February 4, 2019
NAB Online Retail Sales Index, Quarterly Update: December 2018
Low wage growth, high personal debt levels and a weakening housing market – particularly in Sydney and Melbourne – have made consumers reluctant to spend on non-essentials.
- We have made some significant changes to the NAB online series (for more details see Appendix). Importantly we have merged SME and Corporate Online into a single index and provide more detail by region and industry on a monthly basis.
- On that basis the NAB Online Retail Sales Index contracted -1.4% in December on a month-on-month, seasonally adjusted basis, down from a 2.9% increase in November.
- The weak result for December was heavily impacted by considerable growth in November. For online retail, on an original basis, November sales are typically the largest for the calendar year. The gap between November and December sales narrowed in 2013 and 2014 as aspects like delivery times improved, allowing online orders to be made later in the lead up to Christmas. However in the past few years, the introduction of online sales events such as Black Friday, Cyber Monday, and Vogue shopping night have cemented the importance of November in the online retail shopping calendar. Seasonally adjusted results for December are normally positive and this is the first time such a large contraction has been recorded for December.
- The NAB Online Retail Sales Index was up 9.0% year-on-year in December. Year-on-year growth is positive for seven of the eight NAB Online Retail Sales Index industry groupings. Department and variety stores remains the fastest growing category (35.1% y/y) – mainly due to new entrants into the Australian market and the removal of the daily deals category – followed by games and toys (23.1%), media (16%), grocery and liquor (13.4%), takeaway food (11.1%), home wares and appliances (4.6%) and fashion (3.9%). Personal and recreational goods (-2.1%) was the only category to contract in year on year terms. See Charts 3, 7 & 8 below.
- The NAB Online Retail Sales Index measures all Online Retail spending by consumers using various electronic payment methods such as credit cards, BPAY, and Paypal. The index is derived from personal transaction data from NAB platforms and is scaled up to be representative of the economy by using scalars including ABS Estimated Resident Population, and RBA payments data. The NAB Online Retail Index has continued to outpace the ABS measure of retail sales (11.8% y/y versus 2.8% y/y in November).
- We estimate that in the 12 months to December, Australians spent $28.6 billion on online retail. – a level that is equivalent to around 8.9% of the traditional bricks and mortar retail sector (which totalled almost $320.1 billion in the year to November 2018 according to the Australian Bureau of Statistics).
NAB Chief Economist, Alan Oster commented:
The NAB Online Retail Sales Index recorded -1.4% month-on-month contraction in December. There has only been one other December contraction in this series – in 2016 at a much more mild -0.1%.
Large online sales events such as Black Friday, Cyber Monday, and Vogue shopping night have contributed to a strong result in November, and may have brought forward some Christmas spending to November. However, given these sales have been part of the online retail environment for some time, it is likely that the weak December read partly reflects underlying weakness in the retail sector.
Low wage growth, high personal debt levels and a weakening housing market – particularly in Sydney and Melbourne – have made consumers reluctant to spend on non-essentials. The Australian economy is still growing, although we revised down our GDP growth forecasts somewhat last month, as wealth effects of lower house prices and slower housing construction bear more on the outlook. We now no longer expect any movement in the cash rate until the second half of 2020.
On a year-on-year basis, strong sales growth in online categories such as department stores, grocery and liquor, media (music, books, periodicals), games and toys, and takeaway food outperformed the large sales category of homewares and appliances, along with slow growth in fashion and a sales contraction in personal and recreational goods.
NAB’s index is derived from personal transaction data from NAB platforms and includes electronic spending by consumers using NAB cards, BPAY and Paypal. NAB’s Online Retail Index is reasonably assumed to be representative of aggregate online retail sales in Australia given its large sample size. NAB’s estimate of the Online retail market is larger than that of the official ABS measure of Online retail trade as it covers businesses that may not be within the remit of the ABS business register, such as overseas online retailers.
For more information, please download the report.