Mobile devices and social media are the key drivers behind online retail growth, with expenditure in this area now accounting for 5.1 percent of all retail sales.
A report published by PriceWaterhouseCoopers and Frost & Sullivan predicts almost half of the New Zealand population will shop online in 2011 with each shopper spending an average of almost $1,400. A third of those sales would go to offshore retailers.
PwC New Zealand retail partner Julian Prior said digital channels were changing the way Kiwis shop, creating both challenges and opportunities for retailers.
“The attraction of lower prices, convenience and broader product ranges is swelling the ranks of consumers choosing to shop online both locally and on international websites," he said.
“New Zealand's retailers are now competing on the global stage and need to embrace the fundamental shift in underlying business models caused by the digital revolution."
In a special section in its monthly economic indicator report, the Treasury said the internet was coming of age economically and was unleashing its power at the right time during a retail downturn.
Online competition is also likely to lead to lower inflation over time, it said.
"Consumers’ ability to find bargains will drive a competitive response among firms ... As a result, someone, somewhere on the internet is bound to be having a sale."
Treasury said a survey by Australia's Macquarie Bank showed the number one reason for online shopping was price (55 percent), more than double the next reason (convenience at 25 percent). "One can assume that New Zealand online shoppers share similar preferences."
According to the PwC survey, 82 percent of online shoppers indicated they would increase or at least maintain their current level of online expenditure in the next 12 months. More than a third were using smartphones or mobile devices such as tablets to buy products online.
Online sales are expected to increase to $2.68 billion in 2011 – an increase of 12 percent from last year.
Frost & Sullivan senior research manager Phil Harpur said: “Online shopping, both locally and offshore, is expected to show strong growth over the next four years, reaching $4.22 billion by 2015. This represents a compound annual growth rate (CAGR) of around 12 percent.”
The report notes that New Zealanders have displayed particularly high adoption rates of social media with 81 percent of online shoppers in New Zealand – compared to 76 percent in Australia - using Facebook within the last year. More than a third of all online shoppers in New Zealand currently follow an online shopping site on Facebook. This compares to 26 per cent in Australia.
Group buying sites are also becoming increasingly popular in New Zealand, with nearly half of online shoppers having used a group buying site in the past year.
Challenges and opportunities for New Zealand retailers
A recent MYOB study showed less than a third of Kiwi businesses have a website, and the vast majority of those without had no intention of establishing one.
“The general lack of an online presence by the large retail chains in New Zealand and in Australia over the last decade has been a significant factor for a relatively poor up take of online shopping within this region,” Prior said .
“Retailers that are able to engage customers through multiple channels will build a deeper relationship than through a single traditional store channel."
According to Statistics New Zealand, the highest percentage of online purchases are made by the 25-44 age group.
In its report, the Treasury said: "Interestingly, the 15-24 group’s third ranking is unlikely to be due to low internet skills, but rather their lower purchasing power and also because many may not possess a credit card for online purchases. Visa debit cards may mean this last factor is less of a constraint in future surveys."