China the new competitor in Australia's online sales
China's online retail market is now the world's second-largest after the US, with an estimated $210 billion in revenue last year, according to consultancy firm McKinsey & Company.
The push comes from websites such as alibaba.com, which links manufacturers and suppliers in China to customers around the world, delivering food, clothing, machinery and software, mostly in bulk.
While analysts say new competition in the international space adds pressure to local retailers, the challenges for the industry remain the same: trying to match lower international prices, with weaker distribution networks.
Jason Pallant, a research fellow at Monash University's Australian Centre for Retail Studies, said local retailers were struggling to meet the high expectations of shoppers, who are adapting to low prices and often free delivery. "We used to have a really isolated market, but now there are a lot more retailers who are willing and focusing on shipping and selling to Australia, and a lot more competition," he said. "The expectation on domestic retailers is not only to meet [low prices and fast delivery time] but to beat them."
He said China could dominate the low-cost end of the market, given its ability to reduce costs by shipping products directly from the factory floor. "[China] is known for really low-price products, and certainly some segments of shoppers put low cost first. While there is a segment of shoppers that will find that really appealing, I don't think it's all of them."
Online retail sales in Australia slowed to 15 per cent growth in March, according to NAB's monthly online retail survey. This compared with 27 per cent growth in January.
But NAB chief economist Alan Oster said the slowdown in online sales reflected the general softness in the retail sector. "People are scared and they are still paying off debt," he said.
According to NAB, about 75 per cent of online purchases in Australia were from domestic retailers - down from 80 per cent in 2010.
"The international share has been growing, but it's still relatively small," Mr Oster said.
Mr Pallant said Australian retailers could benefit from sharing distribution networks. "That's the way we're going to have to move forward, given the challenges we have."
Frequently Asked Questions about this Article…
China’s online retail market is now the world’s second-largest after the US, estimated at about $210 billion last year (McKinsey). For Australian investors this matters because Chinese e‑commerce platforms are increasingly selling into Australia, adding competition that can pressure local retail margins and market share.
Alibaba links Chinese manufacturers and suppliers to customers around the world, delivering a wide range of goods (food, clothing, machinery, software). That global reach means more international sellers are shipping to Australia, increasing competition for domestic retailers, particularly on price and bulk supply.
Analysts say Chinese sellers can reduce costs by shipping products directly from the factory, which helps them compete aggressively on price. Australian retailers face the twin challenge of matching those lower prices while also improving delivery and distribution to meet shoppers’ expectations for low cost and fast (often free) shipping.
Yes. NAB’s monthly online retail survey showed online retail sales growth slowed to 15% in March from 27% in January. NAB chief economist Alan Oster linked the slowdown to general softness in retail and consumers paying down debt, a trend investors should monitor as it affects retail earnings and growth prospects.
According to NAB, about 75% of online purchases in Australia are from domestic retailers, down from 80% in 2010. While the international share is growing, NAB notes it is still relatively small — a useful metric for investors tracking market share shifts.
The low‑cost end of the market is most vulnerable. Experts say China could dominate low‑price segments because of its ability to ship directly from factories. However, not all shoppers prioritize price alone, so higher‑value or service‑oriented segments may be less affected.
The article highlights several responses: investing in stronger websites and online channels, focusing on shipping and selling to Australia, and sharing local distribution networks to cut costs and improve delivery — a move research fellow Jason Pallant says will be important going forward.
Investors should track online sales growth rates (NAB surveys), the domestic versus international share of online purchases, retailer spending on online platforms and distribution, and broader retail sentiment (consumer debt levels and spending). Also watch developments from major platforms like Alibaba as they expand into Australia.
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