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It's true that retail is one of the latest industries to be ‘disrupted’ by the internet. Australia seems to have reached a tipping point with respect to online commerce, driven by a combination of factors from maturing attitudes to online commerce and security, extended range and availability online, and of course price. According to a recent study by the Australian Communication and Media Authority, 74% of people who had purchased online cited convenience as the reason, while 38% cited lower cost.

Frost & Sullivan recently released a report (Digital Media Research 2011: Australian and New Zealand Online Shopping Market Insights) which provides some useful statistics. According to this report online purchases by Australians are projected to reach $13.6 billion in 2011, and to continue to grow at a compound growth rate of 12.6% per annum to reach 21.7 billion by 2015. Further, online retail sales equate to 5.5% of total Australian retail sales, and of that expenditure 44% is projected to be spent on overseas websites. Australia is considered to be a less developed ecommerce market than the US and UK, but notably the online share of retail sales in those countries is still only 7.5% and 9% respectively. 

Equally as important as the growth in ecommerce is the importance of the internet as a source of information which informs purchasing decisions. The same Frost and Sullivan report found that over 65% of in-store purchases were initiated on the web for product information, price comparison and peer reviews. Not surprisingly, the report also found that 95% of online purchases started with internet research.

So what are the implications for retailers and their suppliers?

Firstly, for traditional retailers now more than ever is the time to consider a digital extension to your existing business. Online retail is here to stay, and aside from the potential sales there is much to be learnt from extending the customer relationship through digital. Increasingly over the last few years we've seen retailers implementing email newsletters and loyalty programmes. The logical accompaniment is a online store to enable out of store transactions.

Second, for wholesalers the growth in ecommerce presents the opportunity to get closer to the ultimate customer and even start selling direct. The benefits range from understanding the ultimate consumer of your products better to securing increased margins. However, the challenge is to balance this with perceived channel conflict. In our view the online retail channel isn't yet strong enough to justify losing distribution in the real world.

Finally, while it's true online retail is coming of age I'm not sure why Gerry is in such a flap. Based on the stats in the Frost and Sullivan report only 2.42% of total Australian retail sales are occurring on overseas websites. At this level retailers can hardly be blaming international online sales for their current woes.