Aussies snap wallets shut for online fashion to splurge on travel and education: Airwallex research

NSW, Queensland and Tasmanian digital businesses have seen their annual turnover jump by up to 13 per cent, even as Aussies’ online spending dropped by more than $124 million nationwide.

The first Digital Economy Index released by payments fintech Airwallex shows Australians have spent $124.1 million less online than a year ago as people buy fewer clothes and products through e-commerce, and redirect some of their spending into booking travel and signing up for education courses.

The Index estimates that online businesses in NSW have seen a 12.94% jump in turnover over the last year, while those in Queensland have jumped 6.14% and Tasmania by 1.9%. Online businesses in Victoria saw a 25% hit to turnover, South Australia was down by 13.6% and WA by 36%.

While the boom in NSW was driven by an increase in local e-commerce income, Queensland and Tasmania benefitted from more online tourism spending. Victorian online businesses slumped from a lag in attracting the education dollar, while the SA and WA declines appear to be driven by lower tourism spending.

In the past 12 months, online spending on Australian education and travel businesses doubled and quadrupled respectively as demand for services post-COVID ramped up. Aussie technology businesses have also seen turnover jump by more than 17 per cent.

Attributable to Airwallex Director of Strategy for ANZ, Amelia Hamer:

Key highlights

• Online business turnover growth outpaced the latest ABS data that includes more traditional businesses:
  • Digital and technology (17.4% vs 9.4% for the ABS category of information media and telecommunications)
  • Education (95.7% vs 21.7% for administrative support services)
  • Travel (207% vs 21.7% for accommodation and food services)
  • Financial and insurance (10.3% vs 8.7% for professional services).

• Growth into NSW and Queensland in particular has come as more digital businesses relocate to those jurisdictions for more accessible talent and to be closer to other like-minded online businesses.
• Year-on-year digital turnover dropped by a marginal 0.07%. While a drop in e-commerce was expected given strong market conditions and a return of offline shopping post-lockdown, the downward spike in digital business turnover was mostly concentrated in Q4 2022. This may be indicative of a growing trend that consumers are reining back spending in anticipation of rising inflation and interest rates.
• Education and travel experienced the most significant year-on-year increases in business turnover, of 95.76% and 207.59% respectively, signaling a return to pre-COVID levels of study and movement.
• The Index shows a mixed picture across the country as half of the states saw increases in online business turnover, while the other half saw declines.
  • NSW and Queensland-based online businesses experienced the biggest increase in demand for their products and services, enjoying turnover growth of 12.94% and 6.14% respectively.
  • NSW has benefited from strong growth across all online sectors but particularly in e-commerce, which contrasts to a national decline in spending for that category.
  • Queensland’s growth appears to have been strongly driven by the increase in local online travel business turnover.
  • While Victoria and WA saw significant decreases in turnover for their online businesses through the year, the Index also shows rebounds in the latest quarter, indicating green shoots for growth in 2023.
  • Victoria’s 25.55% decrease in the last 12 months appears to be driven by a shift in education spending compared to other states, but there are indications its online economy will grow in 2023 with a 5% increase reported in Q1 2023 compared to Q4 2022.

Hamer (pictured) said the Digital Economy Index showed spending was flat with online businesses in Australia with a slight 0.07% 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,” 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, as well as 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% 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.”