Commonwealth Bank has released a trove of research on some hugely high-value data: the online shopping habits of 2.4 million of its customers.
That’s quite the rich population sample for a sector that was worth $15 billion in consumer spending for the year to February.
A standout finding in the research note published this morning is that growth in consumers’ spend with traditional bricks-and-mortar stores is starting to catch up with the pure-play online sector.
How about these numbers? In the 12 months to October 2011, pure-play online retail revenue grew 107% as online shopping went mainstream.
In the 12 months to July 2012, the growth was 34%.
In the 12 months to February 2013, it was 23%.
With the total online retail spend growth was at 16%, CBA says this convergence in the growth lines shows major established retailers like David Jones and Myer are “curtailing channel share losses”.
“This gives us more comfort that the overseas trend of traditional ‘bricks-and-mortar’ retailers dominating the online channel is starting to occur in Australia,” the note says.
CBA attributes some of the slowdown in growth to the effects of the strong dollar, as well as a “reduction in unsustainable market-share growth strategies in some categories” — some businesses targeting world domination but learning the harsh realities of competition in a low cost-of-entry world.
But there’s also a simple lever being pulled that’s squeezing the pure-plays, and it’s in search products like Google AdWords. CBA notes an “increase in the cost of internet advertising … as domestic bricks-and- mortar retailers start to shift their large marketing budgets online.”
Because AdWords works on a bidding basis the smaller operators, even those with healthy marketing budgets simply won’t be able to compete with the 800-pound gorillas when it comes to key search terms, even if their digital marketing spend is a fraction of what they’d spend in print or television.
Below is a chart showing the robust market share of domestic spend by CBA’s customers against internationals. From the note:
“The mix between domestic and international is now 61%/39%, which compared to 58%/42% a year ago. We are gaining increasing comfort that Australian retailers can fulfil the needs of local consumers. This would be a reassuring sign for the many Australian retailers that are investing heavily in the online space.”
There’s also a warning that the market has now reached a level of maturity that consolidation is inevitable – as in, some of the smaller, weaker players will start getting snapped up by bigger fish seeking to grow their market share. CBA forecasts “consolidation of pure play online retailers amongst themselves and possibly by traditional retailers. GraysOnline’s acquisition of oo.com.au is likely to be just the start.”
There’s blood in the water.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.