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By PETA COMPTON

Retailers are losing a significant chunk of their revenue to online stores with the trend set to continue until at least 2010, according to the latest figures from the Australian Bureau of Statistics (ABS) and online business magazine SmartCompany.

The $16 billion online retailing industry has experienced strong average annual growth of 8.1 per cent for the past five years and SmartCompany estimates the industry will sustain annual growth of at least five per cent until 2010.

In comparison, ABS figures show that most retail industries experienced big drops in revenue in June 2008, with department stores, small retailers and soft goods retailers the hardest hit.

The effects are starting to be seen locally, with several small businesses around Canberra closing down, including Civic boutique clothing and jewellery store Cowboys and Angels.

The former manager of Cowboys and Angels, Shannon Corrigan, says more stores are likely to follow.

“[online shopping] was basically fatal for us,” she said. “Why would people come in and buy Evisu jeans from us for $500 when they could get them off Ebay for $50? We used to make the day’s budget by selling four pairs of them, but [customers] just stopped coming in when they figured out they could get them online for much cheaper.

 “Every small shop that’s not a franchise is in the same situation. Like [Civic camera store] Digital City closed down just the other week because people kept ordering their cameras straight from Hong Kong.”

Growing consumer confidence in the security of online payments and the increasing penetration of broadband connections has contributed to the increase in online sales.

But Brand Depot Canberra’s marketing director, Jason Costa, says there is a limit to how much online shopping can undermine retail.

“At the end of the day, most people like to physically hold what they’re about to purchase,” he said. “A lot of people don’t like making a purchase unless they can actually feel the quality of the material.

“I don’t think the [online] market’s big enough to make that much of a difference.”

Mr Costa also said that the combination of Christmas approaching and the Reserve Bank’s interest rate cut on Tuesday (2 September 2008) would see retail spending return to healthier levels.

“With the first interest rate cut that we’ve just had in seven years or so, it’s going to relax people,” he said. “And we’re pretty sure that we’re going to get another interest rate cut before the end of the year, so people will…be even more relaxed about spending in the shops.”

However, SmartCompany forecasts retail will become even more competitive as traditional retailers, pure internet-based operators and retailers who have created an online counterpart battle it out to retain profits and market shares.

The marketing spokespeople for Westfield Belconnen and the Canberra Centre were unable to provide comment.