Battling against the online tide

For many people, the very mention of Christmas shopping conjures images of manic crowds on spending sprees at malls and department stores.

For many people, the very mention of Christmas shopping conjures images of manic crowds on spending sprees at malls and department stores.

But in this digital age, it's also something that more and more of us do on a computer or smartphone.

In just about every month of the past few years, a growing share of consumer spending has been done online, at the expense of "bricks and mortar" retail.

It's been great for consumers, but a tough source of competition for many stores.

Lately, however, something peculiar has happened. As this week's graph shows, the rapid rise of online retail has been looking a lot less spectacular in recent months.

NAB's measure of online retail spending is growing at 0.3 per cent a month, its slowest pace in the three-year history of the index.

At the same time, "bricks and mortar" retail trade grew by 0.5 per cent in the latest month, raising hopes this long-suffering industry may be on the path to recovery.

What's behind this sharp slowdown in online spending? Could "bricks and mortar" retailers be making a comeback in their battle with online shops?

There are a few reasons why online shopping has slowed recently. But unfortunately for struggling retailing businesses, these suggest the slowdown in online spending is probably just a blip.

Perhaps the most likely reason online spending has been growing more slowly is the slump in the Aussie dollar.

Since late October, the dollar has fallen from more than US97¢ to about 90¢ at the time of writing. With about a quarter of our online spending going to overseas stores, a fall of that size makes imported goods noticeably more expensive.

Another reason for the slowdown, NAB economists reckon, is weaker spending on "daily deals" - those subscription emails that offer deep discounts in an attempt to get us spending.

This sector has recently been one of the slowest-growing in the online world, as retailers get sick of selling their goods or services at such deep discounts.

All up, a closer look at online retail suggests although it might have slowed down, that's probably because of one-off changes rather than any decline in our interest in shopping over the web.

After all, online shopping is still relatively small in Australia, at 6.5 per cent of total spending. In the United States and the United Kingdom it's closer to 10 per cent - suggesting our online spending habit will only grow stronger.

Therefore, it's safe to assume even more Christmas spending will be done over the web in years to come. Which is probably good news if you dislike the mad Christmas rush, but bad news for store owners.

Spend trends

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