Kiwis spent more than $2.2 billion on physical goods online during the first quarter of 2022. That’s 31% up on the first quarter of 2021 (Q1 2021) and a mammoth 86% up on the first quarter of 2020. Q1 2020 was the first quarter where we saw the impact of COVID on our shopping numbers with lockdowns driving people online from March 2020. Going back to Q1 2019, to get a true pre-COVID comparison, we see this quarter’s online spending numbers are more than double what they were just three years ago. This really captures the seismic shift that online shopping has gone through in such a short period of time.
Q1 2022’s numbers represent the second biggest quarter we’ve seen in online spending since we started reporting. Only the previous quarter (Q4 2021) was higher, reaching $2.5 billion. Q4 2021 had a number of sales drivers including big sales events (Black Friday, Cyber Monday, Click Frenzy, etc.) and the traditional Christmas rush. Furthermore, physical retail stores were closed or restricted for a large part of the quarter. As a result, the peak Q4 2021 online spend was up a massive 25% on Q3 2021.
Online spending in the first quarter of 2022 didn’t have these same drivers and, in fact, was subject to a number of headwinds like the human resource challenges caused by Omicron, a global conflict, further supply shortages and the rapidly rising cost of living.
The fast spread of Omicron was greeted with elevated online shopping spend levels at the start of the quarter. The fear of an unknown new strain, a largely ‘unboosted’ population and strict isolation requirements saw online shopping continue as a smart choice. The close contact rule at the time resulted in many people isolating at home including entire classrooms, day care centres and businesses. For them the only way to shop was online. By late February, when the country moved to Red/phase 3, under the traffic light system, and the rules were less restrictive on businesses and shoppers, we saw weekly spend levels exhibit a steady decline. But even at these lower levels, they were well up on the same months of previous years, suggesting a significant long-term change in shopper behaviour has occurred.
Despite the declines in the back half of the quarter, Q1’s online spend didn’t lose all the big gain it made in the previous quarter, finishing only 12% down on Q4 2021.
Total retail spending for Q1 2022 - online and offline - was $16.4 billion, up over a billion dollars (7%) on Q1 2021. Some would argue that, with inflation running at 6.9%, much of this rise reflects rising prices rather than real growth. More than half of this increase comes from the uplift in online spending, showing what a key role online plays in keeping momentum going in our retail sector. Of course, the line between online and offline has become increasingly blurred with the growth of click and collect and other omnichannel shopper experiences.
Online spending made up 14% of total spending for the quarter, up from 11% in Q1 2021 and 8% in Q1 2020. We’ve seen online’s penetration remain at this higher level for the last three quarters, suggesting it's yet another area where a new benchmark has been set.
And while the quarter as a whole was up from Q1 2021 we can see a progressive monthly decline of both spending levels and the number of people shopping online throughout the quarter. This is the first time we’ve seen this in the last three years. We explore the relationship between Omicron and the quarter’s online shopper behaviours in the article 'Omicron bucks the trend'.
On a more positive front, Kiwis have been showing the love to local online retailers and this also hit a new high this quarter, with 77% of online spending with NZ-based businesses.
The drivers of growth
In each edition of eCommerce Spotlight, we look at the key factors that drive online spending – the number of shoppers online, how often they shop and how much they spend each time. Compared to Q1 2021, we see an upward shift in all these key factors, making it no surprise that online spending overall is up.
Quarterly Online Customers*