Who is Going Online and How Fast? It’s older, lower-income and regional households and they’re fast catching up with the younger, higher income places.
Co-Written by Kevin Johnson
Who is Going Online and How Fast?
Data from our local government Spendmapp subscribers shows that from 2018 the share of all residents’ wallets going online has been quite steady at around 30% (with another 30% as Resident Escape Spend and 40% as Resident Local Spend). But the details show a more complex picture: an acceleration in recent months (December 2020 online share is 10% than December 2019); and what looks like a convergence of online spending share between the early adopters and the new comers.
Recent Changes in Online Spend
Our December 2020 Spendmapp data showed a large increase in Resident Online Spend (up by 10% compared with December 2019). It seems obvious that online spending is taking up a larger percentage of the household wallet, but the reality is not that simple.
The shift to online spending has been steady over the last decade. In Australia, it has been led by younger and higher-income households.
But over the last 12 months, there has been a change as older, and lower-income, households have increased their online share. This has undoubtedly been driven by the responses to the COVID-19 pandemic (and literally driven by better delivery services, particularly in rural areas).
In Spendmapp terminology, Resident Online Spend has significantly increased its wallet share in older, lower-income, and rural locations. This has been at the expense of Resident Local Spend (what is spent by residents in their ‘home’ municipality) and Resident Escape Spend (the share spent in all other municipalities). We are travelling less, even locally.
Where Online Spending Started
Spendmapp user data from 2018 to 2020 shows that, in 2018, there was a strong positive correlation between household income and the spend share of Resident Online Spend. There was also a strong inverse correlation between this share and median age. In simple terms, younger and higher-income places spent more of their wallet online. In fact, inner metropolitan areas online spending made up about 35% of the wallet; and in older, lower-income and rural areas it was an average of 26%.
In the last two years, this difference has started to narrow. From 2018 to 2020, for all Spendmapp users, there was an 8% increase in the Resident Online Spend share. But for the lower-income areas (defined using ABS data), the increase was 24%. In the higher income places, the Resident Online Spend share increased by just 2%. The same pattern appears for age as well: with municipalities with higher median ages significantly increasing their online spending relative to other spending.
The figures below plot the change in Resident Online Spend Share and median income and age, respectively.
Figure 1: Change in Resident Online Spend Share and Median H’hold Income
The red line shows the nature of the correlation between income and the change in online spend share: Lower income households increased their online spend share at a much faster rate than higher income households: a sign of having reached a saturation point? Source: Spendmapp.com.au
Figure 2: Change in Resident Online Spend Share and Median Age
Municipalities with a higher share of older households saw a much faster increase in online spend share Source: Spendmapp.com.au
We did think at first, this change was due to lower-income households embracing online grocery shopping (assuming a large share of a lower-income person’s wallet is taken up by groceries). But this is not the case. The data shows that most of the increase in online spending has resulted from a significant uptake in the Discretionary Spend category. This category includes luxury goods, specialised goods (like musical instruments or sporting goods) and, of course, Dining & Entertainment (we’re ordering more delivery food than ever).
Although younger, metropolitan and higher-income households still spend more of their wallet online, the gap is shrinking fast. Online shopping is now an economic reality across the country, rural and urban, old and young, high and low income.
Where is it heading?
Notwithstanding the rapid increase in online share in older and lower-income areas, overall categories of online spending have not increased significantly relative to other spending. Recall, the online spending share of young, metropolitan and high-income households only increased by 2%, despite lockdowns. Although it is too early to say for certain, this may be an indicator that the growth of the online spend share is slowing down, perhaps even converging to some point of equilibrium (at around one-third of spending). For now, at least.
