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eCommerce Spotlight February

December spending

December’s online spending was an impressive $538m, up 17% on the same month in 2019, making it the best December ever for online spending. Off the back of a strong November, this resulted in a final quarter of 2020 that was 19% up on the same quarter in 2019. This brought a significant year in the rise of online shopping to a close, with 2020 online sales up 25% on the year before. Kiwi’s spent over a billion dollars more online in 2020 than in 2019. 
 

Line graph depicting weekly online spend 2019 vs 2020

 

December’s online spend of $538m was well up (17%) on December 2019 but it still didn’t reach the highs we saw in May (over $600m), or even in November ($584m). It did however contribute to the biggest overall shopping month we’ve ever experienced in New Zealand. December spend, across both online and offline, was a massive $5.78b, 7% up on December 2019.

Instore (offline) spending built through the month, peaking in the days just before Christmas with a number of days of almost $300m daily spent. Online spending peaked a week earlier at $25m a day, as shoppers allowed time for delivery. As a result, NZ Post delivered 2.1m parcels in that week before leading up to Christmas Day – over 200 parcels a minute.

Boxing Day, traditionally a big shopping day, had instore spend at $183m. This was in line with last year but well short of Cyber Monday and Black Friday levels.  The shopping fervour at the malls of previous Boxing Days appears to have waned, replaced by sales events in November, higher sales over a longer Christmas-New Year period and of course, online shopping. Boxing Day online spend was up 19%.  

Like November with its shopping event days, December is usually a month that attracts many first time online shoppers looking to catch Christmas present bargains. Interestingly enough, this year it wasn’t new shoppers who drove the big numbers but existing shoppers, averaging 3.3 transactions a month at $110 spend each time.

Exploring Q4's highs

The December sales numbers contributed to a strong final quarter, by adding to November’s big numbers for Singles Day, Black Friday and Cyber Monday. At $1.5b, Q4 online spending was up 19% on 2019.  

In 2019, Q4 spend dominated the year making up almost 30% of the annual online spend.  In 2020, Q4 come in second to the $1.6b of sales during the lockdown influenced Q2. Q4’s online sales numbers contributed about 27% of the year’s total shopping spend. Overall Q4 was the biggest spending quarter ever, with Kiwis spending a massive $15b across online and instore. This is up 8% on 2019.
 

Q4

 

67,000 new customers joined the online phenomenon in Q4, averaging 1.4 transactions each and spending an impressive $136 per person. It’s a different story to existing customers who shopped more often (3.3 times on average) but spent less ($110 each).

It’s been a year where shoppers have shown a strong preference for buying local and Q4 was no exception, with 70% of spend with domestic merchants. All sectors benefited from this local sentiment with many experiencing numbers 30% or more up on the same period in 2019. Recreation, Entertainment, Books and Stationery was the only sector to have single digit growth for the quarter.


In Q4:

59
%
of spend was from
30-50 year olds
25
%
Growth is
spending by over 60
20
%
+ spending growth from
Gisborne, Auckland, Northland,
Hawkes Bay and Taranaki

All regions, except Southland and Otago, experienced double-digit growth in spend for the quarter, with Gisborne leading the way with 27% growth. Age profiles reflected the pattern we’ve seen all year, with 30-50 year olds making up the majority of online shoppers but the over 60s growing their online spending at the fastest rate.

2020's key trends

It was the year online shopping stepped on the accelerator. It started well with spending numbers up over 10% in the first few months. COVID-19 hit and this changed the shopping landscape in a major way, especially during lockdown when physical stores were inaccessible to most. Those already online spent more often across more sectors and those who hadn’t tried online before discovered its ease and convenience.

At their peak in May, online spend hit over $30m a day, resulting in monthly spend 56% higher than the equivalent months in 2019.

Once shoppers were online and a new habit was formed, many remained there, even when the shops reopened. We continued to see online spending well up on the previous year right through to the end of the year. By year end, online shopping spend for 2020 was $1.2b greater than 2019, a massive 25% increase.


In 2020:

$
5.8
b
Online spend
25
%
Increase in online
spend over 2019
305
k
New online shoppers

Despite most physical retailers being closed for at least two months with lockdowns, instore spending was still well over a billion dollars up on 2019. Overall retail spend for 2020, online and instore was 5% up on 2019. Most commentators see this as a direct result of reduced international travel, leaving us with more discretionary money to spend on retail locally. 


In 2020:

53
b
Total spending
(online & off)
5
%
Increased total
spend over 2019
11
%
of all shopping
is online

And while 2020 was a good year for online shopping, accelerated by COVID, it’s important to note that it only makes up 11% of all our shopping. Going to the shops is still how most Kiwis choose to shop. In the UK, US, China and other developed nations, over 20% of all spending is online. This suggests that, even after 2020’s boom, there is plenty of room for online retailers to experience more growth.

