Country Profile: The Guide to Ecommerce in Australia

Ecommerce in Australia: A Market Overview

Australia's ecommerce market had been growing steadily pre-pandemic, with 10% growth between 2019 and 2020. 

Then, as it did with many other ecommerce markets, 2020 changed everything. 

According to GlobalData, the pandemic  accelerated ecommerce spending by 16.8% to US$41.2 billion in 2020, and then again then by an estimated 13.4% in 2021, reaching US$46.7 billion in 2021. (Note: Australian currency is also called the dollar, but for ease of understanding, all figures in this guide are given in U.S. dollars unless otherwise specified.)

As the ecommerce market grows in Australia, however, the competition for consumers will become fierce—especially in a market that's pulled back on cross-border shopping. 

A WebAlive analysis points out, “Not only will online retailers face up against huge home-grown contenders and international players like Amazon, but they’ll also be competing to meet increasing customer demands.”

With only about 25.7 million people spread across nearly 3 million square miles of land, Australia is the 54th most populated nation in the world. What accounts for Australia’s outsized role in the global ecommerce market?

Australia is very online

Australia is among the most connected countries in the world.   

• Almost all Australian adults (99%) have access to the internet.

• 91% of Australian adults have a home internet connection.

• In the first half of 2021, almost all (98%) Australians aged 55+ used the internet, up from 76% in 2019.

Smartphone penetration is similarly high: 93% of Australians used a mobile phone to go online in 2021, up from 84% in 2017.

Australians love ecommerce

According to the Australian Communications and Media Authority, 85% of Australian adults bought goods or services online in 2021, while 37% sold goods or services online.

According to a report by Australia Post (the government-owned postal service),  over 9.1 million Australian households shopped online between July 1, 2020 and June 30, 2021—a 5.4% YOY increase. 

In an intriguing development for ecommerce merchants, Australians are quickly adopting American-style holiday shopping habits, with double-digit growth in Black Friday and Cyber Monday sales. These events are now commonly viewed as the start of the holiday shopping season.

Australians spend a lot online

The average revenue per user (ARPU) in the Australian ecommerce market is USD$2,339.36. That means the typical online shopper in Australia spends well over $2,000 per year online.

Our own original research lines up: In our recent State of Consumer Attitudes on Ecommerce, Fraud & CX 2022 , we discovered 13% of Australian consumers spend $200-$400/month online, with 9% of them spending over $400/month (just squeaking behind the U.S. at 10%). 

Types of Online Markets
in Australia

The Australian ecommerce market is diverse, with a mix of local stalwarts and international brands. 

By net sales, the top ecommerce retailers in Australia are: 

1. Woolworths.com.au

2. Apple.com

3. Coles.com.au

4. Amazon.com.au

5. Kmart.com.au

Those top three stores make up 10% of online revenue in Australia.

It's worth noting that Amazon had a bit of a slow start in the Australian market but is now making serious headway. They're now the second-most visited ecommerce site in Australia, behind longtime leader Ebay.com.au. 

Australia and Cross-Border Ecommerce

A analysis by Edgar, Dunn & Company found at the time that “cross-border ecommerce” – purchases from websites based in other countries – accounted for 36% of online retail sales among Australians.

Things have changed, and it's placed some significant hurdles in the way of Australian cross-border ecommerce. Supply chain shortages and freight bottlenecks have resulted in an increased interest in buying local. 

As such, only 20% of Australians made purchases in 2020 from international sellers. 

This mirrors our own research:

When we asked Australian consumers if they usually order from local websites or from overseas ones, only 17% said "overseas" ... and that number plummets to 9% in the under-25 age group.

When Australians do shop overseas, where do they turn? Increasingly, it's China. According to the Australia Post, "40% of Australian shoppers' most recent purchases were from China." That means an uphill battle for North American retailers hoping to break into the Australian market—the U.S. was only home to 21% of those overseas purchases. 

Australian merchants looking to expand beyond their own borders (and foreign merchants looking to expand into Australia) need to ensure they’re addressing Australians' unique shopping concerns:

Australian Consumer Behavior

Despite their proximity to Asia, many Australian consumers skew more “western” in their behavior, values, and expectations than their regional neighbors. This is one of the reasons Australia is a fitting target for U.S.-based ecommerce merchants: Adapting to the Australian market may be more straightforward than mastering the customs and languages of other parts of the globe.

