Think books and fashion have nothing in common? IBISWORLD reveals why these two sectors are set to shine for local retailers online.
The rise of online retailing at the expense of bricks-and-mortar stores has been well documented.
Overseas retailers have thus far been the primary beneficiaries of this shift.
The strong Australian dollar and significant web presence of companies like ASOS, the Book Depository and Amazon have made online shopping from overseas retailers easy and affordable for local shoppers.
However, as the Australian dollar depreciates, domestic retailers are seizing the opportunity to build their online brands and claw back market share from overseas competitors.
As online shopping continues to grow in popularity, and as local retailers benefit from changing economic conditions, the local online retailing industry is set to enter a boom period.
This trend is clearly demonstrated in bookselling.
Australian bricks-and-mortar bookstores have had a tough five years, with revenue for the books and newspaper retailing industry expected to have declined by an annualised 5.7 per cent in the five years through 2013-14.
Major bookselling chains Borders and Angus & Robertson closed their doors in 2011, though web-retailing operations were maintained. Local retailers, both physical and online based, have struggled to compete with the low prices and extensive range of foreign web giants like Amazon and the Book Depository.
The advent of e-books, particularly with the take-up of e-readers and tablets, has encouraged online purchases, which are inexpensive and immediate.
However, as the Australian dollar declines in value, more consumers are making their book purchases from local online retailers.
Australian companies like Booktopia and Bookworld have expanded, and their economies of scale and declining per-unit costs have allowed them to pass savings on to customers.
This, combined with the falling Australian dollar, has made local online retailers increasingly popular.
The online book retailing industry is expected to benefit strongly from the depreciating dollar, the continued popularity of e-books and the growing scale of participants.
The industry is forecast to record strong growth of an annualised 14.5 per cent in the five years through 2018-19.
Online apparel retailing is entering a similar phase.
Clothing retailing in Australia declined by an estimated 0.9 per cent annualised in the five years through 2013-14 (the online operations of bricks-and-mortar stores are included in this industry, but this has not been enough to offset the decline).
Many consumers have turned away from physical stores, preferring to compare prices across a broader range of apparel online.
Overseas retailers, with established brands and websites and lower prices, were the main beneficiaries of the move to online clothing shopping.
The UK-based ASOS, for example, has dominated online clothing sales from overseas in the past five years.
In 2013, the company was sending four jumbo jets of stock to Australia per week.
However, local online retailers like The Iconic have been building strong brands and loyal customer bases.
Assisted by the lower Australian dollar, companies like The Iconic and Surfstitch have started to thrive, while ASOS has recently reported falling Australian sales.
Australian online men’s clothing sales are expected to grow by an annualised 9.7 per cent over the five years though 2018-19.
The online women’s clothing sales industry is forecast to record similar growth, though off a considerably higher base.
Bookselling and clothing retailing are just two industries where local online retailers are set to expand at the expense of overseas competition.
A vast number of retailers, both pure-play and traditional bricks-and-mortar, have entered the online space in the past five years.
While overseas competitors have tended to dominate, local operators have now established strong brands and economies of scale.
They are providing a wider range of products to Australian consumers at more competitive prices and have been given a boost by the depreciating Australian dollar.
Conditions are ideal for local online retailers, and all signs indicate that strong growth will continue.