Country Profiles

Apr 3, 2020

Country Profile: The Guide to Ecommerce in Australia

The Australian ecommerce market has been in a growth period for awhile now. But in 2021, it's been explosive. In January alone, national online purchases grew 44% year over year, according to the Australia Post.

What does this mean for ecommerce merchants? It means that the time is ripe to leap upon the many opportunities in this red-hot market. But, just because a market is thriving, it doesn't mean guaranteed success. The Australian ecommerce market has its own unique characteristics and pitfalls.

This guide covers everything you need to know to get started with ecommerce in Australia. We’ll dive into an overview of the Australian market and Australian customer behaviors. Then we’ll look at how fraud affects ecommerce in Australia and suggest some strategies for reducing the risk of fraud, chargebacks, and false declines while doing business in Australia.

Australia is a bit of an anomaly on the international scene. As an island continent situated between the Indian and Pacific oceans, Australia is often grouped with other Asia-Pacific nations. But culturally and economically, Australia has more in common with Europe – with which it shares historical ties, and North America – with which it shares a language.

Australians are more likely than most global citizens to do business with ecommerce vendors outside their country’s borders — even more so than residents of some European nations, such as France or Spain. Coupled with relatively relaxed regulations and restrictions (Australia comes in 14th on the World Bank’s Ease of Doing Business rankings), this makes the Land Down Under an enticing opportunity to expand your ecommerce business into a market of English speakers who are comfortable and eager to buy products and services online.

If you are an ecommerce merchant with eyes on the southern hemisphere, this guide is for you.

Ecommerce in Australia: A Market Overview

According to Statista, Australia is currently the 11th largest ecommerce market in the world, with an annual revenue total of $22.8 billion in 2020. (Note that Australian currency is also called the dollar, but for ease of understanding, all figures in this guide are given in U.S. dollars.)

In Australia, online goods spend was up 57% YOY in 2020, according to the Australia Post, with segments like variety stores and home and garden seeing mind-boggling growth — 188% and 177% respectively — after the Covid-19 lockdown.

This growth has showed no signs of slowing down, either: In January 2021 alone, fashion, home and garden, and food and liquor all grew year over year by 40% or more.

But as the ecommerce market grows in Australia, the competition for consumers will become even more fierce.

A WebAlive analysis points out, “Not only will online retailers face up against huge home-grown contenders and international players like Amazon, but they’ll also be competing to meet the increasing customer demands.”

With only about 25.6 million people spread across nearly 3 million square miles of land, Australia is the 54th most populated nation in the world. What accounts for Australia’s outsized role in the global ecommerce market?

Australia Is Online

Australia is among the most connected countries in the world. Internet penetration in Australia is 88% of the total population, about the same as in the United States.

Smartphone penetration is forecasted to exceed 80% by 2023. (Again, this is similar to the United States.)

Australians Love Shopping Online

Even before the pandemic, Australians loved shopping online. Now? It's a way of life: 82% of all Australian households shopped online in 2020.

In an intriguing development for ecommerce merchants, Australians are quickly adopting American-style holiday shopping habits. In 2018, Australian participating in Black Friday/Cyber Monday jumped 28.7%, according to Australia Post. For the first time, the period between Nov. 25 and Dec. 1 eclipsed the first two weeks of December in total online sales.

Australians Spend a Lot Online

The average revenue per user (ARPU) in the Australian ecommerce market is $1,228.51. That means the typical online shopper in Australia spends well over $1,000 per year.

Types of Online Markets in Australia

Over 40% of business-to-consumer ecommerce transactions in Australia take place on ecommerce platforms or marketplaces (according to a SelectUSA guide). The rest of the transactions take place on individual business sites.

Ecommerce resource site Power Retail maintains a list of the most popular online retailers in Australia. The rankings are based on metrics like traffic, user experience, and customer satisfaction. According to Power Retail, the top 10 most beloved online shopping destinations in Australia comprise a mix of domestic favorites and international giants:

Amazon launched an Australian marketplace (amazon.com.au) in 2017, but the site has yet to achieve the dominance it enjoys in other countries. Ebay’s Australian presence, on the other hand, continues to flourish. (Ebay has been available to Australians since 1999.)

