Australian retailers are entering into the Christmas season with high spirits, but few expect to see more than 2% of sales from their online channel, according to a new Deloitte report. 

The Christmas Retailers’ Survey 2012 found many interesting trends regarding the current state of retail in Australia, yet the key issue within the findings appeared to be that online is still not a top priority for retail heads. 

Christmas optimism 

Most retailers seem optimistic about sales this Christmas period, with 70% saying they feel more positive than they did twelve months ago and as many expect sales to be higher. 

David White, the national leader for retail, wholesale and distribution at Deloitte, cited that this optimistic insight was extremely gratifying, but retailers will need to have a carefully planned, market-conscious stratgey – especially around the issue of discounting – if they want to reap the rewards during the holiday period: 

Despite challenging conditions leading into Christmas, there is a clear underlying optimism for the holiday period. Many retailers are expecting to achieve higher sales as well as margins. However, the key to the success of this strategy will be early and continued discounting. 

Too early and potential full prices sales are lost. Too late and competitors will take market share. 

32% of retailers said they will begin discounting in early December in order to capture the most sales, but a similar proportion (35%) said they will only be doing discounts between the 27th and 29th of December.

A further 23% said they will discount products in the week coming up to Christmas and 10% said 30 December to 2 January is when they expect to run discounts.

Slow shift to online 

Despite nearly three-quarters of respondents feeling optimistic about Christmas sales, 65% of retailers expect less than 2% of their sales to come from their online channel, which is drastically low.

While this figure indicates that online isn’t bringing in revenue for retailers, the report suggests the finding may actually be an indication of how few retailers have an online channel. 

Abigail Thomas of Deloitte Digital said another reason for this low expectation could be that retailers aren’t yet properly geared up for online shopping and may not believe consumers are ready to make their principal buys online.

However, retailers aren’t ruling their online channels out altogether, 56% believe they will see more than 10% growth in this area in 2013.

Rising competition

Cost pressures don’t seem to be a big concern for retailers at the moment, with only 10% saying they find this an issue. In contrast, 19% see macroeconomic factors as a concern and 31% cite existing competitors to be a worry.

When it comes to competition, 33% of Aussie retailers are concerned about going up against foreign-owned bricks-and-mortar stores and 27% are worried about locally owned bricks-and-mortar stores.

However, online stores seem to be less of a concern for retailers with only 25% seeing international online stores as competition and a very small 6% seeing Australian online retailers as a threat.   

But White said this lack of concern for digital disruption could cause problems for retailers down the line:

Undoubtedly, traditional risks remain significant, but there is a danger of being blind-sided, missing opportunities or simply being left behind by the competition if the threats from digital innovation aren’t recognises and fully appreciated early enough. 

There is still clearly money to be made from traditional bricks and mortar stores, but combining store network expansions with a broader omni-channel strategy will be key to a retailer’s success.

Thomas agrees with this sentiment, saying that retailers should be looking to sectors that have already become almost exclusively digital in order to properly model their business: 

Electronic retailers can act as a role model for other segments; this survey suggests that 75% of them see omni-channel expansion as a core strategic focus.

The next twelve months 

One-third of respondents indicated that online offerings and new sales channels will be key strategic priorities in the next twelve months, as well as newer trends like click-and-collect and an increasing focus on leveraging mobile. 

But only a small number said overseas expansion will be on their priority list during 2013, which demonstrates that even though foreign players are entering the Australian market, local retailers are somewhat reluctant to head overseas themselves.

Retailers are also still very focused on their bricks-and-mortar channels, with 73% foreseeing growth in this area next year and 33% believing it will be the largest driver of new growth for their business.  

This doesn’t sit too well with Thomas, who says that digital needs to be bumped up to the top of the priority list for most, if not all, retailers

The urgency…to adopt an effective online strategy is clear – and the anticipated growth in future online sales suggests many retailers recognise this.