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Internet Competition Inquiry
3. 3. Response of Retail and Small Business to Internet Competition

Introduction

3.1
The growth in internet commerce resulted in significant disruption to markets in many sectors of the economy. New digital platforms have emerged as key intermediaries between customers and businesses and, in many cases, have enabled purchases to take place across international borders. This has resulted in many Australian small businesses having to directly compete with international retailers for the first time. Equally, it has enabled many small businesses to export their products to consumers overseas for the first time.
3.2
The NSW Small Business Commissioner suggested that digital platforms could offer small businesses both benefits and risks, stating:
In the short term, global internet-based platforms enable small businesses to go online and increase their digital footprint, exposure and scale. However, over the longer term, if this results in a monopoly, small businesses could be disadvantaged.[1]
3.3
This chapter outlines the impacts of increased internet competition on Australian businesses and the opportunities that increased online shopping provides for Australian businesses. In addition, it considers the take-up of the digital technologies that are key to participating in the digital economy and the barriers that are preventing some businesses from taking up these technologies.

Review of the Evidence

Consequences of Internet Competition

3.4
The Australian Booksellers Association (ABA) stated that ‘global internet based retailers rely on being disruptive’.[2] Internet based companies with disruptive business models often have the ability to rapidly gain market share and this rapid growth can come at the expense of existing businesses.
3.5
The Australian Industry Group (Ai Group) reported that a 2016 survey found that 89 per cent of Australian companies feared that their business could become obsolete due to digital disruption.[3] The Ai Group added that ‘the modern catch cry for incumbent businesses is to disrupt or be disrupted.’[4]
3.6
The CSIRO’s Data61 digital research group (Data61) described many digital technologies as following an exponential, rather than linear, growth pattern. Data61 described the risk to existing businesses from digital disruption stating that ‘platform based models such as Uber, Airbnb, Amazon and others are capable of transforming a marketplace within months and existing companies or industries may not have time to catch up’.[5]
3.7
Data61 highlighted Uber’s sudden transformation of the taxi market stating that it provided no time for a gradual transition for existing taxi operators. Data61 added that it ‘expects Amazon to have even greater impact on the much larger retail sector as it gets established this year and next’.[6]

Internet Competition in the Retail Industry

3.8
Between 2012 and 2017, the number of Australian retail businesses fell from 140 000 to 133 000.[7] The current challenging environment for Australian retailers was described by the Australian Retailers Association (ARA) as being due, in part, to the ‘marked increase in internet competition from overseas retailers’.[8]
3.9
The ARA suggested that the increased competition from overseas retailers was part of a fundamental shift in the Australian retail landscape. The ARA stated:
What was once a nearly closed retail market, with large margins protected by distance from the latest consumer trends, is now a very open market with considerable global investment.[9]
3.10
Despite the increasing presence of global retailers, online shopping accounts for a small, although rapidly growing, share of the retail market in Australia. Currently, just 6.4 per cent of Australian retail turnover takes place online but this has grown by 142 per cent since 2013. In contrast, the retail industry as a whole grew by just 16 per cent in the same period.[10]
3.11
In the United States of America (USA) and the United Kingdom online shopping is significantly more popular than in Australia, making up ‘10 per cent and 15 per cent of retail spending respectively.’[11]
3.12
Currently 80 per cent of online spending is with domestic retailers. With increasing investment from global retailers and, especially, the arrival of Amazon into the Australian market the dominance of online sales by domestic retailers is likely to decrease.[12] Nevertheless, it may take time for the global retailers to gain significant market share with UBS predicting that Amazon could take 5 years to reach 2 per cent of overall retail sales in Australia.[13]
3.13
The Department of Industry, Innovation and Science (DIIS) identified a number of types of retail business as being ‘likely to face significant pressure’ from global internet-based competition.[14] These groups included large retail department stores, domestically focused low-cost online retailers, and small retailers selling homogenous products that can be purchased more cheaply online.[15]
3.14
The ability of Amazon to place significant competitive pressure on other retailers was, in the view of the DIIS, due to:
Amazon’s scale, lack of physical stores, membership based model (through Amazon Prime), and cross subsidisation from its hugely profitable web services business [meaning] it can offer far greater choice at lower prices than traditional retailers can offer.[16]
3.15
In order to compete with Amazon, the DIIS suggested that large Australian retailers will need to make ‘significant investments in automation’ and ‘become more sophisticated in their use of data and networks’.[17]

