SYDNEY, AUSTRALIA
In 2023, Australians spent $63.6 billion online, with more households shopping online than ever before, according to Australia Post. In 2023, 9.5 million households shopped online, compared to 8.1 million in 2019. But as an industry, we still don’t understand the impact online is going to have on retail.
New data from Roy Morgan earlier this year revealed market disruptors Temu and Shein are swallowing market share, nearing AUD $3B and growing. And that’s before we’ve even mentioned Amazon. Within six years, it has claimed 42 percent of sales in online marketplaces.
E-commerce is eroding bricks-and-mortar sales.
Amazon has invested significantly in local distribution and fulfilment. If others decide to take this approach, the outcome could be more extreme than anticipated.
Australian retailers are stuck in their old ways. Face-to-face interaction and personal relationships with customers are the way retailers worked for decades. But when e-commerce started to take off 20 years ago and IT companies used customer search history to build a profile of likes and dislikes, the way retailers operated changed.
The data was more sophisticated. Retailers could separate buying habits of men from women, young from old, rich from poor, urban from rural, culture from culture in a micro-marketing frenzy to help retailers target those more interested in their products.
Data yielded from e-commerce can tell businesses what their customers like right now, based upon previous purchases and buying habits. But the next transformation in retail is here, and the businesses failing to adapt will be left behind.
Artificial Intelligence (AI) and machine learning are being used to predict what customers want to buy, before they know, based on predictive analytics. Retailers have the ability to connect the right products in the right place at the right time with the right customer – before that customer has even realised they need it.
Let’s take an example. A thirty-something searches for private health insurance online. A day later, advertisements for house paint begin to appear on their social media feeds. Why? Because AI knows that half of all applicants for new private health insurance do so when they are starting a family. Half of these will need to make alterations to their home to accommodate a baby for the first time.
Ninety per cent of those will repaint the nursery in anticipation of their new arrival in six months. So, when the thirty-something goes searching for private health insurance, retailers know to offer special deals on cans of paint, before the prospective customer has even thought about re–modelling the house.
E-commerce platforms can monitor conversations and interests on Instagram, X (Twitter), TikTok, Facebook and other social media platforms, along with search history on Google, and matches them against age, spending levels, and location to predict future needs. It identifies lifestyle, interests, values and beliefs, personality traits, social class and aspirations, opinions and attitudes, and ultimately, future buying patterns.
Retailers who acknowledge the inevitable have done and are doing this, transforming their operating models. But the laggards ignoring e-commerce are doing it to their detriment and to their end.
It is not all doom and gloom – there is an opportunity for innovation. But while optimisng the online cost-to-serve and omnichannel fulfilment is crucial, it is shrinking market share that should sound the alarm.
Adapt and get ahead of the changing market conditions or you will no longer be a player.
This piece was originally published by MHD Supply Chain News on December 10, 2024.