Australians killing the brick-and-mortar retail industry

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A survey undertaken by Boston Consulting Group (BCG) has revealed that Australia has the highest frequency of online purchases from overseas stores compared to any other developed country, highlighting a key problem facing Aussie retailers.

Surprisingly, it was not so much the lower prices that have attracted Aussie consumers online, but the wider array of products on offer. NAB’s online retail sales index for the year until May 2013 showed that around $13.7 billion was spent by Australian consumers on online stores with growth of 18% year-on-year, in comparison to year-on-year growth for brick-and-mortar retailers remaining flat at 3%.

Whilst the survey established that consumers are preferring to spend online due to the availability of different products – as opposed to cheaper prices – retailers such as David Jones (DJS.AX) or Myer (MYR.AX) will need to find a way to attract consumers back in order to maintain and increase market share.

If they cannot find such a method, the changing trend could result in a number of store closures, which would also have a drastic effect on companies such as Westfield (WDC.AX) that rely on stores remaining open for profitability.

The survey also showed that 54% of consumers disagree with modern consumer culture, up from 49% from last year. BCG’s Jane Danziger said, “the results clearly show retailers would be foolish to pin their hopes for a spending recovery on an uptick in the Australian economy. There are some fundamental shifts taking place in consumer attitudes and behaviours.”

Foolish takeaway

Many of the risks facing the industry have already been factored into a number of companies’ share prices, giving investors prime opportunities to pick up quality companies at outstanding prices. Myer is one such retailer that has had its shares battered down recently. Alternatively, shopping centre operator Westfield offers a 4.3% dividend yield and is trading 8% below its 52-week high in May.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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