The Book Industry

3.16
Books were the first product sold by Amazon and the ABA suggested that, in relation to internet competition, the book industry is the ‘canary in the coalmine’.[18]
3.17
The ABA stated that the Australian book industry has experienced more than twenty years of competition from Amazon and the ABA believed that Amazon (including its subsidiary companies) was now the biggest bookseller in Australia.[19] The ABA outlined the challenge that Amazon provides to all Australian booksellers, from small local stores to chain stores and online retailers, stating that:
Their ability to undercut prices - frequently selling at below what small to medium bookshops pay at wholesale price is unprecedented. Their pricing model suggests that books as a category have been treated as loss leaders to gain market share and to data mine. [20]

Impact of Physical Stores

3.18
As the pressure on local retailers grows some may be forced to close their physical stores and this could impact the vibrancy of town centres and local shopping strips. A vicious cycle of decline can be created in a local shopping strip where each closure contributes to ‘a lack of incentives for people to go to their local shopping strip or town centre [which ] decreases footfall and increases the pressure on [remaining] SME retailers’. [21]
3.19
Research in the USA compared Amazon’s online sales to average sales figures for physical retail stores across a range of business sectors. The research found that Amazon sales were potentially displacing 38 669 physical stores across the USA and that there was a 25 per cent increase in the number of stores displaced between 2014 and 2015.[22]
3.20
The DIIS reported that in recent years Australian department stores had been increasing their floorspace. In contrast, department stores in the USA have recently decreased floorspace by 15 to 20 per cent. The DIIS suggested that with the arrival of Amazon it was likely that the ‘retail footprints of existing department stores will shrink as physical stores lose market share to online retailers.’[23]

Internet Competition in Non-Retail Industries

3.21
While elements of the retail sector may expect to see significant pressure due to the entrance of Amazon this may not be the case for all Australian small business. In the USA a survey found that 83 per cent of small business owners believed that ‘their business is not affected by Amazon’.[24]
3.22
The effect of internet competition on Australian industry is likely to vary greatly between sectors. The DIIS identified small manufacturers as businesses that could ‘benefit significantly from the use of online platforms.’ The DIIS stated small manufacturers could leverage Australia’s reputation for producing ‘safe, high quality products’ and use online platforms to sell these products to global markets. The DIIS also suggested internet competition could force down prices and the savings made by consumers could benefit the ‘providers of ‘luxury’ services, such as travel, health care, and fine dining’.[25]
3.23
The impact of internet competition on the transport and logistics sector is likely to be mixed. The DIIS suggested that large companies directly competing with the distribution networks of major online retailers are likely to face significant pressure. In contrast, the growth in online shopping may benefit some companies, particularly those that can work as a part of an online retailer’s distribution network, or those that can serve areas beyond the reach of these networks.[26]
3.24
Responsible Wagering Australia (RWA) outlined the challenges that Australian licensed online wagering companies face from competitors based overseas. The RWA, reported that overseas companies are not subject to Australian regulations such as restrictions on bets being placed on a sporting event once it has started. The RWA stated that 26 per cent of Australian punters use offshore accounts. In addition, an estimated 60 per cent of the $1.6 billion spent annually on online wagering is spent with overseas providers.[27]

