43% of online sales go to foreign online retailers: Report

New research reveals 43% of Australian online sales go offshore, suggesting foreign retailers are successfully targeting Australian shoppers and have gained a strong foothold in the local market.

The Global Retail Insights report, released by the Australian Centre for Retail Studies, is supported by data from Google and direct marketing company Salmat.

ACRS research fellow Sean Sands says the research shows UK department stores pose the biggest threat to local retailers, followed closely by US retailers.

“Overseas retailers are definitely on the attack. About 43% of local sales online are going offshore… My gut feeling is the penetration rate will be increasing in the next few years,” Sands says.

“They’ve got the stocks, the brands and the distribution systems in place.”

Sands says while Australia is a relatively small market, it is considered quite lucrative given the strength of the Australian dollar and cultural similarities to British and American consumers.

He is urging retailers to provide online sales options to avoid being made redundant, describing the trend as a tipping point.

“It’s interesting because the innovation has been coming from the smaller players and the bigger guys have been lagging,” he says.

Ross McDonald, Google head of retail in Australia, says UK and US retailers are paying Google to aim online advertisements at Australian shoppers searching for products online.

Despite the increasing number of Australians browsing the websites of international retailers, the research reveals 68% of Australians still prefer to shop domestically.

“Australian consumers still want to shop from local retailers but [the number of] people searching for international retailers is increasing at a faster rate [than those looking for local stores],” McDonald says.

According to the research, consumers are also starting to demand more of retailers, including pre-purchase research resources and fully transactional websites.

The research also states that mobile must be a key consideration for retailers in the year ahead.

“Over Christmas 2010, 17.5% of all Google retail searches occurred on a mobile device and [catalogue site] Lasoo saw an increase of over 1,500% of mobile searches, with over 15 million catalogue pages viewed on Lasoo’s iPhone application,” the report says.

There is also an expectation for retailers to be across multiple channels to help generate sales.

“Retailers are starting to see online as a brand and engagement channel for driving store traffic and sales, not just as an eCommerce or fulfilment platform,” the report says.

“Australian retail marketing teams are changing dramatically… yet still lack much of the expertise required to execute multichannel strategies.”

“Retailers know they should be investing in new media but are apprehensive about making those investments and are therefore missing out on opportunities.”

This article first appeared on StartupSmart, Australia’s top site for start-up entrepreneurs.