close
Image
Oct 2020 spotlight
eCommerce Spotlight October

September spending

Online spend in September was 22% up on September 2019. While this is an impressive number, it’s well down on the 32% growth experienced last month in Lockdown 2.0 and the huge 56% growth experienced in April. 

For September 2020 (compared to September 2019):
 

22
%
Increase in
online spend
17
%
increase in
online transactions
5
%
increase in average
spend per online shopper

For the first nine months of 2020, online spending is 28% up compared to the same period last year. This is driven by more people spending online, buying more often (20% more transactions) and spending more each time (7% higher basket size). On average, we are now spending about $18m a day online. That’s a very healthy 25% up on last year.

Graph Oct 2020 online spend


Around 11% of all retail spending is now online. Even though this continues to grow, in-store (offline) continues to be the main way Kiwis shop. In August we saw offline spend drop 5% as lockdown forced stores to close or restrict customer numbers. This wasn’t as significant as the first lockdown, which saw April spending tumble a massive 41%. In September, offline spend bounced back with a 10% increase. This is back to the month-on-month growth levels we were seeing in June and July.

Buying locally continues to be a big feature of how Kiwis are spending online. So far this year, 71% of our online spend has been domestic. While domestic is still well ahead, we’re seeing international spending start to recover in recent months.  A number of sectors – most notably Department & Variety and Homewares – have shown positive growth over the last month. 

In our view, this reflects the disrupted local supply chain, with some goods becoming unavailable locally, and consumers becoming more price sensitive as the economic recession hits. With the big global shopping events and Christmas ahead, we expect to see more growth in international spending.

We saw some impressive growth figures across several sectors in September, compared to the same time last year:
 

44
%
local Clothing
& Footwear
24
%
local Homeware
54
%
local Food
38
%
local Departments
& Variety
45
%
overseas Homeware
52
%
local Marketplaces

1.3 million Kiwis shopped online in September, with 1.6% of them shopping for the first time. Taranaki and Northland continue to experience the highest levels of customer growth and we look more deeply at what’s driving this later in this update. Looking at our online shoppers by age, the 75+ group have been leading the way, growing their spend by 34% so far this year. This is three times the growth rate of the under 30s group.  Next month, we’ll explore this a little more and highlighted the difference between the age groups.

What’s in store for the shopping season ahead?

In both 2018 and 2019 we saw a significant ramping up of online sales in Quarter 4 (Q4). In both years, Q4 transactions were 12% up on the year before. The growing hype around grabbing a bargain saw even more shoppers flock online, buying more items and spending more each time. More discounted products offered by more retailers, across an ever growing range of sectors, is also a big contributor to this growth.

While transaction growth was similar, there were some notable differences between 2018 and 2019. In previous years, sales peak was around Christmas week but last year we saw the peak move much earlier, with Black Friday spend $100 million more than Boxing Day. Just as important, Black Friday and Cyber Monday are no longer individual day sales, with big sales numbers in the days immediately before and after. Combined, we ended up with a period over late November to early December when Q4 sales numbers reached their peak. 

The other trend evident in 2019 was the increased number of sectors benefiting from sales events. While traditionally we saw big growth in everyday consumer items like clothing, footwear and cosmetics, last year we saw a real lift in bigger-spend items like electronics and homeware. Partly, this was because these retailers were late in embracing these sales events but also because consumers have become more familiar, and confident, with buying more expensive items online.

So given what we saw last year, and the difficult year that 2020 has been, what can we expect this coming Q4 period? The graph below shows what this may look like if growth this year follows a similar pattern to the last two years. November spending looks like it may approach the highs we experienced back in April.
 

Graph Projected peak 2020 spend


Some argue that sales numbers should be higher than last year because we are starting from a higher base with many more shoppers already online and already aware of event days. Expectations have been growing and more shoppers have been waiting for these peak events before buying certain items.  With less travel and eating out this year, an increase in discretionary spend could see further growth in higher-ticket items through this period.

On the other hand, there is a recession and what history tells us is that shoppers cut back on non-essential spend. In theory, this means we should see less spend overall or at the very least spending focused in a smaller number of categories.  However, even in the toughest time, buying Christmas presents is seen as essential, so we may see many of this years’ gifts purchased early during the event sales. It’s likely, many of purchases will be made using Buy Now Pay Later facilities.