The Accommodation Industry

3.25
The Accommodation Association of Australia (AAA) stated that Australia’s accommodation industry is experiencing ‘significant disruption from online businesses, the majority of which have their headquarters overseas.’[28] There are two main causes of the disruption being experienced by the accommodation industry: competition from the sharing economy platform Airbnb; and the growing dominance of online travel agencies as the source of customer bookings.[29]
3.26
The AAA reported that more than 80 per cent of accommodation bookings in Australia were made via the internet.[30] Of these online bookings nearly 85 per cent are made through sites owned by two companies, Expedia and the Priceline Group.[31] The AAA commented that these two companies had a ‘virtual duopoly in the Australian market’ for accommodation booking.[32]
3.27
The AAA reported that the commissions charged by Expedia and Priceline Group have risen from 5 to 10 per cent in the 2000s to 20 to 25 per cent today.[33]
3.28
The AAA suggested that if an Australian accommodation provider ‘chose not to list their properties on these websites, they risk losing a significant amount of their business’. The resulting situation is that Australian accommodation providers have ‘no bargaining power with these global giants’ and are effectively forced to accept the increasing commissions.[34]
3.29
Airbnb is a sharing economy platform that enables house owners to least out all, or part, of their home to short-term renters. The Australian Small Business and Family Ombudsman estimated, however, that 35 per cent of Airbnb listings are ‘commercial operators that lease out property all year round, and have investment properties designed specifically for the sharing economy’.[35]
3.30
The AAA estimated there are currently 125 000 Airbnb properties in Australia and were concerned that Airbnb providers are not required to comply with the same regulations as traditional accommodation providers such as hotels and motels.[36]

Take-up of Digital Technology

3.31
The DIIS stated that while the impact of global internet based competition would differ between companies, ‘what is clear is that in general, digitally enabled businesses will be better placed to succeed’.[37]

Retail Industry

3.32
The DIIS highlighted research by McKinsey which had found that the Australian retail sector has a ‘medium level of digitisation [but] it lags behind international peers, particularly in relation to reaching and influencing customers through digital channels.’[38]
3.33
The DIIS also reported that medium and large retailers are less likely than equivalent businesses in other sectors to have a web presence but are ‘more likely to be using social media and placing and receiving orders via the internet’. The rates of social media use and internet ordering among small retailers are lower than among larger retailers but are higher than among other small businesses.[39]
3.34
Master Grocers Australia (MGA) commented that the challenges facing independent grocers, including competition from larger rivals, forces them to focus on survival and has made ‘the vast majority of small retailers very hesitant to look too far into the future’.[40]
3.35
The MGA added that while online retail as a whole is growing there has not been significant growth of online shopping in the independent grocery sector. The MGA suggested that most of its members would consider a move into online retailing but ‘not in the immediate future and maybe not even for several years’.[41]
3.36
Nevertheless, the MGA stated that the ‘grocery supermarket industry is worth approximately $15 billion in sales and at present less than 1 per cent is online, but that could be 10 per cent in 5 years’ time.’[42] The MGA was concerned that ‘a period of prolonged procrastination may not be a viable option’ and that, over time, a failure to invest in online shopping could severely damage the independent grocery sector.[43]
3.37
The ABA reported that several larger Australian booksellers such as ‘Readings, Collins Booksellers, Abbeys, Dymocks, and Gleebooks’ are engaged in online retailing. In addition, Booktopia, a solely online bookseller started in Sydney 15 years ago, now turns over ‘nearly $100 million per year’.[44]
3.38
The ABA added that many of the larger bookstores had invested heavily in ‘proprietary or customised digital technology’ but that most new and smaller bookstores did not have the capacity to make such investments.[45]

