Why should you start a dropshipping business in Australia?

In 2023, Australia will have the 8th most active and profitable ecommerce market globally according to IBIS World. The Covid-19 outbreak was the driving force behind Australia's increased online shopping habits. Post-pandemic, it remains popular. Dropshipping is a beginner-friendly business idea in the land of kangaroos, motorbike cowboys, and the Great Barrier Reef.

Dropshipping is an online retail business model. A manufacturer sends items directly to customers on behalf of a seller that advertises the manufacturer's goods. The seller doesn't store, pack or ship the goods themselves. For example, by signing up with dropshippingXL, you can advertise and sell vidaXL products online. When you make a sale, we send it to your customers directly from our warehouse.

Location

Australia, formally known as the Commonwealth of Australia, is a developed country and the sixth largest in the world. It sits in Oceania, in between the Indian and Pacific oceans. The capital city is Canberra, located in the south east.

Population

According to Australia's Department of Climate Change, Energy, the Environment and Water (DCCEEW), almost 90% of Australia's population lived on the coast in 2019. This equates to over 22 million residents living within 50km of the sea. The Australian Bureau of Statistics estimates a national population of 26.2 million in December 2022. The World Bank reports that Australia had the 55th largest population in the world in 2021 (behind Korea, Cameroon, and Venezuela, but ahead of Sri Lanka, the Netherlands, and Romania).

Wealth

Australians have an average household income of AUD 2,349 per week as per the Australian Institute of Health and Welfare (AIHW) in December 2020. The Organisation for Economic Cooperation and Development (OECD) reports that Australia has an above average employment rate of 73%, household disposable income of USD 37,433 per annum, and household wealth of USD 528,768.

The ecommerce market

90% of Australians buy online from domestic businesses (Statista, 2023).

The ecommerce market has been growing steadily and is expected to see a compound growth rate of 10.5% between 2022 and 2026 (Global Data, 2022).

Australians spent a record AUD 353 billion on retail goods in 2022, 9.2% more than in 2021 (CommBank iQ, 2022).

Online shopping has a 17.1% share of the Australian retail market and will increase by an average of 6.6% to 22.1% by 2027 (eCommerceDB, 2022).

82% of Australian households made an online purchase in 2022 (Australia Post, 2023).

By 2033, around 1 in 3 dollars will be spent online (Australia Post, 2023).

These statistics represent a big shift towards the ecommerce for Australian consumers. Pursuing an online retail business in this region could pay off, especially with the healthy ecommerce forecast for the following years.

Product categories with high sales

Australians online annual spend for each category of consumer goods as per Data Reportal, 2023:

Fashion (USD 9.8 billion)

Toys, hobby, DIY (USD 8.52 billion)

Electronics (USD 6.23 billion)

Personal and household care (USD 4.41 billion)

Food (USD 3.81 billion)

Furniture (USD 3.3 billion)

Beverages (USD 2.76 billion)

Physical media (USD 740.7 million)

Rising number of internet users

Data Reportal, 2023, found that Australia has an extremely high internet usage rate of 96.2% compared to the global average of 64.4%. Oceania accounts for just 0.7% of internet users worldwide, which is the smallest portion compared to other continents. For example, South Africa has the second smallest share (0.9%), North America has 6.7%, and East Asia has the largest share (24%). However, it is still a large customer audience to tap into.

It is predicted that by 2028, Australia will gain 1.4 million internet users, based on data from Statista, 2023. By then, the total number of users will be 24.19 million following a steady increase in previous years. Use of smartphones

In 2019, Deloitte reported that 9 out of 10 Australians owned smartphones. Data Reportal suggests that 92.2% of the Australian population will own a smartphone in 2023. This compares with 67% that own a laptop or PC, 44% that own a tablet, and 32% that own a smartwatch. It is worth noting that 51% of Australia's daily internet time takes place on a mobile device.

Logistics

Australia is well placed as China's neighbour. Most retail manufacturers are based in East Asia, which is an advantage when shipping to Australian customers. The logistics network in Australia is highly developed and efficient. Australia Post is one of the leading logistics providers. According to the 2023 Australia Post eCommerce Industry Report, Australia Post invested AUD 427 million in new parcel facilities, fleet and technology. They also opened eight new facilities nationally in 2022. This brings Australia Post's total investment over the last three years to more than AUD 1 billion.

Other major players in Australia's logistics industry:

Linfox

Brambles

Aurizon

AirRoad

Summary

As Australia becomes increasingly digital each year, ecommerce is a ripe opportunity for a customer base ready to buy. Taking into account the high internet penetration rate, high numbers of digitally-savvy shoppers, and smart-tech owners, there aren't many disadvantages to starting a dropshipping business down under.