• The NAB Online Retail Sales Index expanded rapidly in February (1.6%) on a month-on-month, seasonally adjusted basis. This follows on from an upwardly revised slight contraction in January (-0.3% mom, s.a.).
• In year-on-year terms, the growth in the NAB Online Retail Sales Index accelerated (+14.5% y/y s.a.) in February, and it continues to outpace the broader ABS retail sales series.

• Six of the eight categories recorded sales growth in month-on-month growth terms. Grocery and liquor recorded the highest growth in month-on-month terms in February. This category is the second largest online spend share, and has contributed heavily to the headline result. The largest spend share category, homewares and appliances, went against the broader trend and contracted, albeit mildly, in the month.

• In month-on-month terms, all states and territories except WA and Tas. recorded sales growth. NSW recorded the strongest growth in online retail sales in February, following on from a considerable contraction for that state in January. In year-on-year terms, all states recorded double digit growth.
• Sales growth in metro areas was considerably stronger relative to regional areas in both month-on-month and year-on-year terms. In year-on-year terms, Qld recorded the strongest growth for metro areas, while Tas. was fastest for regional growth. See Charts 15 and 16 for more detail.
• Growth in the month was slightly stronger than the overall index for international merchants in February, with sales growth for domestic merchants slightly lower. By category, while homewares and appliances contracted at a faster rate, the biggest hit to international retailers was the contraction in fashion, which represents a larger share of sales.  For domestic merchants, fashion, and the department store category, were key areas of weakness.  See charts 13 and 14, and table 3 for category growth and share.
• We estimate that in the 12 months to February, Australians spent $31.16 billion on online retail, a level that is around 9.4% of the total retail trade estimate (January 2019, Series 8501, Australian Bureau of Statistics), and about 8.3% higher than the 12 months to February 2019.

 NAB Chief Economist, Alan Oster commented:

Our NAB Online Retail Sales Index data indicates that there was a rebound in online spend in February, following on from a mild contraction in online retail sales spend in January. A jump in online grocery and liquor sales contributed strongly to the headline result in February. This category has been growing at a relatively steady pace for the past year and now represents almost 15% of all online retail sales. It’s worth noting that sales for this category, while up 22.7% on the same period 2019, were also up over 17% on January sales. It is likely that panic buying in February provided an additional boost to an already rapidly growing category.

Growth for takeaway food sales in month-on-month terms was effectively flat, putting an end to the run of 5% average monthly growth for the past 7 months, and the above trend growth (8.6% mom, s.a.) in January.  Although sales for this segment have more than doubled over the past year, it remains the smallest online retail segment with a 4.3% share of online retail sales. With respect to COVID-19, anecdotal evidence from overseas online takeaway food retail markets is mixed, with some reports suggesting the initial period caused a slowdown due to a closure of key restaurant suppliers, which then affected delivery service volumes. However, reports also suggest a boost to sales as remaining restaurants supplied delivery only services, combined with self-isolation and contactless delivery. It is likely that the Australian online takeaway food market has experienced the former in February, but this is compounded by the closure of high profile restaurants, for unrelated reasons, occurring at the same time. With the number of confirmed cases of COVID-19 cases accelerating in early March, we will continue to monitor to see if the latter behaviour observed overseas eventuates for the Australian market.

The three most populous states represent just over 80% of all online sales, slightly above their share of the population. Of these three states, online sales growth in NSW grew most rapidly, rebounding after a sales contraction in January followed by Queensland. A key driver of NSW growth in February was grocery and liquor (+9.7% mom, s.a.), which was well above national result for the category.

Representing about two-thirds of all online sales, metropolitan areas generally performed more strongly than the overall result. Over the year, WA regional was the only area to show a contraction in online sales.

In February there was a rebound in sales by international merchants, which grew at a rate slightly faster than the overall index. Online sales for international merchants contracted heavily for the same period in 2019, so much of the recent rebound in growth is off a smaller base.  Domestic merchants, which make up the vast bulk of sales, grew slightly below the overall rate, but contributed more heavily to the total boost. The domestic merchant result was driven by department stores, and grocery and liquor category, with the latter contracting for international merchants in the month.

For further details, please see the NAB Online Retail Sales Index February 2020.