Small Business

3.39
The Council of Small Business of Australia (COSBOA) stated that ‘most small business owners have already made significant changes to their businesses because of digital technologies’.[46] The COSBOA stated that digital and online technologies had altered small business processes in areas including business management, human resources, supplier interactions, customer relations, government relations, and online sales.[47]
3.40
A survey of 1500 Australian SMEs conducted by Deloitte and Google had found that Australian small businesses ‘are becoming more digitally capable over time’. The survey found that in 2017, for the first time, more than half of the participating businesses had ‘high or advanced levels of digital engagement’.[48]
3.41
In contrast, the Ai Group stated that ‘SMEs are lagging large businesses in the use of … now-mainstream business applications. There is considerable scope for further SME technology adoption’.[49]
3.42
The DIIS agreed that small business was lagging behind in technology adoption. The DIIS highlighted Commonwealth Bank of Australia research which found that ’80 per cent of small and medium businesses are delaying the adoption of technology that could offer long-term benefits.’[50]
3.43
The Ai Group stated that 42 per cent of Australian businesses were using cloud storage. The Ai Group explained the value of cloud storage, especially for small businesses, stating:
Cloud usage is likely increasing because the growing services on offer enable businesses to acquire infrastructure and go to market quicker and more easily than with an internal platform. This may be particularly valuable to smaller businesses.[51]
3.44
The Australian Bureau of Statistics has found that 16 per cent of Australian businesses have experienced a cyber security breach.[52] To illustrate the impact that these breaches can have, Data61 drew attention to a study which found that 50 per cent of small businesses who had their data stolen did not exist six months later.[53]
3.45
The Ai Group highlighted cybersecurity as a technology with particularly low levels of adoption among small businesses. While noting that most businesses probably used ‘off-the-shelf antivirus software’, the Ai Group stated that more advanced cybersecurity measures were used by 22 per cent of all businesses and just 11 per cent of small businesses.[54]

Barriers to Going Digital

3.46
A 2015 survey conducted by the Ai Group found that the four main barriers to Australian businesses investing in digital technologies were: ’lack of employee skills (33 per cent of businesses), costs (31 per cent), perceived lack of relevance (24 per cent) and slow internet (23 per cent).’ The proportion of businesses that did not perceive digital technologies to be relevant was significantly higher (36 per cent) among small businesses.[55]
3.47
Similarly, among independent grocers, the MGA identified the main barriers to greater use of digital technologies to be ‘cost, wages, and having the expertise required to establish and control the digital platform needed to set up the system and maintain it.’[56]
3.48
In addition to the barriers above, the DIIS suggested that smaller businesses may feel that greater use of digital technologies would be inconsistent with the service levels expected by their customers. The DIIS also suggested that a reluctance to invest in digital technologies could be due to the ‘culture within a family-run enterprise, generational issues or a reluctance to depart from methods which have traditionally been successful.’[57]
3.49
The ABA commented that expansion into online retailing can be difficult for small bookstores as ‘bookselling is a capital intensive business that requires high levels of stock/inventory to be held’.[58] The ABA added that:
For small and micro businesses, the significant costs of creating a viable online store so as to compete with global online retailers or even large Australian online book retailers are, without significant improvements in technology and supply chain processes, unviable.[59]
3.50
The ABA in particular highlighted the difficulty smaller booksellers have with managing the data needed for effective online commerce. The ABA added that there are already millions of books available for print in Australia, with approximately an additional one million new books published in English each year.[60] The ABA added that:
… because of the sheer volume of the product range the customer expects from a bookstore, many of the new and innovative digital retail platforms, products, channels and technologies being trialled in other retail sectors cannot easily be adopted or are not available to booksellers.[61]
3.51
The ARA stated that ‘Australia’s logistics and postal services need to be modernised … to keep up with demand’ for online shopping.[62] The ARA reported that 56 per cent of Australian retailers struggled with shipping and suggested that Australia’s currently sub-optimal domestic supply chain was reducing the competitiveness of Australia retailers.[63]
3.52
The ARA suggested that Australian stores were being hampered by customs processes delaying the importation of products they wished to sell. In addition the ARA suggested that there was a need to simplify regulations related to ‘planning and zoning for warehousing, logistics and transport regulations, and customs and border operations’.[64]
3.53
The ABA suggested that the government should ensure that all Australian small businesses can access the National Broadband Network and that the government should monitor the market for internet services and digital infrastructure to ensure that small business is paying ‘a fair price for their digital assets and footprint’.[65]
3.54
A lack of digital skills and expertise can also be a significant barrier to small businesses taking advantage of online retail opportunities. These issues are discussed in Chapter 4.

