Unboxing Australia and NZ’s eCommerce paths

Published on the 21/02/2023 | Written by Heather Wright

Unboxing Australia and NZ’s eCommerce paths

Correction follows Covid-inspired hyper-growth…

The pandemic may have changed the way Kiwis and Aussies shop online, but when it comes to those changes, it’s something of a movable feast, with businesses being warned to keep on their toes in the coming months and years.

While Australia logged the largest December in Australian online shopping history in 2022, New Zealand’s online shopping slumped 23 percent to $480 million, with 15 percent fewer Kiwis shopping online during the month, buying less often and spending less each time.  

December’s poor showing – even the sales underperformed – contributed to the third consecutive quarter of online spending drops in New Zealand, with the rate of decline increasing each quarter. Q4 saw a drop in online spend of more than $422 million, or 22 percent, year on year.

“Are your social platforms set up to sell? That’s the big question for 2023.”

Those figures, however, aren’t as bad as they look and don’t tell the full story given the year-on-year comparison is against Q4 2021 – the largest online quarter seen in New Zealand, thanks to Covid restrictions during the sales.

“This no doubt contributed to an exaggerated decline that would probably otherwise have been a smaller quarterly correction,” NZ Post says.

For context, Q4 2022 was still up 49 percent on pre-pandemic Q4 2019.

Nonetheless, the figures point to another changing market in what is now a crucial channel for many businesses, especially those ‘digital first’ players.

Covid’s restrictions saw annual online shopping peaking around the globe. In New Zealand’s case online sales were nearly 70 percent above pre-pandemic levels. In Australia, too, shoppers moved online, with more than 80 percent of Australian households purchasing something online during 2021, though growth was more subdued in comparison to 2020.

“There was always going to be some correction to online’s hyper-growth in the aftermath of Covid restrictions,” NZ Post says in its latest eCommerce Insights.

“What wasn’t expected was the ‘inflation pandemic’ that also followed, characterised by higher prices, rising interest rates, a declining housing market and a decline in real wages.”

Kiwis responded by cutting back on their online spend once lockdowns lifted in the second quarter leading to the three consecutive quarters of declines.

But even with that cutback, the country recorded what is arguable a strong result for the overall year – with online spending at $6.07 billion for the year it’s just four percent below 2021’s record levels, and up 62 percent on pre-pandemic levels. Instore retail spend, in comparison, was up seven percent year on year.

Last month New Zealand’s The Warehouse Group noted that the impacts of the pandemic and its corresponding acceleration of eCommerce had put increased expectations on the company’s supply chain and fulfilment capabilities. The company also noted there was greater competition from a broader range of general and specialist retailers, both in New Zealand and overseas.

In Australia, meanwhile, December spend was up 1.2 percent year on year, though down 13.9 percent on November which was a record-breaking month. While the full 2022 annual report isn’t out yet, Australia Post says over the course of the year eCommerce was down 2.6 percent compared to 2021.

And while New Zealand’s Boxing Day sales were down 27 percent online and five percent instore, Australia’s Boxing Day week was 5.9 percent up on last year as shoppers sought to take full advantage of the last sales event of the year. Those figures continued to climb the following week – up a further 8.3 percent, week on week – as retailers continued to fulfil Boxing Day orders.

As to what we bought online, in New Zealand health and beauty was the online sector to experience positive spending growth, up 10 percent. That spend was driven largely by essentials such as drug store and pharmacy purchases (up 22 percent) and ‘misc. medical, up 24 percent. Spend on discretionary, non-essentials was down seven percent.

All other sectors saw a decline for the year – though specialty food, groceries and liquor saw the lowest decline, down just one percent, as online grocery shopping trends stuck (up 11 percent). Non-essentials, like liquor stores, were down 22 percent.

Homewares, appliances and electronics were also down saw the biggest decline as a category, dropping 10 percent.

In Australia, all categories saw a drop in spend for the 12 months to December 2022, with variety stores (down 11 percent), hobbies and recreational goods (-8.9 percent) and specialty food and liquor (-7.6 percent) seeing the biggest drops. As in New Zealand, health and beauty saw the least decline, at 2.2 percent.

eCommerce trends for 2023 

But with the changing financial landscape, both NZ Post and Australia Post are warning there could be rougher times ahead, requiring eCommerce businesses to dig deep in order to stand out from the crowd and grow.

In a tough economic environment, household spending is forecast to remain weak, leading NZ Post to predict ‘another challenging year for online retailers in 2023, requiring them to continue to adapt their product, website and delivery experience to meet customers changing needs and to offer more value’.

Australia Post says the year ahead signals a time when businesses will need to focus on building strong relationships with customers, with sustainability practices, shifting payment preferences and growing expectations for delivery and returns processes also featuring highly.

“As the economic future becomes less easy to predict, shoppers are searching for businesses they can trust, with a focus on stability and positive relationships,” it says. Establishing ‘clear trust signals’ including positive reviews, clear information on your About page, well-written content and contact information will be key, as will ‘being human’ and providing a strong sense of connection via social media and empathetic customer service that anticipates their needs and pain points.

And speaking of social, Australia Post says social commerce continues to be a growth market as consumers look to buy directly from social channels.

“Are your social platforms set up to sell? That’s the big question for 2023. Whether you’re starting to sell socially or improving your process, set your focus on the platforms that attract your ideal customer.”

For Gen Z, that’s likely to be TikTok. For Gen X, it’s more likely to be Facebook or YouTube.

Upping the delivery and returns game will is also in focus, Australia Post says, with customer expectations for fast delivery and multiple collection options expected to continue to rise.

It suggests ensuring delivery options are clear on the website and monitoring whether they are meeting customer expectations, along with providing easy returns, citing its own research showing almost two-thirds of online shoppers say the cost of returns is their top barrier when it comes to shopping more.

While 70 percent of Australians intend to be more mindful in their spend this year, the convenience and lure of bargains is expected to continue to keep Aussies online shopping, with the lure of key sales events such as Click Frenzy, Afterpay and Cyber Monday, an opportunity for businesses to attract new customers and garner more spend from existing customers.

It’s forecasting big growth ahead for Buy Now Pay Later (BNPL) options, such as Afterpay and Zip, which are tipped to double market share this year.

“This will see them attract one in five Australians as we witness the slowing of credit card use.”

BNPL is also proving popular in New Zealand, with GlobalData forecasting 28.3 percent growth for the year ahead.

In fact, it’s proved so popular – the amount of money spent with BNPL in New Zealand jumped to $1.7 billion in 2021, up from $755 million in 2020 – that plans are underway for new protections for consumers using BNPL. Feedback on the proposals closes this week, and if adopted will see BNPL consumers receiving many of the same protections as borrowers using other consumer credit such as credit cards and personal loans.

Loans above a certain threshold – currently proposed at $600 – would be subject to affordability checks. Comprehensive credit reporting will be required for smaller loans and all providers will need to have hardship processes in place and belong to a dispute resolution scheme.

Australia Post, meanwhile, says new BNPL companies are likely to appear this year and gain popularity.

Also on the up is the sustainability push, with Australia Post saying consumers are willing to spend with brands that meet their sustainability values – meaning it’s time to check the health of your business’ green practices, from using sustainable materials in your products, to carbon neutral delivery options and being transparent about your sustainability initiatives.

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