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Weaker dollar dampens online shopping boom

Amazon fulfilment centre: The boom in digital shopping appears to slowing to a more moderate pace. Photo: Jeff SpicerShoppers will make some $2.8 billion in online purchases over the six weeks before Christmas, according to industry predictions, much of it on smart phones.

Yet despite the spectacular rise of online retail in recent years, the boom in digital shopping appears to slowing to a more moderate pace.

This is partly because the weaker dollar has made overseas internet shopping dearer. But traditional “bricks and mortar” retailers are also fighting back against their online rivals by competing more aggressively.

As a consumer, it can be worth using this fierce competition between physical and online stores to your advantage, as many retailers are willing to match digital shops on price.

National Bank’s index of online sales shows ns spent $17.9 billion on online retail in the last year, but growth is slowing. Spending rose by 5.7 per cent in the past year, a far cry from around 2011, when it was booming by more than 20 per cent a year.

The exchange rate is one reason for the slowdown – the currency has slumped 13 per cent in the last year to about 73 US cents, pushing up the cost of overseas purchases, and the extras, such as shipping charges.

In fact, the share of our online spending that goes overseas is steadily declining, as this week’s graph shows. Overseas online retail is edging up by just 1.3 per cent a year, whereas the local online businesses are enjoying overall sales growth of 7.3 per cent.

But even though the glory days of cheap online imports are probably in the past, the rise of online shopping is still benefiting consumers in other ways.

For one, it has meant there is more choice, and convenience. As well, digital commerce has brought customers the added bonus of more competition, because it’s forcing the traditional retailers to compete more fiercely with their digital rivals.

NAB’s chief economist Alan Oster says more traditional retailers are fighting back against the online invasion by matching the lower prices, and that is another reason why online growth has slowed over the last few years.

For consumers, that means it can be worth checking out the prices of online stores, and then seeing if physical shops will beat or match it.

Officeworks, for instance, says its policy is to beat the offers of online stores just like other businesses, but it will take into account the cost of delivery. Many other “bricks and mortar” stores have a similar approach.

The weaker dollar may have taken some of the value out of overseas online shopping. But even so, the lasting effect of online retailing is likely to be sharper competition – and that’s a win for consumers.

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