Digital Technologies - Opportunities for Business

3.55
The COSBOA stated that ‘small business has to embrace change. If we don’t we don’t exist.’[66] The COSBOA added that digital technology had played a ‘critical role’ in the creation of many small businesses and emphasised the importance of access to global markets for small business. The COSBOA stated:
Online retailing and platforms for small businesses to sell online has enabled many people to create and sell new products. Without the ability to market and sell online, many new businesses in Australia would struggle to survive.[67]

Digital Supply Chains

3.56
The Ai Group commented that the Australian SME sector was relatively small and remote and this made it difficult for Australian SME’s to participate in global supply chains. The Ai Group noted, however, that global manufacturing industry is ‘evolving towards smaller batches, customised products, rapid prototyping and increasing servitization - the process of adding services to a product or replacing the product with a service’. The Ai Group suggested that these changes offered Australian businesses with innovative business models an opportunity to participate in new forms of global supply chains.[68]
3.57
The Ai Group stated that in advanced manufacturing the ‘traditional delineation between manufacturing and services is becoming more blurred’.[69] The Ai Group added that manufacturers were increasingly bundling their products with value-adding services and that 32 per cent of manufacturing exports is in the form of bundled services. The Ai Group recommended that small manufacturers continued to move into the services space.[70]

Artificial Intelligence and Automation

3.58
Data61 emphasised the importance of artificial intelligence, stating that it ‘will have profound implications for our industry, economy and society’ and will ‘enable new industries, security and a higher quality of life’.[71]
3.59
The ARA stated that artificial intelligence ‘is probably where the biggest growth in retail is’ but suggested that the benefits of artificial intelligence would flow more to large retailers than small retailers. The ARA stated that while small retailers may have databases of names and addresses to use for marketing the larger retailers will have access to more precise data. Larger retailers, for example, may be able to identify ‘that you are in fact a 64-year old male and you’ve entered the shop’.[72]

Online Digital Platforms

3.60
The COSBOA suggested that for retail and hospitality businesses having a presence on online platforms was almost essential to be able to stay in business.[73] The Australian Competition and Consumer Commission (ACCC) made a similar comment stating that many small businesses ‘consider an online presence through intermediaries to be an essential component of their marketing to potential customers’. The ACCC expected the use of online platforms to grow thus ‘creating greater risks for businesses that do not move online’.[74]
3.61
The DIIS emphasised the importance of digital platforms by stating that ‘the main way that small retailers benefit from the growth in online selling is through the opportunity to sell through online platforms.’ In addition the DIIS stated that ‘sellers do not need to invest in highly sophisticated digital skills to use these platforms, meaning the barriers to [accessing] global markets through these platforms are low’.[75]
3.62
The Digital Industry Group Inc. highlighted the results from a survey conducted with 5000 Australian small businesses using Facebook. The survey found that these Australian small businesses use online tools to:
1
Provide information (95 per cent);
2
Advertise to potential customers (92 per cent);
3
Communicate with customers or suppliers (92 per cent);
4
Show products or services (92 per cent);
5
Sell products or services (82 per cent); and
6
Manage internal business processes (56 per cent).[76]
3.63
In its report on small business in the agile economy commissioned by eBay, Deloitte Access Economics (Deloitte) described four key benefits that digital platforms can provide for small businesses:
Global Markets: Enables small businesses to reach a greater number of buyers and also enables them to purchase goods and services from a greater number of sellers;
Data Analytics: Provides small business with information about the customers that can be used to better target marketing campaigns;
Network Effects: The benefits to both businesses and consumers grow as the number of people using a platform increases;
Lower Costs: Using a digital platform is often cheaper than creating a physical store or standalone website.[77]
3.64
Deloitte suggested that digital platforms lower transactions costs by making it easier for consumers to search for products and businesses to find potential buyers.[78] Deloitte stated that through a combination of lower costs and access to larger markets ‘platforms allow small businesses to become viable competitors outside their local markets’.[79]

