New Zealand’s online retailers are doing surprisingly well against global gorillas such as Amazon. Richard MacManus finds local distribution centres and the rise of online grocery sales are helping.
Online shopping continues to grow in popularity. Last year Kiwis spent $3.6 billion online, an increase of 13 percent over the previous year. That’s according to a new report commissioned by NZ Post, which has a vested interest in the success of online shopping. After all, someone has to deliver all those goods bought in cyberspace.
The increase in online shopping is corroborated by the latest monthly BNZ Online Retail Sales Index, produced by consumer analytics firm Marketview. It reported that total online retail sales in May were 10 percent higher than a year ago.
Domestic retailers continue to fare strongly against international competitors, with two-thirds of New Zealand online spending going to Kiwi retailers according to the NZ Post report. Marketview puts the Kiwi retailer share of online spending a little lower, at just over 55 percent.
Either way, Kiwi retailers are more than holding their own.
In my own experience as an online shopper, it seems to me that Kiwi e-commerce sites have become more sophisticated over the past year or two. I often do a grocery shop online with Countdown, I get both my coffee and hard liquor online (from Coffee Supreme and Whisky and More respectively), I’ve bought clothes online from the likes of Rodd & Gunn and AS Colour, I’ve gone to Mighty Ape for DVDs and other entertainment items, I’ve ordered electronics online from local stores like Harvey Norman and JB Hi-Fi, and many other examples. My online experience with Kiwi retailers, including delivery of the goods, has generally been high quality.
I asked Stephen Bridle, Managing Director of Marketview, why local retailers are doing so well – especially when global competition is fierce (cough, Amazon!).
“As you note, local operators are getting more sophisticated in the way they market,” Bridle said. “They use data science to customise offers, optimise websites, and there are more players coming into the market.”
“You’re also seeing the ecosystem become a lot more seamless,” he added. As evidence he pointed to simpler payment systems and saved details across multiple devices.
One category in particular is driving the growth of local e-commerce companies: groceries. Bridle attributes that to “a mix of existing providers increasing their popularity and new players entering the market.” Given that supermarkets take about one in every five dollars spent with New Zealand retailers, Bridle expects the continued growth of online groceries “will move the market more than other categories.”
With that said, Bridle pointed out that “spending at international sites tends to pick up in the second half of the year, particularly in October and November, when there are some big promotions.” These include Singles’ Day in China, Black Friday and Thanksgiving in the US, and Amazon Prime Day.
The goods that Kiwis buy on overseas websites during those times – which include books, games, and home and garden items – are often available from NZ e-commerce sites too. In particular on Mighty Ape, which has been selling stuff to Kiwis online since 2008. Indeed, if you count earlier incarnations of the brand it’s been a thriving e-business for nearly two decades now.
I contacted long-time Mighty Ape employee Dylan Bland, to find out how the company has adapted to recent online shopping trends. I was also curious to know how Mighty Ape was coping with the industry’s 800-pound gorilla, Amazon.
“Like all Kiwi retailers, we’re facing increased pressure from large offshore mega-companies,” Bland told me, “but fortunately our investment on the ground here in New Zealand appears to be paying off.” He cited Mighty Ape’s distribution centre in Auckland as being a key competitive advantage.
“It means Mighty Ape delivers overnight nationwide, and same-day in Auckland, Wellington and Christchurch,” he said. “This level of service and speed is hard to replicate from offshore – planes can only fly so fast!”
Bland thinks Kiwi retailers should focus on the basics when it comes to e-commerce: “a great range of products, competitive prices, fast delivery and good old fashion customer service.”
Mobile has been another driver of growth for Mighty Ape. “Nearly 40 percent of our sales now come from a mobile phone and the number is only growing,” Bland said.
I must admit the 40 percent figure for mobile surprised me, as I typically use my laptop – sometimes my tablet – to purchase goods online. It’s even more surprising considering Mighty Ape doesn’t have a mobile app. But I checked out Mighty Ape’s website on my iPhone browser and sure enough, it was just as slick and easy to use as the full website.
I finished by asking Bland, who has been with Mighty Ape since its beginnings in 2008, what’s been the biggest change in e-commerce over the past decade?
“E-commerce used to be a bit like the wild west, with uncertain product quality and delivery times,” he replied. “Would your stuff show up in a week? At all? Who knows! With the advent of social media there’s nowhere for rogue operators to hide, and great online retailers are flourishing through word of mouth and positive customer reviews.”
There’s no question New Zealand’s online shopping ecosystem is in much better shape now than it was a decade ago. But it’s easy to forget that market penetration of e-commerce is still relatively small here in New Zealand. According to the NZ Post report, online shopping was just 8.1 percent of all retail spend in New Zealand during 2017. That figure is similar to our neighbour Australia (7.9 percent) and our trading partner the US (9 percent).
Some countries do a lot more online shopping. It’s no great shock that China is the global leader in e-commerce, given its sophisticated mobile payment apps. Over 23 percent of retail sales in China last year were online, well over twice as much as New Zealand and the US. The UK wasn’t far behind China, at 19.1 percent.
Those figures suggest there’s scope for plenty more growth in New Zealand’s online shopping industry. Even better, there’s more than enough market demand to feed both the Mighty Apes of our country, as well as the global gorillas.