Features

COVID-19 drives an e-commerce revolution

Australia Post reported its busiest day in history due to a record breaking boom in online consumers. Ben Franzi, General Manager, Parcel & Express Services at Australia Post accounts how this is a transformational time for the nation’s post and parcel service.

Millions of people around the world are being encouraged to stay home in an attempt to flatten the curve of infection from COVID-19.

In Australia, many people are also being encouraged to work from home. This rapid change in routine has led to a significant change in consumer behaviour.

Following the stay-home directive, people are forced to use the internet to connect with loved ones, participate in gym classes, or even see a doctor via an online video conferencing service.

Another change in behaviour during COVID-19 is in people’s shopping habits. Across Australia, there has been a huge increase in online shopping as people take to retail therapy during the coronavirus lockdown.

This trend can be seen across the world, with Italy also reporting an 81 per cent increase in e-commerce transactions since the end of February, estimates by McKinsey & Co reveals.

The UK, France and the US have also reported similar increases. Ben Franzi, General Manager, Parcel & Express Services at Australia Post says Australia is very much on the same upward trend.

“Comparing April this year to last year, the growth rate we’ve seen is between 60 and 80 per cent. We’re seeing almost close to a million additional shoppers on a regular basis,” he says.

Traditionally April is a quiet time of year for e-commerce. After the peak spending across Christmas and new year sales, shoppers tend to tighten the purse strings before starting to hit the shops again around Mother’s Day.

However, the growth that Australia Post has seen throughout April 2020 is even larger than previous peaks around Cyber Monday, Black Friday and the lead up to Christmas.

“Even looking at the figures against Cyber Monday last year, there is more shoppers in this market. We’re seeing new consumers who have never shopped online before now shopping in a big way,” Ben says.

The Tuesday after the Easter long weekend was declared as Australia Post’s busiest day on record. While the volume is variable week to week, Ben says it’s somewhere between two and five per cent increase on Australia Post’s busiest days in the Christmas shopping period last year.

When Australia went into Stage Three lockdown at the end of March, there was an initial increase in panic buying, items like household goods, wine, puzzles, children’s toys. However, Ben says this volume is yet to normalise. “It’s massive growth and it happened almost overnight,” he says.

“The panic buying hasn’t really dropped away. We’re consistently seeing growth rates of 60 per cent as people start to settle into a new norm. I would suggest that the panic buying is over and what we’re seeing Is a new trend in buying online.”

Before COVID-19 transformed Australia’s shopping habits, the country was slightly behind some other European markets when it came to the percentage of retail spend online. In the UK for example, e-commerce accounted for 16.5 per cent of business turnover in 2017.

According to Ben, pre COVID-19, Australia’s e-commerce spend was around the 11 to 11.5 per cent mark of total retail expenditure.

However, while it may be too early to make accurate assumptions, Ben is predicting that as we come out of this period the figure will be more like 15 per cent.

“The growth may soften for a little bit, but I think the next 11 months we will be looking at growth rates of around 30 to 50 per cent compared with the same time last year,” Ben says.

When comparing these statistics to Australia Post’s predictions and forecasts, Ben says the rate of uptake in e-commerce has been bought forward two years in four weeks.

“We were predicting by 2025, we might reach 16-18 per cent, with a gradual growth rate of eight to 12 per cent year on year increase to get there. We’ve now jumped forward and in four weeks we’ve managed to bring the e-commerce market share rate forward a couple of years,” he says.

Two trends

With physical stores having to adapt their models due to COVID-19 restrictions, Ben says both the small retailers and larger players had a lot of work to do.

“The small high street trader had to launch its online offering almost overnight. Some hadn’t operated in this space at all but going forward online retail was the only way they could continue to reach customers,” he says.

Furthermore, the larger retailers had to ramp up their current e-commerce offerings to meet increased demand. “Organisations like Kmart, Target, Myer have seen massive growth upwards of 200 to 400 per cent, so they have really had to accelerate their capacity in this area,” Ben says.

He says this change in model has also been adopted by cafes and restaurants to ensure that they can still operate a profitable business.

He cites the example of Attica, one of Australia’s most acclaimed fine-dining restaurants, offering a take-away menu. “So many businesses have had to shake things up in order to keep their business profitable as well as to keep people employed.”

The new norm

For Ben, some of these changes in behaviour are here to stay. “It’s suggested that it takes six to eight weeks to settle a consumer trend. I think for many people post COVID-19, the items they have been buying online for the past few weeks they will continue to shop online for.”

It is also doubtful that a return to a normal working environment will take place this year. “I think we’ll find that the work from home scenario has worked well for many companies so there will continue to be a higher percentage of people working from home. Especially if social distancing remains in place for the next six to 12 months,” Ben says.

As the trend shifts towards e-commerce, one thing that will change is retail footprint. This has already been seen across organisations like Kmart as they start to use retail space to fulfil online orders.

“The rents and the ability to afford them as we see a continued push to online may change the way retailers operate in the future,” Ben says.

A further shift Ben sees on the horizon is an increased demand for same day delivery, and to be able to deliver on this promise organisations will need to hold more stock locally. “We might see retailers convert physical stores or set up a 3PL operation in Melbourne, Sydney and Brisbane to meet consumer demand in these populated areas,” he says.

Many of the changes that Australia Post has implemented to meet the increased demand are here to stay, Ben says.

“The additional facilities and processing arrangements we have implemented to deal with demand are here to stay as we move towards traditional peak period. We are working on a big facility in Melbourne and this will go live before Christmas. The additional labour force we have deployed to deal with the demand increase will also be here to stay,” he says.

However, some changes to the Australia Post service such as contactless delivery, and shift patterns to ensure social distancing may be reversed once social distancing is no longer a requirement.

A bright future for e-commerce?

When Australian shoppers first started to buy online during COVID-19, there was a shift away from fast fashion. A category that ordinarily makes up more than 30 per cent of e-commerce spend.

However, recent data has revealed that spend across the fashion industry has increased. According to Ben, this is positive news for the e-commerce sector as a whole.

Ordinarily a large percentage of online shoppers are in the under 25 group, however with the casual and part time labour force being hit the hardest. There has been a shift in the core demographic who are now shopping online.

For Ben, this is also positive news. “You have to imagine that the under 25s are constricting their spend, but this has been more than offset by a whole new generation who are probably much older who are buying online for the first time,” he says.

When the economy returns, post-recession, if the younger generation return to online spending, combined with the older generation who are now happy to shop online. The e-commerce industry will see another acceleration, Ben says.

 

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