Online shopping is forcing down prices by $1100 a year

People are saving more than $1100 a year due to the increasing popularity of online shopping, with the biggest savings coming from growing competition in the market, a study has found.

But research from consulting firm the Mandala Partners also found consumers could save almost twice as much if online shopping represented two in every 10 purchases in Australia.

The study was funded by Amazon Australia to mark the completion of its sixth year of operations.

The report also came after figures showed Australians were making more of their purchases online and Roy Morgan estimated consumer confidence remained steady.

The Mandala Partners paper tracked the price of 60,000 products between 2019 and 2023, and compared changes to Australia’s Consumer Price Index.

It found growing online retail offerings had saved households an average of $3463 over those five years, with $2560 due to the effect of heightened competition and $903 attributed to savings from more cost-effective practices such as reduced in-store handling and a centralised inventory.

Last year, the study found Australian households saved $1181 due to making online purchases, including savings of $770 from competitive pressures on price.

The greatest savings were seen in the prices of “recreation and culture” items, such as stationery, toys and pet food, the research found, followed by groceries, furnishings, and the price of dine-in and takeaway food.

Online stores considered by the researchers included dedicated online outlets, such as Amazon and eBay, as well as product-specific outlets like The Iconic and Appliances Online, and retail chains that have invested in online offerings, such as JB HiFi and Officeworks.

The report also found Australian shoppers could have saved more if online shopping represented more purchases, with households unlocking up to $6344 in savings over five years if online channels represented 20 per cent of all purchases rather than 10.7 per cent.

Report author Adam Triggs said online retail stores of all kinds were “helping consumers more easily shop around for the best price” and could help to keep the economy on track.

“Inflation would have been worse without online sales, which helped drive down prices directly and create competition to ease pressure on offline sales,” he said.

Online shopping is growing in Australia, with the NAB’s Online Retail Sales Index finding consumers spent $55.8 billion online in the year to January 2024, representing 13.1 per cent of all retail purchases.

That figure represented growth of five per cent compared to the year to January 2023.

The online shopping research came after the Reserve Bank kept rates on hold at 4.53 per cent and as Roy Morgan found consumer confidence remained steady but consumers paying off a mortgage reported feeling less confident.

Jennifer Dudley-Nicholson
(Australian Associated Press)