As of March 2019, ebay.com.au saw estimated monthly traffic of 74.4 million visits. Amazon Australia attracted only 14 million.

Australia and Cross-Border Ecommerce

The COVID pandemic and its effect on supply chains and shipping have placed significant hurdles on Australian retailers hoping to sell into other markets. Nonetheless, there exists a healthy level of cross-border ecommerce trade.

An analysis by Edgar, Dunn & Company found that “cross-border ecommerce” – purchases from websites based in other countries – accounts for 36% of online retail sales among Australians.

“These purchases are made from U.S. websites, international ‘.com’ websites and British websites, confirming the cultural closeness and affinity of Australian consumers with these countries,” the researchers wrote.

Australian merchants looking to expand beyond their own borders (and foreign merchants looking to expand into Australia) need to ensure they’re addressing consumers’ top three shopping concerns:

Sustainable packaging and delivery: The growth in online shopping has led to a commensurate growth in packaging. As such, consumers are increasingly aware of ecommerce-related waste—47% want recyclable packaging and 28% prefer carbon-neutral delivery.
Return policies and processes: No matter how clear and detailed product descriptions might be, some returns are inevitable. Australian merchants should keep in mind that 16% of their items may be returned (higher than the global average of 6%). As such, 49% of global consumers want a returns process that’s as headache-free as possible.
Additional costs: Extra costs like shipping, taxes, and duties have resulted in many an abandoned cart. Being clear about these extra costs and mitigating them whenever possible (e.g. free shipping on orders over a certain threshold) will go a long way toward consumers trusting you.

Australian Consumer Behavior

Despite their proximity to Asia, Australian consumers are more “western” in their behavior, values, and expectations than their regional neighbors. This is one of the reasons Australia is a fitting target for U.S.-based ecommerce merchants. Adapting to the Australian market may be more straightforward than mastering the customs and languages of other parts of the globe.

Although Australia does not have an official language, more than three-quarters of Australians speak English in their homes. Most of the rest of Australians speak English as a second language.

If you plan to market in Australia, however, be aware of the unique spelling, vocabulary, and slang of Australian English. Australians are proud of their manner of speaking and its idiosyncratic differences from American and British English. It may be worthwhile engaging the services of a native Australian copywriter to help you effectively reach this audience.

Here are some of the characteristics and buying habits of Australian consumers:

Internet Access

As we noted above, close to 90% of Australians have internet access, about the same rate as in the United States. Where Australia differs from the United States (and many other mature markets), however, is with the speed of its internet service.

Compared to the rest of the world, Australia has been slow to roll out high-speed fiberoptic cables. The situation has left Australians with only the 52nd fastest internet on the planet. This is something to keep in mind if you plan on delivering high-definition video to your customers or sell through sites with multiple bandwidth-intensive elements.

It’s also worth noting that the typical Australian online shopper tends to be more technologically sophisticated than the general population.

Australian research firm Roy Morgan reports that “nearly half of all online shoppers (49.1%) fall under the umbrella of either Technology Early Adopters or Professional Technology Mainstream, the two most digitally inclined segments of the population.” Nevertheless, even “technology traditionalists” and “technophobes” shop online to some extent.

Mobile Commerce Habits

According to a PayPal survey of over 2,000 Australian consumers and 300 businesses:

73% of Australian consumers use mobile devices to purchase and pay for items online.
55% of mobile shoppers purchase or pay for things using their mobile devices at least once a week.
33% of online sales in Australia are done through mobile devices.
The average Australian consumer spends $235 per month using mobile devices.

Which mobile devices are they using? All of them. In 2020, there were significant increases in shopping via mobile devices compared to the previous year:

91% of consumers used a mobile phone (up from 87%)
76% used a laptop (up from 69%)
61% used a tablet (up from 56%)
And a whopping 60% used a television or Smart TV (up from 48%)

Despite the strong and growing Australian preference for mobile commerce, only 60% of Australian businesses are optimized to process mobile payments, PayPal reports. Only 22% of businesses have made mobile optimization a priority for the next year. Therefore, mobile commerce may be a potential opportunity for foreign merchants to make a splash in the Australian ecommerce market.

