• The NAB Online Retail Sales Index contracted slightly in May (-1.0%), on a month-on-month, seasonally adjusted basis. This result comes after recording the most rapid growth in the series history in April (16.4%).
• In year-on-year terms, while the growth in the NAB Online Retail Sales Index slowed a little (+50.4% y/y s.a.), this is the second highest year-on-year growth rate comparison in the series history, after the April result.
• Five of eight categories recorded a sales contraction in month-on-month growth terms. Takeaway food, grocery and liquor, and to a lesser extent, fashion, went against the broader trend. While sales growth for grocery and liquor was much slower in May, this category has recorded continuous growth each month for the past year. Games and toys, which grew rapidly last month, recorded the largest sales contraction in May. A big contributor to the drop in the month was from the large sales category of personal and recreational goods, which had recorded strong growth in the two prior months. For more detail, see Charts 3, 5, 7 & 8 below.
• In month-on-month terms, only Qld. recorded online sales growth, with Vic. virtually flat. The largest contraction in sales growth was in WA, with Tas., ACT and NT not far behind. In year-on-year terms, all states recorded double digit growth, with ACT leading overall, and Vic. leading the larger sales states.
• Sales growth in regional areas remained positive in May, with the overall sales growth contraction due to the metro result. In year-on-year terms, only Tas. recorded faster growth for regional areas relative to metro in May. See Charts 15 and 16 for more detail.
• The fall in the month was driven by domestic online retailers, with sales at international merchants remaining positive. The largest sales share for international merchants, fashion, grew strongly in the month, along with department stores. For domestic merchants, the result by category mostly mirrored the headline, with only takeaway, and grocery and liquor recording growth in the month. See charts 13 and 14, and table 3 for category growth and share.
• We estimate that in the 12 months to May, Australians spent $34.18 billion on online retail, a level that is around 10.3% of the total retail trade estimate (Preliminary May 2020, Series 8501, Australian Bureau of Statistics), and about 18.7% higher than the 12 months to May 2019.

NAB Chief Economist, Alan Oster commented:

Our NAB Online Retail Sales Index data took a breather in May from the record growth that has been recorded over the past two months. While online retail sales growth is typically volatile month to month, the recent changes that COVID-19 has brought to the broader economy, and day to day life, has made it even more so. From our observations, the general trend for online retail is up. In this way, Australian online retail sales closely match those of other key international online retail markets. For example, the US census bureau quarterly ecommerce estimate for online retail is about 11.5% of total US retail sales, a figure not too dissimilar to our estimate for Australia. The two series have broadly followed a similar growth trajectory. When we began the NAB series nearly a decade ago, our online series was about 4% of all retail sales, again, similar to the US census bureau comparison. Over time, both series have seen high volatility, but have generally outpaced broader retail. So, while we are expecting ABS retail trade to be faster than online retail in May in month-on-month terms, the trend for online remains far stronger.

In the month, growth was strongest for the smallest sales category, takeaway food, which added to April’s strong growth, albeit at a slower pace than the previous months. The contraction in online sales for this category, which occurred during the early phase of the pandemic, has been effectively erased by the recent growth. We estimate May 2020 sales in this category to be almost three times larger than May 2019. This growth over the past year has occurred during a period where there were high profile exits and entries, and also an increased focus on platform commissions from local start-ups. While recording more moderate growth over the same period, the much larger category, grocery and liquor, has contributed more to the headline number. So despite the rapid growth of takeaway, it remains the smallest category, for now at least, given growth in other, much larger categories, over the past twelve months.

The three most populous states represent just over 80% of all online sales, slightly above their share of the population. Of these three states, only Queensland recorded growth in the month, with Victoria leading over the year. Over the past 12 months, although elevated, online sales growth on average has been more stable in Queensland relative to all other states.

Only regional areas grew in the month, but at a rate much lower than April. Metro areas, which represent the majority of online spend, contracted after two rapid months of sales growth. For regional areas, in year-on-year terms, growth has been driven by the two largest sales states, NSW and Vic., along with smaller sales state, Tasmania.

In terms of merchant location, sales at international merchants, which didn’t grow as fast last month, slowed slightly, but remained positive. In contrast, sales growth turned negative in month-on-month terms for domestic retailers, following on from two exceptionally strong months.

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