The economics of e-commerce

Summary:Australians buy a lot online, but much of it comes from overseas. Will that ever change? Or is geography against us once again?

Australians buy a lot online, but much of it comes from overseas. Will that ever change? Or is geography against us once again?

On this week's Twisted Wire we ask whether it's viable for mainstream e-commerce players to service Australia within the country, rather than basing themselves overseas and shipping in.

Australians have been quick to adapt to buying online. Figures from Forrester Research show that our eCommerce spend will reach $31.7 billion this year, up 7 per cent since last year. Groceries and appliances account for 20 per cent of that — products with a short shelf-life or those that are too bulky to fly-in from overseas. They're also the products that are limited in range, so warehousing them for a small local market is a realistic option.

Clothing, music, books and other consumer goods have a broad range of products. We're often buying from overseas, not just because it's cheaper, but also because the choice is more extensive.

Ron Koehler, CEO of logistics firm Schenker Australia, said that for some goods, it makes more sense to warehouse products in Asia and then fly them in to the country. It helps to achieve economies of scale, allows you to serve a bigger market and it can be quicker than moving goods across the country.

Jeff Clementz, the new managing director for PayPal Australia, said that Australian retailers have been very innovative when it comes to pure online plays, but admits that some goods will always be bought overseas. He said that retailers will increasingly have to differentiate through convenience, though suggested that bricks and mortar providers will still have a role, because of the entertainment value of shopping.

Listen to the program, then tell us what you think. Is it realistic to expect a domestic eCommerce player to be able to compete against established retailers or major online providers from overseas? Won’t it quickly become a question of who has the scale to achieve economies?

Running time: 24 minutes, 19 seconds

Topics: Telcos, E-Commerce

About

Phil Dobbie has a wealth of radio and business experience. He started his career in commercial radio in the UK and, since coming to Australia in 1991, has held senior marketing and management roles with Telstra, OzEmail, the British Tourist Authority and other telecommunications, media, travel and advertising businesses.

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