The Digital Economy Index report released by payments fintech Airwallex has revealed some intriguing insights into the state of online businesses in Australia.
Despite Aussies spending $124.1 million less online than a year ago due to a decrease in e-commerce purchases, the report found that digital businesses in New South Wales, Queensland, and Tasmania have experienced an annual turnover increase of up to 13 per cent.
The Index also reveals that online businesses in Victoria experienced a significant decline in turnover by 25 per cent, while South Australia saw a decrease of 13.6 per cent and Western Australia saw a decline of a staggering 36 per cent.
NSW, QLD, TAS digital businesses shine
According to the report, the drop in online spending can be attributed to Australians redirecting their spending habits towards travel and education courses, leading to a decrease in online purchases of clothes and other products. In contrast, digital businesses in NSW, QLD, and TAS appear to have adapted to these shifting consumer patterns, significantly boosting their annual turnover.
The report also reveals a fascinating trend in the Australian online business landscape. While New South Wales experienced an impressive boom in local e-commerce income, Queensland and Tasmania saw a surge in online tourism spending.
However, there’s a significant decline in Victorian online businesses, which struggled to attract the education dollar, while South Australia and Western Australia experienced declines due to lower tourism spending. These findings underscore the importance of businesses keeping a pulse on evolving consumer preferences and diversifying their offerings accordingly.
Upward trend for digital businesses
The report indicates that online spending on Australian education and travel businesses doubled and quadrupled over the past year as the demand for these services increased post-COVID. On the other hand, Aussie technology businesses saw a turnover jump of more than 17 per cent, highlighting the growing importance of the digital sector in driving the Australian economy forward.
The digital businesses in Australia have shown a mixed picture of growth, with some states experiencing increases while others have seen declines. The growth in turnover for digital businesses has outpaced traditional businesses, as shown by the latest ABS data.
Specifically, digital and technology businesses grew by 17.4 per cent compared to 9.4 per cent for information media and telecommunications. Education and travel businesses saw the most significant increase in business turnover, with growth rates of 95.76 per cent and 207.59 per cent, respectively. Meanwhile, financial and insurance businesses grew by 10.3 per cent compared to 8.7 per cent for professional services.
NSW and Queensland saw the largest increase in demand for online products and services, with a 12.94 per cent and 6.14 per cent increase in turnover, respectively. The growth in NSW was driven by strong growth in all online sectors, while Queensland’s growth was due to an increase in local online travel business turnover. Victoria and WA saw significant decreases in turnover for their online businesses in the last 12 months, but the latest quarter showed signs of a rebound, indicating the potential for growth in 2023.
Despite the growth in turnover for digital businesses, the Index also showed a marginal drop of 0.07 per cent year-on-year. The decline in e-commerce spending was expected due to strong market conditions and a return to offline shopping post-lockdown. However, the decrease in digital business turnover was mainly concentrated in Q4 2022, which could indicate a growing trend of consumers reining back spending in anticipation of rising inflation and interest rates.
Digital Business Turnover by state
|Jurisdiction||% change 2022 Q1 to 2023 Q1||% change 2022 Q4 to 2023 Q1|
Digital Business Turnover by industry
|Category||% change 2022 Q1 to 2023 Q1||% change 2022 Q4 to 2023 Q1|
|Digital and technology||17.41%||10.40%|
|Financial and insurance||10.30%||-2.21%|
Ms Hamer said the Digital Economy Index showed spending was flat with online businesses in Australia with a slight 0.07 per cent annual decline, which highlighted they were holding up in the face of a negative economic outlook.
“Online businesses are holding more strongly than other parts of the economy, but the data shows they aren’t immune from the economic headwinds the world is facing,” Ms Hamer said.
“The message from this data is if you’re going digital, you’re generally going strong. Especially compared to businesses that aren’t part of the digital economy, where we’ve seen online business growth outpace the latest ABS data on turnover in almost every category except retail trade or e-commerce.
“The figures indicate the post-COVID economic recovery is patchy, in full swing across some areas while South Australia and WA and Victoria continue to struggle.
“There’s an alarm bell for some businesses that rely on international purchases, with the Index highlighting they’ve dropped by 6 per cent since last year, but domestic online consumption has made up for it. Local businesses are increasingly becoming Australians’ first choice for online shopping.
“Consumers are still drawn to spend with digital brands, but their reliance on them has waned post-lockdowns. Australian online businesses need to work harder to find opportunities to grow their income and revenue.
“Those smaller businesses that are still feeling the squeeze from the downturn need to keep focused on using the tools that will cut their costs, so they’re well positioned for when conditions pick up again.”