Top Payment Methods

Payment cards (including credit cards and debit cards) are the most popular way for Australians to pay for their online purchases. About half (47%) of Australian shoppers use cards to buy products online. Other common payment methods include:

Third-party payment systems, such as PayPal (29%).
Bank transfers (15%).
Cash-on-delivery (9%).

Top Categories

Online shoppers around the world love buying fashion, and Australians are no different. More than half of Australians shop for clothes online. According to Australia Post, fashion accounts for 27% of all online purchases in Australia.

Other popular categories include physical media (such as books, DVDs, and video games), consumer electronics, and cosmetics.

Ecommerce in Australia: CNP Fraud Facts

Card-not-present fraud poses a significant challenge to ecommerce merchants and consumers in Australia.

In a 2017 Merchant Risk Council (MRC) survey, Australian merchants reported losing 1.3% of their ecommerce revenue to global fraud. To put that in context, American merchants reported a loss of only 0.5% to fraud.

Between July 1, 2018, and June 30, 2019, card-not-present fraud affected nearly 2 million transactions within Australia. Foreign transactions using Australian payment cards accounted for another 1.6 million cases of fraud. Combined, the total value of CNP fraud in Australia exceeded $450 million.

In 2012, card-not-present fraud represented 70% of all fraud on cards issued in Australia. By 2017, that number had jumped to 85%. Meanwhile, other types of fraud, such as counterfeit/skimming dropped significantly.

A 2017 report by the U.S. Payments Forum attributed this shift to the growing popularity of card-not-present transactions in Australia. The report cited a Reserve Bank of Australia study that found that card-not-present sales (including online) represented nearly a quarter of the value of all debit card purchases and 40% of all credit card purchases.

The U.S. Payments Forum report also noted, “Part of the challenge currently faced by the industry is the amount of card data that has recently been stolen through large data breaches, which can lead to an increase in CNP fraud in Australia and overseas.”

AusPayNet’s CNP Fraud Mitigation Framework

The Australian Payments Network – a self-regulatory body for the payments industry in Australia – enacted its CNP Fraud Mitigation Framework on July 1, 2019. Aimed at reducing the level of card-not-present fraud, boosting consumer confidence, and supporting the growth of ecommerce in Australia, the framework:

Sets the minimum requirements for card issuers or merchants to authenticate CNP transactions online.
Establishes authentication as a best practice to reduce CNP fraud online.

The AusPayNet framework prescribes two forms of authentication: risk-based analysis and strong customer authentication (SCA).

Risk-based analysis assesses the characteristics of a transaction to create a risk profile and then assigns a level of authentication proportionate to that profile. (Higher-risk transactions require stronger authentication.)

Strong customer authentication is also known as two-factor or multi-factor authentication. It asks cardholders to prove their identities using at least two of three factors:

Something they have (such as a payment card, token, or device).
Something they know (such as a PIN or password).
Something they are (such as a fingerprint, voiceprint, or other biometric markers).

While the framework never requires risk-based analysis, AusPayNet notes, “Risk based analysis and SCA are commonly used in an integrated approach.”

If you’re familiar with the European Union’s Second Payment Services Directive (PSD2), you may see some similarities with the AusPayNet Fraud Mitigation Framework. Both regulations require strong customer authentication.

However, while PSD2 mandates strong customer authentication for almost all online transactions in Europe, the AusPayNet framework was built to minimize its impact on smaller merchants. The framework requires SCA only for merchants operating above fraud thresholds of AUD 50,000 in fraud losses and fraud-to-sales ratios of 0.2% for two consecutive quarters.

How to Prevent Fraud When Selling in Australia

Australian ecommerce merchants, foreign merchants selling into Australia, and Australian consumers face most of the same fraud risks as the rest of the world. Ecommerce fraud is evolving rapidly, and fraudsters are developing increasingly sophisticated techniques for circumventing the latest fraud prevention solutions.

