Online shopping to reach AU$18bn in 2013: Frost & Sullivan

Online shopping continues to grow rapidly in Australia, and will account for almost 10 percent of total retail sales by 2017, according to Frost & Sullivan.

In its Online Shopping Market 2013 report for Australia, the analyst firm predicts that online spending will reach AU$18 billion this year, and will make up 7 percent of total retail sales. This is expected to grow at an annual rate of 13.1 percent over the next five years.

With overseas retailers, particularly those in the fashion category such as Asos and Macy's, heavily marketing their wares to Australians, local retailers, including Harvey Norman and Myer, have been forced to up their game in the online space as well, according to Frost & Sullivan senior research manager for Australia and New Zealand Phil Harpur.

"Customers have become more comfortable with the online shopping process, including reduced concerns over security and higher levels of confidence in the delivery process, which helps drive growth in online shopping," he said in a statement.

It seems that efforts by local retailers in the online market have not gone to waste. In 2011, 21 percent of online shoppers went through Australian sites, and that number has jumped to 29 percent in 2013. Still, 79 percent of Australian online shoppers still buy from foreign websites.

Online shopping through mobile phones is also on the increase. Roughly 30 percent of Australian internet users aged between 15 and 65 have bought physical goods through their smartphones in the last 12 months. Around 19 percent have made a purchase through a tablet, according to the report.

Local retailers that have a physical and online presence are at an advantage, being able to appeal to consumers in a number of different ways, including through the use of social media, emails, and in-store kiosks, Frost & Sullivan said.

It would seem that Australian retailers aren't so convinced on having an advantage over pure online players. Australian retailers have been fighting for the federal government to lower the GST exemption threshold for goods purchased online for some time.

Currently, the 10 percent GST rate does not apply to products bought from overseas websites online with a value of less than AU$1,000. Local retailers argue that this exemption is hurting their businesses as consumers flock to online stores based overseas.

According to a study in January, lowering the GST threshold wouldn't stop consumers from buying from foreign websites.