From e-commerce to AI – 5 trends shaping Oceania’s retail and consumer sector in 2024

Until recently, Oceania was a comparative baby in e-commerce terms.

With small populations dotted far beyond the main cities, its retail and consumer sector – and consumer habits as a result – have been shaped by the logistics and supply chain challenges of moving goods across vast distances.

The pandemic signalled a fundamental change for e-commerce in the region, as it did for many other sectors. Unable to go to a physical store, consumers rapidly shifted online and Australia and New Zealand were the fastest-growing e-commerce markets in the world in 2020.

As ongoing economic uncertainty and rising costs of living reshape buyer behaviour, once again, Oceania’s supply chains are being put to the test in new ways. Meanwhile, emerging and evolving technologies are also reconfiguring what is possible.

Here are five trends shaping Oceania’s retail and consumer sector in 2024.

1. E-commerce growth is decelerating after pandemic bump

Stuck-at-home shoppers drove a huge surge in e-commerce penetration during the pandemic, particularly in Australia and New Zealand. Online shopping spend accounted for around a fifth of all retail spending in Australia in 2021 and continues to grow. E-commerce revenue in Oceania is projected to reach US$42.70 billion in 2024, growing to US$67.10 billion by 2029.

The region still has a way to catch up with other parts of the world, in online spending and frequency. In South Korea, for example, more than half of online shoppers are, at minimum, making weekly purchases, compared to 25% in Australia. But the habits formed over the pandemic are now ingrained in many.

However, cost pressures, driven by inflation, cost of living increases and other factors, have significantly impacted growth. Basket sizes shrunk in Australia in 2023 with consumers more hesitant to spend on non-essential goods, and the younger generations, in particular, being more careful with their money. And the country’s year-on-year growth in retail spending dropped to 2% last year, below the pre-COVID-19 average.

2. E-commerce will exaggerate generational divides in shopping habits

How much is spent online and what it is spent on varies significantly across age groups. Fashion items dominate the online shopping baskets of Gen Z, whereas home and garden items are the biggest share for the older generations. Another divide across the age groups is seen in younger people’s greater likelihood to return items bought online.

This emerging demographic split is shaping both front-end retail strategy and back-end logistics processes. To appeal to younger buyers, fashion brands such as Princess Polly are building their business models around e-commerce and buy-now-pay-later models.

But to serve older, omnichannel customers, big-box retailers like Target Australia still rely heavily on regional distribution centres replenishing stores. Optimising fulfilment flows and inventory management across these diverging channels is a growing logistical challenge and our network of warehouses and facilities is designed to enable efficient inventory positioning closer to end consumers.

3. Just-in-time inventory management is here to stay

Retailers were forced to switch up their inventory models to a just-in-time approach during the pandemic when supply chains struggled to keep up with demand. This model is set to become more embedded as many retailers look to reduce costs in an inflationary environment.

Retailers neither want to be stuck with stock that becomes obsolete nor to pay additional warehousing and storage costs. And these leaner inventory levels rely on time-sensitive replenishment throughout the supply chain.

Increasingly, retailers are looking for innovation from their suppliers and supply chains to increase operational precision.

Balancing the need for a stock buffer and avoiding empty shelves while containing costs has become a whole-of-supply-chain issue, and we’re helping address this in several ways – offering scalable warehousing, integrated logistics and better end-to-end supply chain visibility.

4. “Fast homewares” are gaining momentum

The rise of fast fashion – inexpensive clothing that follows the latest trends – has been enabled by lean, globalised supply chains funnelling a constant churn of new products. Now, this model is expanding into other consumer sectors like home goods and furnishings.

There has been significant growth in “lifestyle brands, driven by social media, increased working from home and other factors, bringing fashion into home styling. Several clothing brands such as H&M and Zara have expanded into homewares, and other traditional players are under pressure to provide low-cost, stylish homeware items to cost-conscious but fashion-forward consumers.

Often this involves similar tactics as fast-fashion players – sourcing low-commitment, disposable pieces through flexible overseas vendors. This “fast homewares” movement puts added pressure on supply chain agility.

Compared to clothing, these bulkier goods are more complicated and costly to move through logistics networks. But expectations around speed-to-market and inventory turnover remain equally unforgiving and require new approaches like our micro-fulfilment solutions – which put inventory at small logistics facilities, often much closer to consumers.

5. Greater technology adoption across the supply chain

Technology investment was cited as one of the biggest challenges for logistics companies in Oceania in 2023, and one that’s unlikely to abate in 2024 as manufacturers and retailers increasingly prioritise supply chain visibility and traceability. From factory to front door, they aim to closely track products to manage costs, mitigate risks and provide customers with order transparency.

Adding intelligent technology at every stage of the supply chain is at the heart of our strategy. Using automated gate systems and high-bay storage to bolster warehouse efficiency, our connected supply chains provide enhanced visibility and enable dynamic inventory management.

Growing adoption of AI and machine learning will be crucial to helping retailers navigate the growth and management of their online offerings. And technology will increasingly become a service differentiator for logistics companies, enabling deeper supply chain resiliency and visibility.

While we’ve made good progress, there’s more to come as Oceania continues to play catch-up with many other parts of the world and capitalise on the opportunities that will come to fruition as its logistics and warehousing capabilities grow alongside its e-commerce sector.