Online retailing will reduce margins

Online retailing will reduce margins

Online retailing will slash margins and could drive many Australian businesses to the wall, according to a new report from Deloitte Consulting.

"The shift towards online retailing will mean significantly lower inventories as goods are produced and sourced on demand. Where high sales volumes meet low 'virtual' inventories, margins are sliced significantly and the consumer wins with lower prices," said Colin MacKinnon, Deloitte consulting partner, responsible for e-commerce.

While consumers are the winners, many Australian businesses will be the big losers, he said.

"Too few Australian companies have come to terms with this issue.

"Australia doesn't lack good e-commerce ideas; what we do lack is the massive momentum and the aggressive management mindset associated with the US Internet economy."

As a result, Australian companies will struggle to compete, he said.

Deloitte predicts that consumers will soon be using "shop-bots" that will search for products, compare prices, conduct transactions and arrange for delivery based on the information provided by them.

Auction systems like eBay are another trend that will see margins continue to shrink.

The report also predicts the rise of digital cash and the XML language. It also says the Internet will soon slow to a "a snail's pace" caused by video and audio being transmitted over the Net.

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