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eCommerce Spotlight September

The rise and rise of online

Like the move to Level 3 back in May, online sales rose in August while physical shopping took a dip. At over $511M, online spending in August was up 31% on August last year. This is a significant step up from July which was 18% on the previous July. Physical store (offline) transactions were down 6%, reflecting Auckland’s lockdown status, the reduction in the number of people out and about and limits on numbers allowed instore.

While August numbers were big, the impact on shopping behaviours was less extreme than the first time we went into lockdown. In April we saw online spend up 56% on the previous year. Offline spending was down 41% in the same month.

 

Graph Sep 2020 online spend

 


Auckland leads the way

As you’d expect, online spending in Auckland stood out as the city went into Level 3 lockdown. Online spending was a massive 70% up on August last year, exceeding even the highest point achieved during the first lockdown (68%, May).  

There is much talk about the importance of Auckland on New Zealand’s economy and this was sharply highlighted in August, with 43% of all online sales coming from Auckland customers. 

For August 2020

 

70
% increase in Auckland online spend
43
% of all online sales from Auckland
x5
Auckland’s growth rate vs the rest of NZ

Auckland’s online spending growth in August is five times the growth rate of the rest of the country (14%). The move to level 2 saw a slight increase in online spending (from 13% in July) across the rest of the country, possibly suggesting that Lockdown 2.0 did little to change non-Aucklanders shopping habits.

The growth in Auckland’s spending in August was across all categories, mirroring that of the first lockdown. The biggest increases was once again in the homewares and food categories.

For 2020 so far, Auckland’s growth in online spending is double the rest of the country. Interestingly though, Auckland isn’t the region with the highest online growth this year – that honour remains with Taranaki, followed by Northland.  

 

Graph Sep 2020 Auckland spend


Growth Drivers 

In the first eight months of 2020, Kiwis nationwide have spent $3.7b online, up 29% compared to same period in 2019. Offline spend decreased by 2% for this same period in 2019. 

For the eight months to 30 August (compared to same period 2019):

 

29
% growth in online spending
11.4
% of all retail spend was online
71
% of all online spend was from domestic retailers

Three key factors drive online growth  – the number of people shopping, how often and how much they spend each time. Online shopping continues to grow to the power of all three. 

  • In August there were 1.36m shoppers online. 1.8% of these were new shoppers (approx. 24,000) who hadn’t shopped online in the previous 12 months. All age groups experienced growth in their shopper numbers in August, with the 75+ group leading the way with 38% growth.
  • Online transactions were up 26% for August 2020 compared to August 2019. So far this year, the number of online transactions is up 21% compared to the first eight months last year.  
  • The average online transaction (known as basket size) so far in 2020 is $108. This is 7% up on the same time last year.

In August (compared to August 2019):

 

1.36
million Kiwis shopping online (up 19%)
26
% increase in online transactions
108
dollar average spend per transaction (up 7%)

In August we saw domestic clothing and footwear up 47% on August 2019. For the same period, domestic department and variety spend was up 66% and domestic homewares spend up 51%.  Not surprising,  August’s big winner was domestic food and grocery spending, up 62%.

Further fuelling growth for domestic online retailers is the continued preference to shop local with 71% of online shopping so far this year with domestic retailers. This is 11% up on the previous year. However, there are recent signs, including during August, that international online spending is on the rise as Kiwis look for lower prices and more product options. We’ll keep an eye on this trend in the months ahead.

 

What’s ahead

Online sales have remained strong all year and we know traditionally they ramp up from Black Friday / Cyber Monday (in late November), through Christmas, and well into the new year. With COVID-19, higher unemployment, less discretionary spend, the continued closure of our borders and the onset of a ‘long and deep’ recession, will ‘peak season’ reach the levels it has in recent years?  

Next month we’ll consider this question further and help retailers prepare for peak.

 

Accelerating in a recession

Video case study

Debbie Humphrey, from strategic business advisory firm, Spring, shares her expert thoughts on the challenges and opportunities a recession brings for retailers. See why she advocates that now is the time to “put your foot on the accelerator, not on the brake.”

2020 Trends: Buy Now Pay Later 

Despite growing warnings against rising debt levels, especially in these tougher economic times, Buy Now Pay Later (BNPL) has continued its meteoric rise from the last three years. In 2020, BNPL grew by 65% over the same period in 2019. This is driven by an increase in the number of customers (37%), transaction (49%) and basket size (10%)

Lockdown 2.0 didn’t have a specific impact on BNPL, growing in line with online spending as a whole. It rose for the start of the month but tailed off as Level 3 reduced to 2.5.

Around 86% of BNPL customers are aged 45 or under, rising by over 35% since the start of the year. The fastest growth however, is coming from the much smaller 60 plus groups. Some commentators suggest that this growth reflects the older generation’s familiarity with the original Layby concept. Others see it as evidence of tightening economic conditions, requiring those with fixed income to adopt spread payment options.

BNPL is growing in popularity nationwide with just about every region experiencing double-digit growth so far in 2020. The stand out areas for growth in August were Auckland (90%), Northland (78%) and Hawkes Bay (60%).

 

Graph Sep 2020 BNPL spend

2020 Trends: Domestic Marketplaces 

Marketplaces are a great way for new online retailers to test the market for their products and services and for existing retailers to reveal themselves to new customers. In 2020, domestic marketplaces - like TradeMe, The Market and a number of the newer ones that have launched – have experienced growth of 53% compared to the same period in 2019. This is driven by a 60% increase in transactions but also by a 9% increase in customer numbers. Interestingly, basket size is down 5% which suggests Kiwis are buying more often but buying lower value goods.  

August saw strong growth with marketplace spend 72% up on August last year. Transactions for the same period were up 81%. Not surprisingly, Auckland dominated in August with 37% of all marketplace spend from Auckland customers. 

OnlineMarketplace

 

Shoppers aged 45 and younger, make up 62% of current marketplace customers but this is not where the fastest growth is coming from. It’s the older groups 60-80 years who are embracing marketplaces at the fastest rate over 2020. Online shopping overall by this age group is growing and marketplaces are a good first place to explore what’s available online. 

Marketplaces are being enjoyed by Kiwis nationwide. In 2020 we’ve seen the strongest growth from Auckland (70%), Northland (45%) and the Hawkes Bay (42%). 

 

Graph Sep 2020 NZ Marketplace spend

 

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

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