Online shopping is becoming increasingly popular all around the world, but the tide of change feels like it has taken its time to reach our shores.
Well no longer. It’s fair to say that online shopping has truly taken off in New Zealand with the rate of adoption picking up speed each and every quarter.
Looking back a few years, it was very difficult to find international clothing brands outside of a very few fashionable stores in Auckland. Take for example, the extremely fashionable line of ‘Next’ clothing from the UK (a popular but mid-market brand) which was for many years only available from the super-trendy ‘The Department Store’ in Takapuna, Auckland.
Today, Next clothes are available direct from the UK online via next.co.uk/ as well as being available in New Zealand via ezibuy.co.nz.
The impact on New Zealand Retailers
According to research published by MYOB in July 2013 around a third of NZ small and medium sized enterprises (SMEs) operated a website. When you consider that over 80% of New Zealand businesses are categorized as SMEs, it shows the potentially devastating impact that international competition could have on our home retailers.Traditional ‘bricks and mortar’ businesses that have been slow to embrace online shopping have suffered (and will continue to do so). By resisting investment in online channels, they have simply been unable to cater to the rapidly changing demands of savvy online shoppers.
Even retailers that have been in business for decades and have built up a loyal customer base are feeling the effects of online shopping in New Zealand. One increasingly popular practice among customers involves examining and comparing instore and then once a choice is made purchasing that product online, often at a cheaper price. The stores manage to display the products that the potential customers would want, but they don't get any business from them. Functionally, they are displaying them for free and for the benefit of the online retailer. The reverse is also true as well (research online, buy in store), but as Kiwi's become more comfortable with online purchase we predict the former will become the dominant practice.
Customers leaving stores without purchasing anything that they've examined or tried on has always happened, but it is now common enough to be a national trend in New Zealand. Boutiques that operate locally and do not stock international brands are most likely struggling the most.
However, the change in consumer buying behaviour has allowed many smaller businesses to open online-only stores and run businesses with much lower overheads than traditional high street style shops. This has allowed them to compete with much larger businesses and remain profitable.
So, bad for some and good for others.
So what’s the bigger picture?
It is still very much the big international brands that dominate the online shopping landscape in this country and, ironically, this could be protecting NZ businesses to a certain extent.But, whilst the sentiment that causes New Zealand consumers to ‘only buy Kiwi’ is still very much there, I believe it is really only apathy and nervousness on the part of the New Zealand shopping public that stops them from fully embracing online shopping regardless of where the retailer is based.
There will come a time very soon where it is totally acceptable to order clothing (or anything for that matter) online from a company based in UK, that accepts payment in your local currency, offers cheap delivery within days and free returns.
But we don’t appear to be there yet.
Online Shopping and the Generation Gap
If we interrogate the data a bit more keenly, what we see is that the highest percentages of online shopping adoption is taking place with teenagers and people in their twenties. These demographics typically have lower disposable income than people in their 30s, 40s and 50s and therefore the impact is yet to be truly felt.I say ‘yet’ because it doesn’t take a huge amount of deductive reasoning to figure out that this trend is only going to grow. These young people will get older and will have more money to spend and more younger people will enter their teens to fill the ranks of active online shopping fanatics.
Buy why the generation gap?
Some marketing analysts predicted the rise of online shopping over a decade ago, but attitudes about the Internet did not advance fast enough. For many of the older individuals that operate shops in the first place, online shopping is a very new and surprising cultural change.However, with the younger generations, the Internet has always been part of their lives. They aren’t called “Digital Natives” for nothing.
And it is the loss of business from these people - under the age of thirty-five - that is particularly troubling for many Kiwi retailers. Younger people form one of the most important demographics for many retailers so if they are radically changing their spending habits, retailers will have to adapt.
Shopping online for a bargain
Kiwis love a bargain, and many now recognize that online shopping is often more cost-effective than shopping in person. Online retailers don't have the same overheads as bricks and mortar businesses so they can charge less but still make a profit thus attracting the thrifty shopper.However, I predict that this behaviour will change over time. As more and more people embrace the Internet as a medium for shopping, the emphasis on price as the determining factor will lessen. People will gravitate towards online shopping as standard rather than as a cheap alternative to going to the high street.
So what about luxury items?
The more boutique stores that operate in the luxury market will have to find ways of projecting the quality of their products in an online environment. Just like they do in their physical stores. Adjusting their prices down, rather than investing in new channels, could be a fatal mistake.
Technological and Economic Changes
The New Zealand dollar has stayed surprisingly strong in the wake of the GFC which has made it more affordable for New Zealanders to buy products from overseas. (Just think, the GBP was 3 - 1 against the NZD only 6 years ago and now it’s 2-1.)
Meanwhile, online shopping websites have become easier to navigate and more ubiquitous with the widespread marketing of popular eCommerce platforms like Magento and Shopify. Add to this, the widespread use of smartphones and social media and you have a ready made market of consumers demanding an alternative to putting on their shoes and going to the nearest mall.
People are online all the time now and levels of accessibility to the Internet (and therefore online shopping) has never been so high.
It is no surprise that online shopping in New Zealand has nearly doubled in the last five years. The future of traditional retailers in New Zealand is uncertain at present.
Hopefully, they will rise to the challenge and get onboard.
The POLi team
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