This will be the third consecutive year in Australia where online sales drive November into position as the highest dollar and volume sales month of the year. Traditionally, December has held that honour for centuries. But now, due to the large percentage of online sales events occurring in November, it has usurped December as the biggest retail month of the year. Last year, sales in Australia in November rose to $26.39 billion, while December sales fell 0.06 per cent to $26.25 billion.
That gap is forecasted to widen in 2018 with events like Black Friday, Cyber Monday, Singles Day and Click Frenzy all gaining momentum and increasing both the number of participating retailers and discounts offered. In addition, this will be the first year that Amazon will offer free delivery through the Prime offer that launched in July. Amazon claims that it will have “deals on tens of thousands of products in its first ever Black Friday event in Australia”. Prices are typically reduced by 30 per cent to 50 per cent in these events.
These online events are changing the way Australians do their Christmas shopping. Traditionally, Christmas retail sales would build in stores through November and December, reaching a peak on the weekend before Christmas and then again on Boxing Day.
Looking at the retailers participating in these events, there is hardly a national retailer that is not listed. From Harvey Norman to Woolworths, and brands are introducing special deals and offers for these events. Almost every category has great deals offered, including appliances, fashion, toys, fragrances, jewellery, phones and tech and homewares. Virtually anything and everything will be available at compelling discounts.
Furthermore, whilst Black Friday began as a one-day event, it now officially starts on Friday, November 23, and runs through the whole weekend. It’s followed immediately by Cyber Monday, which has now extended to include Tuesday. And in some cases, the week before and the week after! I sense a trend here.
This is putting even more pressure on bricks-and-mortar retailers, not only on sales, but on margins as well. These discounted November sales are cannibalising full-priced December sales. This is impacting any retailer that is not involved in these retail events. These online events also allow shoppers to browse and shop when they want to in the comfort of their homes, snaring bargains that they would have had to queue and fight for on Boxing Day.
According to recently released figures by ABS data and research by retail platform Neto, August online sales grew 28 per cent year-on-year, while clothing sales grew 57 per cent, homewares 55 per cent, health and beauty 37 per cent, and sporting goods 28 per cent.
This is truly staggering growth, and alarming if these trends continue.
The message is clear, online retail is here to stay and will continue grow at a pace that will impact bricks-and-mortar sales, as the total market will not grow as fast as the online sales. With wages growth stagnant, petrol prices at the highest level ever, interest rates low but threatening to increase, house prices falling and living standards declining, it is understandable that people are chasing bargains.
This is going to put great pressure on retailers to ensure that a visit to their store is a delightful and memorable experience that reduces the importance of price. However, depending on your category, location and structure, you need to think about the impact that this trend will have on your business and the old adage: If you can’t beat them, join them.
It seems like being part of the omnichannel world is no longer a choice. If you are not part of it or won’t join in on the largest shift in retail this lifetime, then you suffer the consequences.
First published on InsideRetail on 5 November 2018