The online retail revolution is here.
Thanks to COVID-19, 2020 saw transformation in the retail industry go into overdrive – with this fully expected to continue through 2021 and beyond. Social distancing, restrictions and lockdowns have meant that more people are shopping online than ever before – and it shows. Online sales are at record highs with no signs of slowing down, and retailers are scrambling to meet demand while navigating the challenges of doing business online.
The challenge for retailers is how to capitalise on these opportunities. With access to the right retail finance products, businesses can capture once-in-a-lifetime opportunities and set themselves up for a strong, profitable future.
In this article, we look at how the eCommerce landscape has changed, which categories have been the biggest winners and what this means for your retail business.
Online sales soar
2020 was the year no-one saw coming.
Governments closed borders, imposed lockdowns and put restrictions in place. These changes hit the retail industry hard, forcing many businesses to shut down. Other ‘essential’ retailers faced strict store occupancy limits and reduced foot traffic.
Understandably, traditional retail rapidly declined as consumers were forced to find new ways to shop.
While eCommerce was on the rise well before COVID-19, its growth trajectory skyrocketed this year. In February, online sales made up 6.6% of retail and wholesale trade. That figure then nearly doubled to 11.1% in April. With the percentage of online sales remaining elevated ever since, it’s clear that consumer behaviour has changed.
Here are some of the drivers behind this change.
More people at home
With official advice to socially distance, work from home where possible and avoid non-essential travel, most of us spent a lot of the year at home. This meant that more of us also spent more time online than ever before.
Embracing online buying
Traditional retailer closures forced previously reluctant consumers to shop online. They also introduced more people to the benefits of online ordering, and saw previously lagging online categories – such as fresh food – grow, as buyers were encouraged to reduce their in-store visits.
We saw varying levels of lockdowns across the country, with metro-Melbourne, Victoria and Adelaide all experiencing multiple phases. These meant online shopping represented a reliable, consistent source of goods for many Australians.
Shift in spending
With Australians spending less on eating out and traveling in 2020, people switched their attention to online shopping. The demand for home-based products soared, and for those who weren’t impacted financially by COVID-19, spending continued.
So what does this mean for 2021 and beyond? For retailers who’ve embraced online business, sales and revenues have soared. Australia Post has brought their eCommerce growth projections significantly forward, with 5 years of projected growth occurring in 6 months.
In short, consumers have embraced digital faster than expected, and everything suggests the trend is here to stay.
The eCommerce winners
Life with COVID-19 has not only changed the way consumers shop, but also what they look to buy. And when it comes to eCommerce, the year has seen some clear category winners. With more people staying home and facing spare time on their hands, it’s no surprise that these categories have come out ahead:
- Home and garden – Australians turned to growing their own food, renovating and decorating in a year that had them spending more time at home than ever.
- Health and beauty – Gyms and beauty salons had to close during long periods of lockdown this year, forcing consumers to look for alternatives. Bikes around Australia sold out by June, sales of fitness apps grew and at-home beauty treatments quickly became the norm.
- Food and liquor – Pre-pandemic, consumers were slow to embrace buying fresh food online. This trend has now reversed, with total supermarket sales up 6.3% from a year earlier.
- Hobbies and recreational goods – products in this category sold out fast as COVID-19 first hit.
- Media – as Australians turned to more books, music and TV, they also turned to their phones. Social media use grew by 30% to help people stay connected with family and friends, and shop online.
For eCommerce category winners, 2020 was the perfect opportunity to build market share, and those who moved fast have made impressive gains. As we kick-off 2021, the question is, “What will online shopping look like in the future?”
The eCommerce legacy of COVID-19
The shift to online shopping began well before the pandemic, but COVID-19 has cemented its growth. As a result, the retail industry is in the middle of its biggest shake-up to date, with the pandemic’s legacy likely to forever change the shape of the industry.
New-look traditional retailers
For traditional retailers who relied on foot traffic, the year highlighted the importance of embracing eCommerce and significantly changing their business model. Moving to build an online presence helped businesses find customers beyond their geographic proximity, expanding their earning potential and diversifying their risk.
In fact, an online presence is no longer an option – it’s a necessity for most. Now’s the time to look at different eCommerce models and evaluate which would work best for your product or service.
The transition of more retailers to online business and the growth in dropshipping popularity means businesses face more competition than ever before. With so much noise online, investing in new product and service ideas and innovation will become crucial to stay ahead of your competitors.
Businesses with an established online presence are in the very fortunate position of taking advantage of growth opportunities. By capturing opportunities now while your competitors work to catch up, you can secure market share and brand equity that helps to set your business up for long-term success.
How to manage your cash flow and win in online retail
One of the key challenges facing online retailers today is finding the right funding to help them adapt and grow. Traditional financiers are tightening their lending criteria thanks to COVID-19 and other economic factors. This means it’s becoming more vital to increase cash flow and working capital in your retail business to fund those activities.
We have a range of flexible finance products that help retailers to tap into the power of your working capital and take advantage of the online revolution. Our most popular cash flow solutions include:
- Trade Finance: increase your purchasing power by providing your business with a convenient revolving line of credit to use when and how you need.
- Supply Chain Accelerate: a unique solution that links buyers, suppliers and financiers to lower costs and improve efficiency.
- OctetPay: secure better foreign exchange rates and pay your international suppliers via a dedicated payments platform.
Will you be part of the online revolution?
The retail industry has been undergoing an online revolution for some time, and COVID-19 has significantly accelerated this change. Whether you’re in a traditional retail business or already online, it’s time to look at the eCommerce landscape and decide where you want to fit in.
Our flexible retail finance solutions can give you the power to grow and scale your business.
Contact us to find out how.
Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.