Global Export Markets

3.65
The ACCC highlighted that access to global markets provided small businesses operating in niche sectors a much greater chance of succeeding. The ACCC stated:
The markets are much, much bigger than they ever were before. There are opportunities for niche players that never really existed before, as a result of the internet. In our work we are seeing businesses that are really focusing on very, very small areas that would not have been sustainable if they only had their local geographic area to sell to, but now, because they are selling on the internet, they are sustainable.[80]
3.66
The DIIS emphasised the importance of Australian small businesses using digital platforms to export their goods and services. The DIIS stated:
The most positive aspect of the likely increased use of online marketplaces by small Australian firms is that businesses that use global digital platforms overwhelmingly tend to become exporters. For example, nearly 90 per cent Australian small businesses on eBay export globally.[81]
3.67
The DIIS also explained the significance of the high numbers of small businesses using digital platforms in order to export by stating:
… [DIIS] research has found that Australian exporters are generally larger than non-exporters in terms of employment, value-added and capital expenditure, are generally also more productive and pay higher wages. Exporting also increases the probability of business survival.[82]

Review and Payment Systems

3.68
Deloitte suggested that digital platforms provide small businesses a means of competing with larger businesses who have already established a trusted brand. Deloitte stated that digital platforms provide small businesses with a ‘short cut’ to building trust with consumers. One means through which trust is built with customers is through the use of payment systems such as PayPal which can ‘create trust in the transaction as financial details are only shared with a secure third party’.[83]
3.69
In addition, the customer review systems used on digital platforms provide small businesses the opportunity to build a reputation as a trusted business. Deloitte suggested that review systems created a ‘feedback mechanism’ which could improve customer experiences. As an example, Deloitte stated businesses listed on Tripadvisor ‘tend to take action in order to garner good reviews resulting in better services being provided and better reviews’.[84]

Risks in Using Digital Platforms

3.70
The COSBOA highlighted accounts of experiences of small businesses using the Amazon Marketplace overseas. The COSBOA stated that Amazon had access to significant data on the businesses using its platform. This data could enable Amazon to identify successful products, manufacture a similar product cheaply overseas, and then market the Amazon product directly to customers of the original product.[85]
3.71
The ABA elaborated, stating that companies using Amazon Marketplace could encounter a situation where Amazon knows everything about their product, their customers, and their business. With Amazon’s access to cheaper manufacturing and distribution systems and a large customer base who are members of Amazon Prime they could effectively outcompete the smaller company. The ABA stated:
There are significant examples of SMEs and medium-sized enterprises in the US with single-line products that have been taken straight out of the market and sidelined in what is effectively a Wild-West-style hijacking. They did not have an opportunity to protect their product in the marketplace.[86]

Non-Technological Responses to Internet Competition

3.72
Data61 commented that ‘not every single Australian company has to got to become fully digital’ and provided cafes as an example, stating:
…the profession of barista is highly automatable. We shouldn’t have them anymore, according to the analysis. It’s a set of rules and procedures and there’s machinery which does it … but we still have baristas, and I think in 20 years’ time we will … [cafes] don’t need to transform and replace that barista with a machine [because it is] a more effective business model with a person because of the broader experiential good.[87]
3.73
Both the MGA and the ABA suggested that, despite the growth in online retail, it is still valuable for a store to maintain a strong link to its local community. The ABA highlighted the growth in ‘shop local’ movements across Australia and stated that consumers still ‘wish to shop locally, if they have the opportunity to do so.’[88] The MGA stated that consumers ‘still enjoy the “personal contact” that is associated with going to the local supermarket at the weekend’ and that retailers still valued offering high quality customer service in person.[89]
3.74
The ABA added that bookstores are often owned and staffed by people living locally and are a key part of the ‘shop local’ experience. The ABA stated that many small to medium bookstores are ‘active cultural and social hubs for their local communities engaging with schools, young readers, community group and local charities.’[90]
3.75
The DIIS agreed that small retailers could ‘leverage local customer relationships and provide in-store services such as product advice and local expertise which many customers will continue to value’. The DIIS added that small retailers selling products not easily accessible online, such as local food products, could continue to be successful without an online presence.[91]
3.76
The DIIS suggested that businesses may have to shift the focus of their physical stores in order to offer customers experiences that are not available online. The DIIS stated that this could be achieved through physical stores ‘shifting from points of sale to platforms for discovery, engagement and experience.’[92]

