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As inflation, rising interest rates and cost of living pressures continue to impact Australia, online shopping remains popular. Consumers don’t seem to have plans to cut back on their online shopping anytime soon.
Power Retail’s August Trajectory report found at 8 out of 10 Australians (79%) either plan on increasing their online spending or keeping it the same.
Power Retail offers online retailers and suppliers access to a range of critical intelligence tools.
Data for the survey is sourced from Power Retail’s Benchmarking Index, using aggregated e-commerce analytics feeds and externally sourced data from Australia’s Top 100 online retailers, drawn from more than 10 million sessions per month, updated every 24 hours. Consumer data is also collected from fortnightly surveys with a minimum of 1,000 respondents from randomly selected Australian online shoppers.
On Tuesday the RBA lifted the cash rate by another 50 basis points to 2.35%, its highest since early 2015 with annual inflation now at 6.1%. The increase marked the fifth in as many meetings with RBA Governor Philip Lowe on Thursday conceding the bank had underestimated inflation and signalling further rate hikes to bring it back to its 2-3% target.
Insights editor at Power Retail Natasha Sholl told Stockhead given that inflation and rising interest rates are putting increased financial pressure on everyday Australians, it’s interesting to note that the majority of consumers don’t plan on cutting back on online spending in the shorter term.
“In fact, while we saw a dip in consumer confidence last month, we can see it’s once again on the rise. Of the shoppers who do plan to decrease online spend, the majority were saving for essential items.”
Sholl said what’s interesting is that despite the rising cost of living, payment methods seem pretty ingrained.
“PayPal and credit are usually at similar levels in terms of last payments made, and BNPL has hovered around the 16% mark consistently for the last two years.
“We were expecting some volatility or a massive shift in line with economic pressures, but that’s not something we’ve seen.”
Sholl said another interesting trend to note is there is a connection between returns policies and both conversion and retention.
“75% of consumers say that a retailer’s returns policy is extremely or very important when considering an online purchase and the same percentage say that they would be unlikely or highly unlikely to purchase from a retailer again if they had a negative returns experience,” she said.
Sholl said after what has been a rollercoaster few weeks on the ASX, E-Com shares look to be finding some kind of equilibrium.
“In the last seven days, the E-Com Index is up 1.1%, outperforming the S&P/ASX200 which shed 2.5% in the same period,” she said.
Australia’s largest online retailer recently released its unaudited FY22 results including revenue up 7.5% to $240.8 million and shipped units up 4% to 8.5 million.
Average order value increased 6% to $75.59, while average spend per customer, per year was up 6.4% to $134.94. However, underlying EBITDA was $6.2 million which despite the uplift in revenue was down from FY21 of $13.6 million.
It has been a challenging year for the company though including the resignation of its CEO and co-founder Tony Nash and an ACCC penalty. Turning the page for positive notes though, Booktopia announced in August that it had signed a lease for a new 20,000sqm Customer Fulfilment Centre (CFC) at South Strathfield in Sydney’s west.
“In terms of pure play e-commerce stocks, we’re keeping a close eye on Booktopia while we wait for news of a new CEO appointment,” Sholl said.
The company’s share price has fallen 81.16% year to date.
The online furniture and homewares store announced a 31% boost to revenues in FY22 to $426.3m and 142% on a two-year period, which equates to a 55% two-year CAGR.
EBITDA margin of 3.8% was at the high end of the company 2-4% target range, this includes an investment of $1.7m in the TPW’s new home improvement site The Build.
The TPW share price is up ~10% in the past week.
“Temple & Webster has been quite strong and it will be interesting to see if there’s still room for growth here,” Sholl said.
Stockhead’s Christian Edwards can tell you all about the diversified e-commerce platforms delivery of its full-year loss after-tax of $35.5 million in FY22.
“The financial year was significantly impacted by ongoing Covid-19 related interruptions and associated fluctuations in demand, experienced across the entire retail industry, resulting in increased logistics and other operating costs,” Kogan said in an ASX announcement.
“The company has made significant progress to achieve a leaner business model in the second half of FY22, by right-sizing inventory and reducing associated operating costs.”
Sholl said it will be interesting to see how the retailer which sells everything from clothes, furnitures, electrical items, credit cards and insurance turns its fortunes around.
“And of course after overcoming some inventory management issues last year, Kogan is always an interesting one to watch,” Scholl said.
The Kogan share price is down ~58% year to date, but is up ~1.4% in the past week.
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