As an ecommerce merchant, you may find yourself caught between a rock and a hard place. On the one hand, you can choose to do nothing about fraud. But this “hope for the best” strategy risks:

Endangering your customers, losing their trust, and driving them away from your online store.
Incurring chargeback fees and losing the value of shipped merchandise. (Card issuers will also increase your chargeback fees if you incur too many.)

On the other hand, you may choose to implement draconian fraud prevention measures. But these, too, have their drawbacks.

Overzealous fraud filters tend to sweep up legitimate transactions along with genuine cases of fraud. Australia-specific numbers aren’t available, but in the U.S., false declines may make up as much as 58% of all declined transactions.

When false declines occur, customers may get frustrated and embarrassed. Some abandon their purchases. Many (32% in the U.S.) never return to the merchant.

It is encouraging to see that the AusPayNet CNP Fraud Mitigation Framework does not require strong authentication on every single transaction. AusPayNet understands that not only can false declines harm ecommerce businesses, but any kind of payment friction can discourage consumers.

Australian regulators want to avoid the widespread level of online cart abandonments triggered by the original version of the 3D Secure authentication protocol.

According to Ravelin’s Global Online Payment Regulation Report:

The 3D Secure acceptance rate in Australia is 70%. That means 30% of online payments through 3D Secure in Australia are lost (many of which are likely legitimate).
A mere 2% of online payment transactions in Australia qualify as “frictionless” (taking less than five seconds to authenticate).
The average time to authenticate an online transaction in Australia is 33 seconds. (In the U.S., the average time to authenticate is slightly less than half that.)

A New Fraud Prevention Solution for Ecommerce in Australia

To defeat fraud without overburdening customers, ecommerce merchants in Australia need a solution that seamlessly approves legitimate payments while turning away even the most sophisticated of fraudsters.

Conventionally, there are two ways to combat card-not-present fraud. Automated fraud prevention tools analyze transactions and reject orders based on pre-determined characteristics. Or, human fraud analysts use their expertise and instinct to assess the risk of fraud.

The advantage of automated tools is that they are fast, and when they’re configured correctly, they can be very effective at stopping fraud. However, automated tools have difficulty adjusting to unexpected circumstances and tend to reject many legitimate transactions.

Human analysts are slower than machines. But their flexibility, knowledge of human nature, and ability to keep up with the latest fraud trends help them tell the difference between fraud and transactions that are merely uncommon.

Thanks to ClearSale’s entry into the Australian market, you won’t have to choose between these methods.

At ClearSale, our fraud prevention solution draws its power from the best of both worlds. We combine advanced statistical and artificial intelligence technology with the world’s largest team of specialized fraud analysts to deliver a balanced, real-world approach that is unlike anything else in the Australian ecommerce market.

ClearSale expanded into Australia in summer 2019 because we saw an opportunity to help the continent’s online sellers and buyers with our 17-plus years of experience and proprietary fraud-busting technology.

“Our company has extensive experience countering fraud in high-risk markets like Latin America, and we understand the needs of ecommerce merchants globally,” chief executive Pedro Chiamulera said. “Clients often forget that the cost of fraud goes beyond monetary losses and ultimately affects reputation. We aim to offer our clients a fully outsourced fraud protection solution that allows them to maintain that level of trust between retailer and consumer.”

With ClearSale, ecommerce merchants receive:

Simple ecommerce integration. Our fraud protection solutions quickly integrate with all major ecommerce platforms via an easy-to-install plugin.
Near-immediate order approvals. Even our human analysts are fast.
Comprehensive protection against fraud. ClearSale’s Chargeback Insurance program offers 100% guaranteed coverage of all fraud-related chargebacks.
The highest approval rates anywhere. Our system will never auto-decline an order.
An innovative approach. Our multitiered team approach to fraud prevention lets us continually calibrate our proprietary statistical model as new fraud patterns emerge.

Considering doing business Down Under? Fraud remains a problem there, but Australians are some of the most enthusiastic online shoppers in the world.

Prepare to make the most of the opportunity for ecommerce in Australia by partnering with a fraud prevention solution that will keep your revenue flowing while protecting your business and your customers. Contact ClearSale today