Record high

The National Australia Bank Retail Sales Index showed that when compared with last year, online sales were up 27%.

While this is only a small increase on the annual growth of 26% that was seen in October, it is significantly higher than the 20% experienced in November 2011

National Australia Bank’s Chief Economist, Alan Oster, attributes this surge in November sales to consumers wanting to allow adequate time for the delivery of Christmas purchases – but he also expects the online sales index to decline for December, because of this very reason:

In the two previous years there has been a notable decline in online sales in December, due to the delivery time required prior to Christmas.

As the online market matures it will be interesting to observe whether consumers have greater confidence to make online purchases later in the month of 2012.

Online retail accounted for 5.7% of the overall retail spending in Australia in the year to November (excluding hospitality) and demonstrating that online shopping is experiencing greater growth than traditional bricks-and-mortar stores, which increased by only 2.8% year-on-year. 

Oster suggests that while the online retail space is still relatively small, it’s expected to continue developing at a rapid pace: 

I think increasingly, people who are not online are realising that they have to be online.

Every four years, it’s going to double. At 10 per cent, it’s pretty important, but at this stage, it’s only 5%.

Retail drop

However, overall retail trade figures released by the Australian Bureau of Statistics reveal a 0.1% drop in total retail sales in the lead up to Christmas, surprising economists somewhat, who were expecting a 0.3% rise following a flat result in October. 

Household goods saw the biggest fall in spending (-0.9%), closely followed by clothing, footwear, accessories (-0.6%) and department stores (-0.4%).

AMP Capital senior economist Bob Cunneen said the while the results were “disappointingly soft”, retailers shouldn’t be worried: 

With the December interest rate cut starting to flow through, [retailers] should be a bit more positive that it should be a better year. 

But already, some individuals are linking the disappointing results to the Australian consumer preference for international online stores.

In particular, the Australian National Retailers Association Chief Executive, Margy Osmond, is being particularly vocal, calling for the Australian government to lower the GST local online threshold from $1000, despite evidence that GST is a fairly minimal issue within what is a much more complex situation: 

We know that Australians look for bargains overseas at peak buying times and it appears they have fully embraced overseas options early to ensure gifts arrive on time.

Australian retailing, our largest private employer is suffering, it’s time to act.These figures make it even clearer that we need the GST tax loophole closed or we will continue to see the retail sector struggle.

[Image credit: Libelul]