Although Australia does not have an official language, more than three-quarters of Australians speak English in their homes. Most of the rest of Australians speak English as a second language.

If you plan to market in Australia, however, be aware of the unique spelling, vocabulary, and slang of Australian English. Australians are proud of their manner of speaking and its idiosyncratic differences from American and British English. Consider engaging the services of a native Australian copywriter to help you effectively reach this audience—especially before you do any social media outreach.

Here are some of the characteristics and buying habits of Australian consumers:

They struggle with their internet

While Australians do have a high rate of internet penetration, the speed of that service is notoriously sluggish. 

Compared to the rest of the world, Australia has been slow to roll out high-speed fiberoptic cables. The situation has left Australians with only the 61st fastest internet on the planet. This is something to keep in mind if you plan on delivering high-definition video to your customers or sell through sites with multiple bandwidth-intensive elements.

Mobile shopping has lost ground, but still rules

While Australia may rank 61st for broadband speeds, its mobile service is no slouch, ranking 18th in the world for speed.

This had resulted in a boost in mobile commerce in Australia, with JPMorgan Chase projecting a CAGR of 16.5% to 2023. 

And yet, according to PayPal's 2020 ecommerce index, mobile commerce dropped considerably during the pandemic: Use of smartphones for purchases dropped from 66% in 2019 to 47% in 2020. 

While mobile is still the top device used to make online purchases in Australia in 2020, people are using fewer devices when making an online purchase, which essentially results in fewer customer touchpoint opportunities. 

PayPal ties this shift to the number of people staying home during the pandemic. After all, there's not as much need for on-the-go shopping if consumers are home more.

So, as people return (or not) to the office, will m-commerce's momentum return? Only time will tell, but we're optimistic: Our own research reveals 43% of Australian consumers have their mobile phone within reach at least three-quarters of the time when making an online purchase.  

Cards are still king

Payment cards (including credit cards and debit cards) are still the most popular way for Australians to pay for their online purchases. Over half (53%) of Australian shoppers use cards to buy products online. Other common payment methods include:

Top categories ... and contenders

Australians are using ecommerce to take care of their everyday shopping needs. The top five ecommerce segments in Australia (by share of revenue) are:

Food & personal care

Fashion

Toys, hobbies & DIY

Electronics & media

Furniture and appliances

Many segments have cause for optimism, though. When asked which types of items they would buy more of online in the future— instead of shopping in-store—certain categories have a bright ecommerce outlook, including these standouts: 

  Gym equipment (87%)

Housewares & furniture (73%)

 Healthcare & pharmaceuticals (72%)

 Alcoholic beverages (71%)

 Groceries (70%)

Ecommerce in Australia:
CNP Fraud Facts

Card-not-present fraud poses a significant challenge to ecommerce merchants and consumers in Australia, and unfortunately seems to be on the rise.

The Australian Payments Network (APN) revealed an increase of 9.2% in fraud on payment card transactions in the 12-month period to June 30, 2021. 

In 2020 alone, Australians lost $418.9 million to CNP fraud. And Australian online businesses lost $265 million. 

AusPayNet’s CNP Fraud Mitigation Framework

The Australian Payments Network – a self-regulatory body for the payments industry in Australia – enacted its CNP Fraud Mitigation Framework on July 1, 2019. Aimed at reducing the level of card-not-present fraud, boosting consumer confidence, and supporting the growth of ecommerce in Australia, the framework:

The AusPayNet framework prescribes two forms of authentication: risk-based analysis and strong customer authentication (SCA).

Risk-based analysis assesses the characteristics of a transaction to create a risk profile and then assigns a level of authentication proportionate to that profile. (Higher-risk transactions require stronger authentication.)

Strong customer authentication is also known as two-factor or multi-factor authentication. It asks cardholders to prove their identities using at least two of three factors:

While the framework never requires risk-based analysis, AusPayNet notes, “Risk based analysis and SCA are commonly used in an integrated approach.”

