Online sales just 5% of total retail but international purchases soaring, NAB index reveals

Online sales only represent 4.9%, or $10.5 billion, of all retail business and offshore retailers aren’t getting as much business as you may think, according to the results of NAB’s inaugural online retail sales index.

However, sales at offshore sites are growing at a much faster rate than domestic sales.

The new index is based on tracking more than two million non-cash transactions per day, scaled up to replicate the broader economy.

It comes as the retail industry undergoes a structural shift, with customers increasingly heading online and directing their spending towards services rather than goods. There have been more than 500 store closures over the past year.

However, the index gives some hope to bricks and mortar stores, revealing that bricks and mortar still dominate with 95% of all business – and almost three-quarters of online sales are being made at domestic retail outlets.

NAB head of consumers sectors David Thorn said the index reveals some crucial backup to the idea that while online sales are growing strongly, bricks and mortar aren’t losing their grip on the market as quickly as some may think.

“The index shows that over 95% of retail sales are still made in bricks and mortar stores, so whilst online sales are growing strongly, they make up only a small part of total retail sales.”

However, Thorn agreed changing consumer preferences “are no doubt causing some structural changes in the retail sector”.

“That structural shift is behind a 29% increase in online spending in 2011. And while three quarters of spending is sent to the domestic market, 27% is going towards offshore retailers, although local retailers have reason to be alarmed – offshore shopping is growing at 40% compared to 25% for domestic retailers.

The index also reveals some of the more popular categories for online retail. By far, the largest category for items purchased online was “auctions, department stores, fashion, cosmetics and variety,” which accounted for nearly 40% of retail goods bought online.

Food has the largest share of physical retail but it remains the smallest of all four indexes, taking up just 13% of business. Home, furniture, appliances and electronics took 20%, while recreation, toys, games, hobbies and music also took 20%.

The vast majority of online spending is also concentrated among those aged in their 40s, 30s and under 30s, with each of those groups accounting for 23%. However, those in their 30s and 40s dominate online spending in per capita terms, and under 30s are below average – although they have recorded the strongest growth rate over two years.

State by state, New South Wales has the largest total share of online spending at 35%, followed by Victoria and Queensland. People in metropolitan areas made up 72% of online sales in 2011. Growth in spending for regional areas is also higher than growth in metro areas.

On a per capita basis, the ACT and the NT have outperformed the other states, while WA has recorded the strongest growth rates.

The survey recorded that online sales actually fell in January, although online sales – unlike bricks and mortar – tend to be very seasonal. The index fell from 190.5 in November, to 184.8 in December, to just 158.9 in January.

“The lead-up to Christmas is the peak period for both traditional and online retail; however November tends to record stronger spending levels in our online series – reflecting the additional time required to allow for the shipment of purchase goods,” it noted.

Online sales just 4.9% of total retail but international purchases growing at 40%, inaugural NAB index reveals