Online Retail Sector Hots Up in 2011 with 83% of retailers increasing online budgets

I’ve talked about it for a number of years, and it seems 2010/11 will see major retail advertising expenditure and sale activity being transferred online. I am Chairman of AIMIA’s (Australian Interactive Media Industry Association) Retail Industry Group and if the current research we have conducted is close to being right, a group of major retailers will be looking to stake their claim in 2011. Interestingly, a second significant group of Australian retailers are still unsure of their approach to online advertising and marketing and seem almost embarrassed by how much they don’t understand online media and online selling, particularly at marketing management level.

According to our research, expenditure on online advertising will increase in 2011 with 83% of retailers increasing online budgets as % of overall marketing budgets - as retailers shift spend away from mature and fading media such as press and traditional direct mail. It’s an emerging fact that Australian’s are becoming conditioned to believing “if you want the best deal” you really need to go online – at least to look for the best deal – if not buy it online. There is no question that traditional media such as press still reaches a lot of people on a daily basis, but there are simply more eyeballs to be found online. Australian’s spend more time online now than watching television according to the 2010 Nielsen Technology Study – but more importantly consumers are seeing online as providing more up-to-date information on specials and deals.

The “you’ll find the best deal online ”movement has been enhanced by travel sitessuch as Wotif.com and more recently the emergence of online buying clubs like Buyinvite.com.au. Graysonline.com.au acts as an enormous clearing houses for wholesalers looking to clear heavily discounted stock. Often items being sold at these sites are still very current – due to extremely short sale periods most store retailers work to these days. The basic proposition of these businesses is known brands at incredible prices – and this is starting to eat away major store retail margins as they now have to battle with market perceptions that you “pay more if you buy in-store”.

I predict that most retailers in Australia will be forced to have an online sales offering in the coming three years. But even if they don’t they will need to have a strong online advertising presence to ensure their messages about offers and deals are put up against the emerging clearance houses and discount coupon businesses to maintain market share. If traditional store retailers don’t have their best offers online consumers will simply forget to consider them. The amount of people browsing online cannot be ignored by retail marketing managers and that is what we are seeing in the research. Those that are learning and adapting to the online media trends are surging as businesses - businesses like Kmart, Officeworks and JB HiFi to name a few. You simply have a look at their business results and how much effort they are placing on reaching consumers while they are online to see these are progressive businesses. Other businesses I see are less confident in the online space and are characterised by more difficult trading results.

It will be interesting to see over the next few years if some of our traditional retail business who don’t become active in the online space begin to fade and become less relevant to the Australian consumer.

The market research AIMIA has independently conducted through Monash University’s Australian Centre for Retail Studies is a landmark report that shows a clear picture of Australian retailers and their attitudes and adoption plans towards online advertising and etailing.

AIMIA will be formally launching their Market Leading research in Sydney and Melbourne on the 22^nd and 24^th of September. For more details on the event please visit www.aimia.com.au

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