If you’re familiar with the European Union’s Second Payment Services Directive (PSD2), you may see some similarities with the AusPayNet Fraud Mitigation Framework. Both regulations require strong customer authentication.

However, while PSD2 mandates strong customer authentication for almost all online transactions in Europe, the AusPayNet framework was built to minimize its impact on smaller merchants. The framework requires SCA only for merchants operating above fraud thresholds of AUD 50,000 in fraud losses and fraud-to-sales ratios of 0.2% for two consecutive quarters.

How to Prevent Fraud
When Selling in Australia

Australian ecommerce merchants, foreign merchants selling into Australia, and Australian consumers face most of the same fraud risks as the rest of the world. Ecommerce fraud is evolving rapidly, and fraudsters are developing increasingly sophisticated techniques for circumventing the latest fraud prevention solutions.

As an ecommerce merchant, you may find yourself caught between a rock and a hard place. On the one hand, you can choose to do nothing about fraud. But this “hope for the best” strategy risks:

On the other hand, you may choose to implement draconian fraud prevention measures. But these, too, have their drawbacks.

Overzealous fraud filters tend to sweep up legitimate transactions along with genuine cases of fraud. Australia-specific numbers aren’t available, but in the U.S., false declines may make up as much as 58% of all declined transactions.

When false declines occur, customers may get frustrated and embarrassed.

Some abandon their purchases. That's bad enough. 

But it gets worse.

The least forgiving Australians?

The retirement-age set. A full 35% of Australians age 65 and over would boycott a store that declined their order, and 26% would complain to social media. 

This creates a difficult situation in a global ecommerce market that is focusing heavily on CX and positive brand relationships: Businesses must increase the sophistication of their fraud prevention efforts, so good customers don't get caught up in the net. 

It is encouraging to see that the AusPayNet CNP Fraud Mitigation Framework does not require strong authentication on every single transaction. AusPayNet understands that not only can false declines harm ecommerce businesses, but any kind of payment friction can discourage consumers.

Australian regulators want to avoid the widespread level of online cart abandonments triggered by the original version of the 3D Secure authentication protocol.

According to Ravelin’s Global Online Payment Regulation Report:

A New Fraud Prevention Solution for Ecommerce in Australia

To defeat fraud without overburdening customers, ecommerce businesses in Australia need a solution that seamlessly approves legitimate payments—while turning away even the most sophisticated of fraudsters.

Conventionally, there are two ways to combat card-not-present fraud:

1. Automated fraud prevention tools analyze transactions and reject orders based on pre-determined characteristics.

2. Or, human fraud analysts use their expertise and instinct to assess the risk of fraud.

The advantage of automated tools is that they are fast, and when they’re configured correctly, they can be very effective at stopping fraud. However, automated tools have difficulty adjusting to unexpected circumstances and tend to reject many legitimate transactions, increasing your false decline rate.

Human analysts are slower than machines. But their flexibility, knowledge of human nature, and ability to keep up with the latest fraud trends help them tell the difference between fraud and transactions that are merely uncommon.

Thanks to ClearSale’s establishment in the Australian market, you won’t have to choose between these methods.

At ClearSale, our fraud prevention solution draws its power from the best of both worlds. We combine advanced statistical and artificial intelligence technology with the world’s largest team of specialized fraud analysts to deliver a balanced, real-world approach that is unlike anything else in the Australian ecommerce market.

ClearSale expanded into Australia in summer 2019 because we saw an opportunity to help the continent’s online sellers and buyers with our industry-leading ecommerce expertise and advanced fraud detection technology.

“Our company has extensive experience countering fraud in high-risk markets like Latin America, and we understand the needs of ecommerce merchants globally,” chief executive Pedro Chiamulera said. “Clients often forget that the cost of fraud goes beyond monetary losses and ultimately affects reputation. We aim to offer our clients a fully outsourced fraud protection solution that allows them to maintain that level of trust between retailer and consumer.”

With ClearSale, ecommerce merchants receive:

Considering doing business Down Under? Fraud remains a problem there, but Australians are some of the most enthusiastic online shoppers in the world.

Prepare to make the most of the opportunity for ecommerce in Australia by partnering with a fraud prevention solution that will keep your revenue flowing while protecting your business and your customers. Contact ClearSale today.