Home CE Retail Australia Lags Behind in Online Retailing But ‘Dark Stores’ Concept Gains Steam

Australia Lags Behind in Online Retailing But ‘Dark Stores’ Concept Gains Steam

International Perspectives Australia Retail

There is far more to Australia than beaches, beer and shrimp on the barbie. There is a large retail sector as well as the 14th largest economy in the world. G’day to that, mate.  

There are approximately 140,000 retail businesses in Australia, accounting for 4.1% of the total GDP ($57.4B) and 10.7% of employment, according IBIS World Research. The Australian retail industry also exhibits great diversity by: size of business, region, retail format, competition within sectors and in the nature of goods sold, the firm claims. 

Not unlike the rest of world, 2020 was a challenging year for Australian retailers, and the sector has actually been trending downward over the past half decade, as consumers now save more of their rising incomes, and their spending is increasingly directed towards a range of non-retail services. 

IBIS also points out that Australia lags behind a number of comparable countries in its development of online retailing. They estimate that online retailing represents just 6% of total Australian retail sales – made up of 4 percent domestic online ($8.4 billion) and 2 percent from overseas ($4.2 billion).  

Other IBIS Findings: 

  • The Australian retail industry has met many competitive challenges in the past. Online retailing and the entry of new innovative global retailers are just the latest. The intensified competition is good for consumers, but is challenging for the industry which, as a whole, does not compare favorably in terms of productivity with many overseas countries. And the productivity gap appears to have widened over time. 
  • Retailers operate under several regulatory regimes that restrict their competitiveness and ability to innovate. Major restrictions which need to be addressed are: planning and zoning regulations which are complex, excessively prescriptive, and often anticompetitive; and trading hours regulations which restrict the industry’s ability to adapt and compete with online competitors and provide the convenience that consumers want. 

Dark Store Concept 

COVID-19 has most certainly challenged Australia’s retail industry, but it has also provided opportunities and lessons in new ways to meet customer demand. IBIS explains that despite the pandemic, the retail industry remained the third biggest industry in the country in 2020. 

In responding to pandemic requirements, many retailers have adopted a mix of click-and-collect (book-and-shop, as it’s referred to in Australia) and many have also moved their main portfolio into online distribution and/or e-commerce. 

Like the rest of the world’s retailers, there has been increased demand for online shopping due physical restrictions from the government, with many Australian retailers now establishing ‘dark stores,’ while closing some of their brick-and-mortar shops, to handle the increase in online shopping demands. 

A dark store is essentially a warehouse or distribution center that helps maintain the online shopping goods and they are similar in nature to shipping company storage; however, they are owned and managed by the retailer itself. These dark stores are not open to the public and instead have staff that pick inventory that is then sent to those who order online. 

The Top Four Largest CE Retailers in Australia
Kogan.com Limited
Apply Pty Limited
JB Hi-Fi Limited
Harvey Norman Holdings Ltd.
– IBIS World Research