Life After COVID-19
Rethinking how we do business
COVID-19 has sparked major changes not only in our lifestyles, but also how we work and do business. You could say that life will never be quite the same again.
COVID has sent shockwaves through the Australian job market, pushing unemployment numbers to a two-decade high. In July, Treasurer Josh Frydenberg said that without Government support, the unemployment rate would have been over 13%.
Even so, the outlook is grim, with the unemployment rate likely to be around 10% by December. One in 10 Australian workers will be out of work by Christmas.
Whilst the global pandemic has been a nightmare for many businesses, it has seen online stores boom. IBISWorld analysts have been studying the changes and this is what they have found.
Firstly, they anticipate that online shopping revenue will now rise by 11.1% compared with the earlier prediction of 2.4% in the current year. They see the increase occurring across most online industries, including food and liquor retailing, clothes and shoes, health and beauty, homewares and appliances, toys, and games, and more.
The Online Shopping in Australia Industry Report recognises that online businesses have been growing for the past five years due to changing consumer attitudes, greater connectivity, and faster broadband speeds. Growth in online shopping has significantly outpaced that of traditional retailers.
What makes this all the more interesting is that discretionary incomes have been declining over that same time period.
It is also important to note that whilst total revenue from online businesses has grown, industry profitability has fallen due to increased competition, and start-up and maintenance costs for major websites.
Many new online businesses are entering the market, whilst major organisations such as Coles and Woolworths have dramatically boosted their online presence. And let’s not forget that major international operator, Amazon, launched in Australia in December 2017.
Interestingly, regional areas will play a major role in the growth of online shopping as better internet connections are rolled out.
The future success of the online shopping industry relies on:
- Increased internet subscribers
- Real household discretionary income
- Fluctuations in consumer sentiment
- Mobile telecommunications density
IBISWorld analysts say that although – or maybe because of – declining discretionary income, online retailing has flourished. Consumers may be cutting back on their spending in bricks-and-mortar stores, but they will search for cheaper alternatives.
However, it’s not only price that drives online sales. Consumers are influenced by reputation, trust, warranties, and add-on services. They consider it easier to find, compare and evaluate products online.
Online sales are also driven by range choice – one of the main reasons people go online. They may prefer to buy in a shop, where they can touch and feel a product but, generally, the range is so limited, they end up buying online.
With more choice available online, many buying decisions will be based on the level of customer service offered by an online store and free delivery.
IBISWorld says the launch of Amazon in Australia has not affected our online businesses as negatively as was first feared. Not only does Amazon Australia carry a smaller range of products, but its launch increased consumer interest in online shopping overall.
So, as online business owners and as consumers, what do we have to look forward to over the next five years?
- Continued strong growth
- Extended reach due to improved connectivity
- Industry innovation, particularly on mobile devices
- Multichannel operations, with online retailers expanding into other sales channels
- More competition
If you are running an online business, your major market segmentation looks like this:
People aged 24 and under: 11.7%
Aged 45-55: 20.3%
Aged 55 and over: 21.3%
Aged 25-34: 21.8%
Aged 35-44: 24.9%
IBISWorld has identified key success factors for online businesses, including:
- Ability to control stock on hand
- Ability to quickly adopt new technology
- Clear market position
- Loyal customer base
- Superior after-sales service
If buying an online business, it is important to weigh up the pros and cons. Here are the main ones:
- No rent
- Larger market – not restricted to geographical area
- Flexible working hours
- Courier costs
- Expensive online marketing costs
- Sometimes high stock levels due to buyers wanting instant delivery