E-commerce and Australian business

20 Sep 2017


  • Mark Thirlwell
  • Australian Economy
  • E-Commerce
  • International Trade

In my previous post on the Selected Characteristics of Australian Businesses I took a look at the share of Australian firms selling into overseas markets, noting both that this was quite low, and also that it had been relatively stable in recent years.

In the context of today’s internet-enabled economy, those findings could be seen as somewhat puzzling. One of the benefits of the internet in general, and of e-commerce in particular, is supposed to be a reduction in trading costs, both national and international. Moreover, we do have some evidence in support of that proposition. For example, eBay data show that Australian businesses on the eBay platform are much more likely to be involved in exporting than those not using the platform (the same holds true for businesses across a range of economies):

Share of eBay-enabled SMEs exporting vs traditional businesses

So, why hasn’t the rise of e-commerce driven an increase in the share of businesses selling overseas as captured in the ABS numbers we looked at in that earlier post? Does it reflect a lack of engagement with e-commerce by Australian businesses, or is some other factor at work?

Interestingly, the same ABS Selected Characteristics of Australian Businesses also provides us with a snapshot of the extent to which Australian firms were engaging with the digital economy in 2015-16. According to the ABS figures, for example, while 95 per cent of Australian businesses had access to the internet that year, only about 50 per cent had a web presence and a lower share again (about 38 per cent) a social media presence. The same data show that in 2015-16, although 57 per cent of firms had used the internet to place an order, just 37 per cent had received orders the same way:

Share of businesses using information technology

By sector, firms involved in arts and recreation were the most likely to have a web presence (about 76 per cent), closely followed by information, media and telecommunications businesses. In contrast, businesses in agriculture, forestry and fishing were those least likely to have a web presence (less than 12 per cent):

Share of businesses with a web presence

(By way of comparison, when we asked participants in AIBS 2016 about these issues last year, about 93 per cent of our respondents said they had a web site but only about 47 per cent reported participating in e-commerce in some way. The higher share of those with a web presence in the AIBS sample compared to the ABS findings might imply that firms involved in international business tend to be more e-commerce savvy than firms overall.)

In the case of a social media presence, the same sectors topped and tailed the ABS league table as in the case of a web presence, although the ratios overall were all lower in the former than the latter case:

Share of businesses that have a social media presence

How does Australia stack up on these kinds of metrics in international terms? The OECD provides some cross-country data here, but unfortunately their numbers are not directly comparable with the ABS data cited above, as while the ABS numbers are for all firm sizes, the OECD only looks at firms with ten employees or more. The OECD does report data on this basis for Australia, although the OECD results are a bit old (from 2014). Data for most of the other countries covered is for 2015, although again there are a few markets where the data are from earlier years. Using the OECD numbers, the web presence data place Australia towards the lower end of the OECD's comparator group and below countries like New Zealand, the United Kingdom and Canada:

Share of businesses with website or home page

In the case of data on social media presence, however, the OECD figures show Australia towards the higher end of the distribution (note, however, that the country sample has changed a little here – the OECD didn’t report any data for New Zealand, for example):

Share of businesses using social media

Finally, the World Bank compiles a Digital Adoption Index (DAI) for business, based on an average of four indicators: the share of businesses with web sites, the number of secure servers, download speed and 3G coverage. The Bank's data put Australia towards the lower end of the upper half of OECD economies in terms of digital readiness:

Business Digital Adoption Index (DAI) for OECD economies

Overall, these numbers suggest that while Australian businesses are taking advantage of the digital economy, the rate of adoption is perhaps not yet as widespread as might be assumed based purely on some of the breathless talk about the rise of e-commerce and a new digital era. In turn, this implies that the distance-reducing impact of the internet is currently only at work for some Australian firms, and not for all.