The online retailing sector is about to get a surprise boost from Melbourne’s second lockdown, as a new report from NAB shows Victoria to be far ahead in adapting to internet shopping.
With locally listed online retailing related stocks firing on the ASX, the bank has for the first time released a regional snapshot of shopping patterns, which shows Metropolitan Melbourne as the leading online commerce zone in the country while even regional Victoria outpaces Metropolitan Sydney.
Victoria is showing close to a 60 per cent lift in online retail sales year-on-year, against a national figure of 50 per cent.
Within specific categories the state has literally taken to online commerce with a rocket. In the games and toys area, Victoria in the year to August 2019 had an 11 per cent increase in sales, this year the figure bounded to an increase of 135 per cent.
“We are now heading into an extended new lockdown where the same conditions will recur, and I certainly wouldn‘t expect the pattern to decelerate,” says NAB’s chief economist Alan Oster.
“Moreover, this is now a nationwide structural shift, once people make a change like this for whatever reason they are unlikely to change back to their old ways. It’s like banking: once you go online, you are unlikely to go back to the bank branch very often. For investors it is time to think about upping exposure to this area,” Oster explains.
The Victorian boost will add more muscle to the wider online retailing sector which, having lifted by 23 per cent to around $36bn in the 12 months to June 30, is now representing 11 per cent of all shopping — that’s up by a fifth in the space of a year.
Responding to the Victorian shutdown on Monday the ASX 200 finished flat, though supermarket groups Coles and Woolworth were higher while online leader Kogan gained another 10 per cent in the session to close at $7.59.
Online retailers and related stocks that can capitalise on the shutdown of traditional outlets have boomed this year.
Online retail platforms such as Kogan and Temple & Webster have soared, along with food delivery stocks such as Marley Spoon.
Meanwhile, Woolworths said it would remodel three of its existing Melbourne supermarkets to become online delivery hubs in the coming weeks.
Across the ASX, shopping both offline and online has performed better in relative terms than many expected as consumer spending picked up in recent times — the broad consumer discretionary index is down 2 per cent over the last 12 months, while the ASX 200 is down 13 per cent over the same period.
But the gap between online and traditional retailers can only be widened by the latest shutdown, with Solomon Lew, the owner of the Premier Investments chain blasting Victorian Premier Daniel Andrews for not “acting sooner”.
The one factor that may undermine the expected uplift for online retailing is the operation of large fulfilment centres across Victoria, which could be facing new difficulties. As Mark Harrison of Pitcher Partners suggests: “Under these unprecedented circumstances you have to allow that unexpected disruptions could come in almost any direction.”
Freeman was speaking after more than 200 workers at a Woolworths distribution centre which supplies both Dan Murphy’s and BWS stores had “walked off the job” after an employee had reported positive to COVID-19.