Are you ready?

Whichever argument you subscribe to, there is little doubt that retailers will see a rise in sales over the next few months. The question is – will it be big, really big or huge?  Whichever, we all need to get ready.  We’ve started. We’re planning for around 16% growth in parcel volumes and gearing up our network for the increased delivery volumes this will bring.

For many retailers a large proportion of their annual revenue comes through this period, and for those who’ve been heavily impacted by COVID-19, this year’s peak period may be even more important than ever. The first thing is ensuring you have stock ready to manage orders throughout the period and also have plans to manage customers’ expectations about when orders will be filled.

While increased revenue and cashflow is welcome, the big challenge for retailers over peak is the impact on profit. Professor Jonathan Elms, from Massey University Business School, sees event days being about exposure. He encourages retailers to see this period as an investment in the future of their business. Sales events can help attract new customers in existing markets and to bring new markets to your brand. He says “the real opportunity is to turn these into long-term loyal relationships built on something other than a discounted price.”

Achieving this means ensuring that a good initial experience with you, is followed up with further information and offers that become more personalised, building an authentic connection between that customer and your brand. 

Elms says “despite the big volumes and lower margins, mobilise the whole team to ensure the shopping experience is the best it can be for new customers.”

Regional spotlight

While all regions have experienced growth in online spending, not all are growing at the same rate. Somewhat surprisingly, it’s the regional areas that are dominating growth with Northland and Taranaki the best performers, supported by double-digit growth in Gisborne and the Hawkes Bay. At the other end of the spectrum, we’re seeing slower, but steady, growth across all regions in the South Island.


Northland

44% increase in online spend in the last 12-months compared to the previous 12-months. This is driven by a 30% increase in transactions and 8% increase in basket size. The key drivers of growth have been:
 

64
%
increased Buy Now
Pay Later Spend
$
105
basket Size (up 8%)
12
%
more customers
shopping online
48
%
growth in Homewares,
Appliances & Electronics spend
39
%
growth in Food,
Groceries & Liquor spend
23
%
growth in
Marketplaces spend

 

Oct Regional spotlight

 

Taranaki

54% increase in online spend in the last 12-months compared to the previous 12-months. This is spearheaded by a 36% increase in transactions and 9% increase in basket size. The key drivers of growth have been:
 

98
%
increased Homewares,
Appliances & Electronics spend
54
%
increased Buy Now
Pay Later Spend
$
109
basket Size (up 9%)
49
%
increased Food,
Groceries & Liquor spend
-3
%
decreased spend in Recreation,
entertainment, books, etc
13
%
more customers
shopping online

The South Island

In the last 12-months, compared to the previous 12-months, online spending in the South Island has  increased by a steady 9%. The West Coast and Nelson/Marlborough regions lead the way, with slightly less spectacular growth numbers the further south you go.

Even before the events of 2020, we saw the South Island’s adoption of online shopping lag that of the North Island. There isn’t one obvious driver for this but a variety of factors coming together. These could include demographics (fewer people, geographic spread, more rural); shopping preferences such as buying from local producers and face-to-face interaction; the availability of options; and infrastructure (less businesses that offer online options, longer shopping distances). 

Last 12-months by region (compared to previous 12-months):
 

22
%
West Coast
9
%
Canterbury
6
%
Otago
7
%
Southland
12
%
Tasman
19
%
Nelson/Marlborough

 

The data used for this eCommerce Spotlight is card transactional data supplied by Datamine.

 

Help us improve eCommerce Spotlight

Tell us what you think by completing this short survey.
It will only take a few minutes

Get started

How we can help

You don’t become New Zealand’s favourite courier without learning a thing or two along the way. We deliver more online shopping, and to a higher service standard, than any courier company in NZ. We know that what we do has a direct impact on how successful your business is. And that’s why we go all out to have such a great range of product, services and people to help your business grow - from product ideas right through to logistics and delivery anywhere in NZ and the world. 

Get in touch and let's talk about becoming partners.


Read More

Image
Female postie