 

2020 shopping


A number of notable online trends emerged through 2020 including:

  • Over 2.17m Kiwis now shop online – this is 53% of our population.
  • Existing online shoppers are spending more often (average 3.2 times) and are spending more each time ($109).
  • The 30 – 45 age group makes around 27+ transactions a year with the 40+ age group making almost 30 transactions a year.
  • 71% of all online spend was with domestic retailers. All but two of our shopping sectors experienced a decline in international spend.
  • Tuesday and Wednesday remain the most popular days to shop online, with Saturday the least popular.
  • The strongest growth online occurred amongst the older age groups (over 60) with a 30% rise in spend.
  • The number of males online continues to grow. Males tend to shop less often but appear to spend more when they do.
  • The regions all experienced strong online growth with Northland, Gisborne, Taranaki and Hawkes Bay all experiencing over 30% growth. 
  • The South Island hasn’t embraced online shopping with the same enthusiasm, with below average growth in Otago, Southland and Canterbury.
  • The launch of a number of new local destinations saw online marketplaces grow by a staggering 46% on 2019.
  • Buy Now, Pay Later continued its meteoric rise from the last few years, more than doubling its annual online spend in 2020.
  • All our domestic sectors experienced growth in 2020, with all but two growing by over 40%. Not surprisingly, our largest sector, Food, Groceries & Liquor led the way, especially through the lockdown period. What is surprising though, is that this wasn’t even the fastest growing sector for the year. Homewares, Appliances & Electronics took this honour, up nearly 60% on 2019. On top of this, this was the only sector to show significant growth in international spending as well. It is appears that if we can’t go on holiday, we’ll spend the money on things for the house.

We will explore all the trends, including looking deeply into each sector, in the The Full Download, our annual in-depth eCommerce report featuring trends, insights, case studies, expert opinions and tools to help retailers grow their online business. 

 

Looking back and forward with Trade Me

Video case study

As New Zealand’s largest online marketplace, Trade Me has a big influence on the trends that shape online shopping in New Zealand. They are also impacted by those external impacts – like a global pandemic – that impact all retailers.

David Swift, Trade Me’s Global Sales Manager, tells us how the events of 2020 impacted them and he looks ahead at what 2021 could bring.

2021 - The year of opportunity

An interview with Chris Wong, NZ Post’s GM of Business Marketing

“2021 will be another eventful year for online retailers,” says Chris Wong. “COVID will still loom large on how the year plays out, regardless of when and how soon a vaccine is rolled out.”  He expects that economic confidence will remain subdued as long as new, more transmissible strains, keep the borders restricted and the fear of further lockdowns is immediate. “Unfortunately, it might be another year of supply chain uncertainty and lumpy cashflows for retailers,” he adds.

But Wong doesn’t see it as all bad news, in fact, he sees 2021 as a year of significant opportunities for online retailers to consolidate 2020’s growth and to keep momentum going. “Online shopping grew by 25% last year and there are now more people online, buying more things, even more often than before. This makes the road ahead look very exciting for online retailers.”
 

Picture of Chris Wong

The five key trends and opportunities Wong thinks will be crucial to online retail success in 2021 are:

  1. Continued local sentiment. 70% of online spend was domestic in 2020 and this sentiment is likely to continue.  With ongoing restrictions to international travel, the ‘see and buy local’ preference has no reason to recede. And as the global situation worsens, we could also see an increasing number of international consumers attracted to our safe, sustainable, natural and innovative products. But Wong warns that local retailers shouldn’t take their preferred status as a given. “The big global players, like Amazon and Alibaba, will keep investing in new platforms, technology and experiences, continually raising the bar for local players to compete.”
     
  2. Adapting to a more competitive online world. In 2020, we saw Office Max take their offering fully online. The Warehouse realigned resources to online and Countdown built a dedicated eShop. Wong thinks we’ll see more of this ‘online first thinking’ as traditional Kiwi retailers, adapt their business model for the growing importance of online to their business. Existing online retailers will continue to invest in online promotions to drive sales and this will continue to push the cost of digital advertising up. The growth of social commerce, facilitated by big players like Facebook and Shopify, lift competition for online attention and sales to yet another level. Wong points out that, “the online world will become even more competitive, requiring businesses to work even harder to develop their brand and to ensure their advertising spend cuts through the clutter.”  
     
  3. Fulfilment as a competitive advantage. Retailers really saw the importance of delivery in 2020. Many will be looking to invest further to ramp up their capacity and to find ways to deliver quicker, safer and more sustainably. Now more than ever, it’s important to give customers choice and control on how, when and where they receive their parcels.  This will see options like Click and Collect and Out of Home collection (like collection agents and lockers) solutions accelerate across many retail sectors. Wong points out that NZ Post understand that the delivery experience is critical to happy customers and that’s why they are working with retailers to create better delivery experiences like same day, evening and weekend delivery options.
     
  4. Enhanced experience expectations. Consumers are no longer seeing it as online vs instore but a seamless experience that spans both. Wong says, “Cross channel retailers need to consider how to create more personal and human experiences that add value for shoppers however they engage.”  He points to examples of personalisation and virtual applications, like augmented reality, to help replicate the instore experience at home. In other situations, the ease and convenience of the online purchase process is offered to customers in an in store setting.
     
  5. The retention focus. Many retailers experienced significant increases in customer numbers over the last year. As the online world gets more competitive, the value of retaining and growing these new customers increases. The challenge for retailers is to think differently about who their customers are and what’s important to them. This new, first time, online shoppers, may be older, live rural and have different preferences, behaviours and needs. Retailers can’t assume that they are similar to the customers they had before. Wong’s advice is to “engage with your customers, understand what’s important to them and keep adapting your offering as their needs and expectations change.”
     

Chris Wong feels excited about the year ahead and what it has in store for retailers. “Bring it on” he says “At NZ Post we are well-prepared for 2021. Whatever the year holds, we are ready to make the most of the huge opportunity that online shopping offers shoppers and the retailers we work with.” 
 

The data used for this eCommerce Spotlight is card transactional data supplied by Datamine.

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