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The number of Australian households shopping online continues to grow, but consumers are spending less at the virtual checkout and hunting harder for bargains as budgets get stretched.
A quarterly eCommerce update released by Australia Post on Wednesday suggests conditions are softening in online retail, even though the sector is becoming more entrenched in the everyday lives of Australians.
Online mid-year sales events helped drive retail turnover for the past couple of months. Credit: Shutterstock
The national postal carrier said, on average, 5.5 million Australian households made at least one online purchase each month between April and June – an increase of 3.9 per cent on last year.
Transaction growth was strongest in the regions, where online purchases were up 4.2 per cent for the quarter. Transactions in the Northern Territory increased by 9.3 per cent and in Western Australia by 6.9 per cent.
Despite this, consumers spent less. Overall spending was down by 3.1 per cent nationally compared with last year. The average basket, or transaction, size was down by 6 per cent to $105, according to the report.
The data also suggests that online sales events are driving shopping activity, with the number of orders made during “end of financial year” sales up by 4.3 per cent on last year.
“Aussies are now more cautious and selective with where and when they spend their money,” Australia Post’s executive general manager of parcel, post and e-commerce services, Gary Starr, said.
Retail giant Amazon was one brand to report recently that promotions were bringing more shoppers online. The company said last week that the start of its Prime Day sales event marked the biggest ever sales day on Amazon’s Australian website.
But evidence of an overall slowing in online spending comes as consumer confidence figures continue to show softness, with the ANZ-Roy Morgan consumer confidence reading down 0.7 points on Tuesday to mark a third-straight week of declines.
Data from ecommerce software provider Shippit for June showed that big-ticket purchases were seeing some of the greatest softening in online sales in this environment, with home furnishings orders down 10 per cent and computers and electronics down 48 per cent compared with June 2022.
The Reserve Bank of Australia’s decision to leave the cash rate on hold in July did little for the optimism of consumers, who have been trading down their purchases to more affordable options for months.
Stock watchers have already lowered their earnings expectations for several discretionary retailers in the lead-up to full-year results in the face of cautious trading updates. Electronics retailer Harvey Norman revealed last month that its earnings were set to slump by 25 per cent.
Morgan Stanley analysts said this week that weakening demand made for a “difficult set-up” for fellow consumer goods brand JB Hi-Fi into next year. Its team said wariness over tough conditions have led it to have lower expectations about the company’s earnings than the rest of the market has.
“We see financial year 2024 consensus as underestimating the additional downside risk created by a weaker consumer,” they said in a note to clients.
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