Is e-commerce spelling doom for Australia’s brick-and-mortar stores?

When e-commerce started picking up, many took it as a complimentary add-on to enhance customer service to existing physical retail stores. Gradually the e-commerce giants mushroomed in number, increasing their market share. But they were never a threat to brick-and-mortar retail shops.

But that was until the COVID-19 pandemic started ripping through the world. As people preferred to stay indoors, many preferred to buy from online websites. It would have been a fair game, had it given an equal opportunity to all sellers to sell their products. In many cases, e-commerce players prioritise their own retail outlets on their portal, even if their rivals are selling the same product at much more competitive prices.

Estimates peg that the size of e-commerce market size has doubled in the last four years to over US$4.2 trillion. If that were an economy, it would be the fourth largest one – only after US, China and Japan. There is no doubt that e-commerce has been an outlier compared with global growth numbers.

Coming to Australia, has e-commerce hit brick-and-mortar shops hard? The numbers say so, at least. Last week, when the Australian Bureau of Statistic (ABS) released the retail sales data for the month of April 2021, there was one outlier – the turnover of departmental stores had dropped 6.7%, while all other sectors had shown growth. In fact, the dip in departmental stores’ turnover dragged down the retail sales growth numbers.

And this dip isn’t a one-off case. In December 2020, the retail turnover of departmental stores had fallen by 12.5% and in January 2021, it had dipped by 40 basis points. Interestingly, December is a festive season, and the numbers should have jumped, in an ideal scenario.

However, it grew in the months of February and March, before dipping again in April.

Industry research provider IBIS World is also of the opinion that e-commerce has finally started eating a lion’s share of the retail pie. It flagged off the issue in its March 2021 report, stating “Revenue for the Department Stores industry is anticipated to decline in the current year due to decreased shopping activity and lower discretionary income stemming from the COVID-19 pandemic,” it said.