Online Retail Spending By Australians Expected To Grow 39 Percent To Reach $25 Billion By 2015

NetSuite and Australian Retailers Association Joint Study Reveals How Unprepared Australian Retailers Are to Take Advantage of Online Selling - Only One-Third Accept Orders Online

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NetSuite Inc.

Aug 19, 2013, 07:15 ET

SYDNEY, Aug. 19, 2013 /PRNewswire/ -- Research sponsored by NetSuite Inc. (NYSE: N), the industry's leading provider of cloud-based financials / ERP software and omnichannel commerce suites, and the Australian Retailers Association (ARA), has revealed key findings pertaining to the adoption of the internet as a channel for the future success of Australian retailers in 2013, based on a joint study conducted by Frost & Sullivan. Some of these key findings include:

Online retail sales are expected to reach more than $18 billion in 2013 and are forecasted to grow 39 percent to $25 billion by 2015 – including purchases by Australian consumers on local and overseas websites.
While more than 50 percent of Australia's 77,000 retail businesses have a website, only one-third currently accept orders online.
With an estimated 33-50 percent of all online expenditures by Australian shoppers now going to overseas sites, traditional retailers in Australia need to consider adopting an omnichannel strategy that leverages all channels – social, phone, web and physical stores – to provide an engaging and rewarding brand experience to remain viable.

The study of 219 Australian retail managers by Frost & Sullivan was carried out in July 2013 to understand the prevailing mood as they head into the peak trading period of the year and to find out what strategies they have in place to tackle the growing pressure from online competition. The study revealed that almost 50 percent of Australian retailers believe that in-store trading conditions in 2013 are worse than the first half of 2012, while only 35 percent view conditions as better. With overall retail sales in Australia expected to continue to grow by only two percent in 2013, smaller chains in particular are finding retail conditions particularly challenging.

"A number of factors have impacted retail sales growth in Australia, including a greater propensity for consumers to save rather than spend, a challenging job market and rising household costs," said Mark Dougan, managing director for Australia and New Zealand for Frost & Sullivan. "The market has also been impacted by price deflation, partially caused by the growth in online shopping and by a growing number of overseas retailers targeting the Australian market, offering a greater variety and choice of goods at lower costs. This is coupled with the lack of consumer foot traffic into brick and mortar stores, as well as the high operating costs retailers must absorb."

Slower Online Sales Growth in Australia than Other Comparable Markets
According to Frost & Sullivan, although online sales have grown strongly in recent years, penetration in Australia is still only around seven percent of total retail sales, which is behind comparable markets such as the UK and the USA, where online sales are now around 10 percent of total retail sales. The largest online expenditure is on clothing, footwear and personal accessories, followed by electrical and electronic items. Despite lagging other markets, online sales in Australia are expected to grow strongly to reach ten percent ($25 billion) by 2015.

"As Australian consumers become more confident with online shopping, and as a greater number of retailers actively promote their online offerings, the value of online retail sales is growing at double-digit rates, suggesting that Australia still has room to grow," said Mark Dougan. "Many brick and mortar retailers are currently missing out on market opportunities from the booming online retail sector in Australia. Taking a multi-channel approach can offer them many opportunities, such as lower operating costs, the ability to reach new customer segments, the potential to broaden their product range and the ability to operate with fewer geographic limitations."

Mobile and Social: Key Factors to Accelerate Online Shopping in Australia
The Frost & Sullivan study indicates that the increasing usage of mobile devices is stimulating online shopping in Australia, with 30 percent of online shoppers using smartphones or tablets for online transactions. This ability to shop online in a greater range of locations and situations is increasing the propensity of Australian consumers to use the online channel.

About one-third of retailers also now have a social media presence, using platforms such as Facebook, Twitter and YouTube, to communicate with consumers. The total global value of social commerce is estimated at almost $15 billion in 2013, and is likely to reach $30 billion by 2015. With over two-thirds of Australians now using social media online, it is increasingly important as a way to search for products, to obtain peer recommendations on products and to communicate with retailers or other businesses. This indicates a significant opportunity for retailers to leverage another channel to interact with consumers.

"Australian retailers are recognising the opportunities that the web offers to interact with their customers in new ways, and to deepen and broaden these relationships, but making the web an integral part of the retailer's approach involves more than just setting up a website or Facebook page," added Mark Dougan. "There are operational challenges that need to be overcome to make the web the centrepiece of a retail organisation. Retailers' existing business software and systems can be an impediment to implementing an omnichannel experience. Successfully providing a consistent experience through whatever channel the customer uses to engage requires an integrated IT infrastructure that can link data from all channels."

Integrated Software Platform for Retailers to Overcome Challenges and Move Online
According to the research, a major challenge faced by many retailers with a web presence is a lack of integration between their web front-end and back-end fulfillment systems. Only 24 percent of Australian retailers with a web presence currently have software that integrates web orders with their inventory management system. Without a unified software solution, retailers face difficulties in maintaining a consistent brand experience in areas such as customer support, pricing and promotions, as well as increased operational costs to run and maintain each channel.

"The hard truth is that a successful omnichannel strategy will be the key to the survival of many Australian businesses in coming years, as the online environment accounts for an increasing proportion of overall sales," said Mark Troselj, managing director of APAC and Japan for NetSuite. "Getting an omnichannel strategy right can deliver substantial and tangible results, but it can take years to develop. This is where cloud computing really opens doors, offering the opportunity for a lower cost and much lower risk rollout of the software needed to support omnichannel retailing. Now they can unify separate retail channels to provide a single view of the customer, sales and revenue."

Based on the NetSuite "Commerce as a Service" (CaaS) architecture, SuiteCommerce provides a suite of fully integrated, cloud-based commerce capabilities that address key omnichannel challenges and deliver critical business advantages, including a 360-degree customer view of all interactions and transactions, real-time business intelligence and inventory insight, seamless order management and an online shopping experience optimised for any digital device – from smartphones to tablets to laptops to desktops.

A more detailed analysis of the research can be found in the NetSuite whitepaper: "Making the Web the Centrepiece of a Retail Organisation," which is available at www.netsuite.com.au/frostsullivan-anz-retail-wp.

About NetSuite
Today, more than 16,000 companies and subsidiaries depend on NetSuite to run complex, mission-critical business processes globally in the cloud. Since its inception in 1998, NetSuite has established itself as the leading provider of enterprise-class cloud financials/ERP suites for divisions of large enterprises and mid-sized organisations seeking to upgrade their antiquated client/server ERP systems. NetSuite excels at streamlining business operations as demonstrated in a recent Gartner study naming NetSuite as the fastest growing financial management software vendor on a global basis. NetSuite continues its success in delivering the best cloud ERP/financials suites to businesses around the world, enabling them to lower IT costs significantly while increasing productivity, as the global adoption of the cloud is accelerating.

For more information about NetSuite please visit www.netsuite.com.au.

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Cautionary Note Regarding Forward-Looking Statements:
This press release contains forward-looking statements relating to expectations, plans, and prospects including expectations relating to the future growth of the online retail market. These forward-looking statements are based upon the current expectations and beliefs of NetSuite's management as of the date of this release, and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements including, without limitation, the risk of continued adverse and unpredictable macro-economic conditions. All forward-looking statements in this press release are based on information available to the Company as of the date hereof, and NetSuite disclaims any obligation to update these forward-looking statements.

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SOURCE NetSuite Inc.