Online retail sales growth in Australia eased in May following a boost the previous month, but is expected to continue to outpace sales growth at traditional bricks-and-mortar stores for up to another 18 months. The National Australia Bank’s latest online retail sales index found sales growth in May grew 18% compared with May last year, down from 24% year-on-year growth in April. “Despite an easing in the growth rate, it remains stronger than the comparatively soft trends across February and March,” the bank says in a statement. The statement says sales in bricks-and-mortar stores grew by 3.2% in April compared with the previous April on a non-seasonally adjusted basis. Internet sales made up 6.1% of total retail sales in the year to April, excluding cafes, restaurants and takeaway food, with Australians spending around $13.7 billion with online retailers in the year to May. NAB Senior economist Gerard Burg told StartupSmart the growth rate of online sales was likely to continue to outpace traditional stores over the next 12-18 months. He says department and variety stores claimed a large share of online sales as they embraced the internet and multi-channel retailing. Large retailers such as David Jones and Harvey Norman have in the past complained about internet shopping eating into their sales but have since created their own online offerings. Fashion, homewares and electrical appliances were the most popular items sold on the internet, with around 72% of sales made domestically. Paul Greenberg, chief executive of the National Online Retailers Association, told StartupSmart he expects the distinction between online and bricks-and-mortar retail will become less with time. “Where the real growth is coming is where retailers provide multiple points of purchase,” he says, noting that daily deals website OzSale had held warehouse sales and opened pop-up stores in shopping centres. Eddie Machaalani, chief executive and co-founder of online store builder Bigcommerce, told StartupSmart he can’t see online sales growth slowing down for at least four to five years. “There are a lot of industries that are still not online,” he says, “or worked out how to go online.”
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Retail giant Gerry Harvey has laid out some ambitious plans for his upcoming online store, saying that he intends to turnover $100 million from the site within the next two to three years and $1 billion within the next decade. However, Harvey has also warned that he may have to cannibalise some sales from franchisees to continue operating the recently launched daily deals website Harvey Norman Big Buys. While the site has mostly been selling discounted goods imported from overseas, Harvey says he cannot continue selling cheap goods forever and will need to introduce premium brands. "Hopefully I won't have to compete for five, 10, 20 years because I have got to be careful I don't upset my franchisees," he told the Australian Financial Review. It is understood that franchisees do not receive revenue from the Big Buys site. "I can say I won't [compete with franchisees] in the next year or two. But five years is too long a time to guarantee it." Harvey was contacted for comment this morning by SmartCompany, but no reply was available before publication. Despite the warning, Harvey is continuing with his online strategy. He says a full-service Harvey Norman online store is scheduled to launch by June or July, and franchisees will receive most of the revenue from those sales. Customers will have their goods delivered from the nearest franchisee. "I've told my team I want them to turn over $100 million within two to three years and then take it to $1 billion within five to 10 years," he said, adding that he had relieved franchisee fears by saying that the online store would be the company's main online focus, rather than the Big Buys site. "It's not a referral program because all the paperwork and business will be done through head office... the local store just gets told to deliver it and contact the customer when it's doing so." Harvey has been resisting moving online for some time, arguing that digital sales won't provide much, if any, benefit for the company. But it is suspected that Harvey Norman's franchising structure has been a stumbling block to moving online as well. However, Retail Doctor chief executive Brian Walker says he has access to various international examples of businesses showing that such a system can work. "I'd be happy to share them with Gerry," he says. Walker says that creating such a site will be good for the company, but warns that Harvey needs to keep focusing on a multi-channel approach that includes social media, etc, in order to increase sales overall. "It's not just about visiting the online store, but about using social media and having an experience that makes me want to spend more. You need to use all your channels to market here." "The strategy of the online store needs to integrate a good deployment model, social, media, and point towards the physical store as well that encourages me to visit that local store and spend more there. It's all about making the pie bigger." The move online for Gerry Harvey comes as a number of department stores including Myer and David Jones have started focusing on their digital shopfronts. Forrester research analyst Steven Noble says these bigger stores now have the perfect opportunity to increase their revenue as a result, even if digital stores are a small proportion of sales overall. "We are seeing more people going online, and we are seeing more users buying online, and that's going to continue. The arrival of each new retailer provides a new reason for an online shopper to continue, but there are other factors as well." "The fact internet access is becoming institutionalised, and so on, will help. I don't think the arrival of online retailers will increase sales overall, but with good luck and planning stores like Harvey Norman can take advantage of the growth of internet users overall."
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