Back in 2009, RCG published a Retail Examiner with the headline “Internet retailing: Get Online or Get Left Behind!” We’ve uploaded this here, for those who want to take a read.
Ten years is a long time in retail, and especially in online retail. But it’s interesting to look back at the archives and see the data we were working with back then, and whether our predictions were correct.
In our Retail Examiner, we wrote that “Internet shopping has been hailed as the ‘next big thing’ for more than a decade. However, the reality doesn’t seem to have matched up to the vision.
Online had been overhyped in the 2000's, and many retailers had launched online shopping, had underwhelming results and abandoned their sites again. In 2009, many NZ retailers weren’t offering online shopping at all (hence the title, “get online or get left behind!”). Of those who did, many felt they'd launched too early and most of them had minimal online sales.
Over the next few years, more retailers would (re)launch online shopping, this time to stay. Some have been faster than others – Farmers launched in 2015, and Kmart not until 2017 – but retailers realised that they needed to commit fully or not at all.
How big was the market in 2009? How fast would it grow?
Online retailing was starting to come into its own in 2009, but it was nearly impossible to get figures for how big it was in New Zealand. Nielsen were publishing figures which, with due respect to them, gave a misleading picture. They included online bookings of travel and accommodation, and even in 2009 this was huge. The amount being spent on physical retail products was much smaller.
We wanted to know how much money Kiwi's were spending on NZ retail websites, so we could tell NZ retailers what the size of the market was. We made our own estimates of this spending, and we did it the hard way. We combed through newspapers to look for any sales figures, painstakingly extracted data from Trade Me to estimate sales there, and sent out a survey to dozens of major retailers.
After all this, we were able to say:
“Our best estimate, based on a range of sources, suggests that there are currently $300 to $500 million worth of online sales going to New Zealand retailers. This is less than 1% of total retail sales, and no more than 1% of core retail sales.”
We also looked overseas for data, because while New Zealand didn’t have good info on online retailing, there were other countries that did. We looked at stats from the US, UK, Denmark, Germany, Sweden, Canada and Korea. This last one proved a bit difficult, since the Statistics Korea website didn’t have much in the way of English translation. We managed to bash our way through with some help from Google Translate. It was worth it, though, as Korea was one of the most advanced countries for online retailing at that time.
The overseas data painted a clear picture. It showed that online retail was growing at double digit rates around the world, often at around 20% a year. In the US and Korea, online ‘penetration’ was above 10% for some store types.
We predicted that NZ would follow suit:
“In the US and Korea, online retail sales have grown by more than 20% a year for the whole of this decade! As such, we expect New Zealand will follow, and the market will grow by around 25% annually for at least five years.
We predict that online retail sales in New Zealand will hit $1 billion in the next five years, and $2 billion by 2020. Even then, we would be behind where countries like Korea, the US, UK and Germany are now. If anything, these growth rates could end up being conservative.”
How big is the market in 2019? Were we right?
Today we have a much better handle on what Kiwis spend online. BNZ (with partners Marketview) have been publishing monthly data since 2014. They're careful to separate out retail and non-retail spending, and can also look at online vs domestic websites.
BNZ estimated that Kiwis spent $2.9 billion online in 2014, with 59% going to domestic online retailers. That’s $1.7 billion, suggesting that we were on track (and actually quite conservative!) with our projection of $1 billion in sales.
They estimated around $600 million in sales for NZ online retailers in 2009, just a little higher than our estimate.
Their data also suggests that the annual growth rate was running at 25% or more over 2010-2012, although it has tended to be in the 10%-20% range since then. Still very substantial, and the growth has continued through to 2019.
Finally, BNZ data suggests that our projection of $2 billion in NZ online retail sales by 2020 was achieved three years early, in 2017!
On the whole, we did pretty well with our crystal ball gazing in 2009. Without a lot of New Zealand data to work with, we managed to make fairly accurate predictions about how online retail would grow. The key thing was that we were able to supplement the meagre NZ information with much better information from overseas, where online had developed earlier.
Luckily, we haven’t had to go back to the Statistics Korea website since 2009, but we often take advantage of retail data collected in Australia, the US or UK to get a better gauge on the New Zealand market. As a result, we’ve helped international retailers to benchmark the NZ opportunity.
And as for where we'll be in 2020? It looks like domestic online retailers are on track to hit $3 billion rather than $2 billion.