled commerce forward by 10 years”.

Among the predictions contained in the report – based on merchant and customer data from around the world – is the forecast that “young consumers will change the business landscape as e-commerce charges ahead”.

According to Shopify, 67 per cent of consumers aged 18-34 have shifted more of their spending to online shopping since the pandemic was declared, compared to 54 per cent for all shoppers.

A burgeoning domestic e-commerce market provides the perfect springboard into global markets.

Matt Malcolm, founder and managing partner of e-commerce consulting firm Gallantway, says the shift to online shopping represents an opportunity for small Australian e-commerce brands to “become impressive enterprises on the global stage”.

“The internet has made it possible to create e-commerce brands and businesses that serve niches that were nascent or didn’t exist at all five or 10 years ago,” Malcolm says.

“Being able to reach millions of potential customers has never been easier thanks to key partners of ours like Shopify and advertising platforms like Google and Facebook.”

Some of the hottest new e-commerce categories to emerge in the past 12 months include fitness and self-improvement, games and toys, and comfort fashion.

Malcolm says e-commerce provides entrepreneurs and growing brands with potential audiences of millions, but while a good idea is the beginning of a good business, the fundamentals of business success also apply to online entrepreneurs.

“The building blocks are similar whatever the business. Good ideas are important but execution and great partners are the larger part of success,” he says.

Those building blocks include: “great products that your customers love”, customer acquisition and retention strategies, understanding and meeting customer expectations, supply-chain reliability and the old faithful – a business plan.

But e-commerce businesses also have inherent advantages: agility, exposure to global markets, the ability to better understand customer preferences and behaviour via customer data.

One of the attractions of e-commerce brands is the relationship they are able to build with customers.

“E-commerce businesses are championing a new wave of social responsibility,’’ Malcolm says.

‘‘Almost all of our current clients have environmental or social aspirations that go beyond the bottom line and consumers are attracted to that. A lot of the founders of these businesses are more progressed on issues like climate change and sustainability than larger enterprises, and a growing trend is that consumers want to buy from businesses whose values are more closely aligned with their own.”

Australian e-commerce businesses possess another advantage that is uniquely theirs: “Brand Australia’’.

“Brand Australia is an incredibly powerful selling point,” Malcolm says. “The Asian luxury market is booming and e-commerce is a huge opportunity for e-commerce entrepreneurs. Australia is recognised internationally as a country that produces great products and great brands and we should be leveraging that.”