We have produced a chart pack showing the growth trends for online retail in Australia. It is in double-digit growth again after a pause in the 2023 calendar year. The growth is strongest for those with the biggest presence online – supermarkets, Amazon, Temu and Shein are all growing rapidly. While online is growing fast, it is happening with a stronger emphasis on profitability than five years ago. We expect retailers with a stronger online presence to have faster sales growth. However, the medium-term risk remains margin dilution for incumbent bricks & mortar retailers as the online sales may not be incremental.

This chart pack provides a range of insights about the online market in Australia including market size by category and penetration rates for a wide range of retailers. Three key insights from our analysis are – 1) Online retail growth is moderating, with the step down to single-digit growth impacting our forecasts for long-term share of sales. 2) Online retailers have shifted their focus to profitability, reducing the consumer appeal of online. 3) Amazon is continuing to take share from other marketplaces, now at 10% of all online retail in Australia.

Woolworths has announced its intention to acquire 80% of MyDeal for $243 million and a substantial takeover premium of 63% compared with its prevailing share price. MyDeal is loss-making and we expect losses to continue over the next 12 months. The rationale for the deal is to build marketplace capabilities. While understandable, this only heightens our concern that Woolworths, Wesfarmers and Amazon will all battle it out over the next three years for the upper-hand online. We are not sure who will win, but we are confident that it will be costly for all involved.