Committee View

3.77
Australians are spending increasingly large amounts of time on the internet and new technologies are embedding internet connectivity into an ever wider array of everyday devices. At the same time, digital platforms are offering a new means for businesses to sell their products directly to consumers across the world. These trends suggest that although e-commerce currently only accounts for a small proportion of the Australian retail market it is going to grow rapidly.
3.78
The Committee was pleased to hear that 80 per cent of online spending currently takes place with domestic retailers. Although it is likely that competition from overseas retailers is about to intensify.
3.79
Several digital platforms have already made significant inroads into the Australian market. These include broad marketplaces such as eBay and more targeted platforms such as Airbnb, Uber, Expedia and Booking.com. The entrance of Amazon, the world’s largest online retailer, into the Australian market has focussed attention on the impact that digital platforms have on Australian consumers and businesses.
3.80
Amazon sales account for 5 per cent of the retail market in the United States but are growing rapidly at the expense of many traditional ‘bricks and mortar’ retailers. While it may take some time to become established in the Australian market, Amazon has many advantages that will place pressure on other businesses in the retail sector. Where it is established, Amazon’s economy of scale, automated warehousing and freight systems, data analytics capabilities, and research and development spending have enabled it to outcompete most other retailers.
3.81
Australian retail businesses should already be considering what they can offer customers that will give them an advantage over internet competitors. It could be great service, expert advice, or local products, but competing on price alone may prove difficult.
3.82
Despite the emergence of increased internet competition, small businesses can survive and even thrive in the digital economy. Many small booksellers have been in competition with Amazon for over two decades. Nonetheless they have survived by focussing on what they can provide that customer’s value, perhaps it is a carefully curated collection, or perhaps it is a sense of community developed through being a hub for local events.
3.83
Indeed, for many small businesses the rapid growth of internet shopping, and in particular the growth of digital retail platforms such as eBay, Etsy, or the Amazon Marketplace, will offer unprecedented opportunities.
3.84
Through the use of digital platforms Australian small businesses are able to sell products to overseas consumers without the need for expensive marketing budgets or high level digital expertise. For example, the Committee was pleased to hear that 90 per cent of Australian small businesses using eBay are exporting products to consumers overseas.
3.85
Digital platforms enable specialist retailers and niche manufacturers access to a customer base large enough for their companies to succeed and grow. Without the access to global markets enabled by internet shopping, many of these businesses would not be viable.
3.86
Taking advantage of the opportunities created by internet retail can require access to some technology and staff with digital literacy. The Committee is recommending that the government establish a digital grants program aimed at assisting small business invest in their digital capabilities. The Queensland Government offers a Small Business Digital Grants Program[93] which provides matched funding of up to $10 000 for small businesses to invest in hardware, software, or services that assist them to take advantage of digital economy opportunities. A similar program aimed at small businesses, and using matched funding to ensure the commitment of the business to the investment, could benefit businesses across Australia.

Recommendation 1

3.87
The Committee recommends that the Australian Government establish a digital grants program for small business. The program should provide small businesses with grants to assist them take advantage of digital economy opportunities such as online retail. Grants should be small-scale and the businesses should be required to provide matched funding and demonstrate how the grant would increase their capacity to take advantage of digital economy opportunities.

[1]     

NSW Small Business Commissioner, Submission 3, p. 1.

[2]     

Mr Tim White, President, Australian Booksellers Association (ABA), Official Committee Hansard, Canberra, 14 February 2018, p. 1.

[3]     

Australian Industry Group (Ai Group), Submission 4, p. 1.

[4]     

Ai Group, Submission 4, p. 1.

[5]     

CSIRO Data61, The Digital Economy: Opening the Conversation, Submission to the Department of Industry, Innovation and Science Digital Economy Strategy Consultation, p. 7.

[6]     

CSIRO Data 61, The Digital Economy: Opening the Conversation, Submission to the Department of Industry, Innovation and Science Digital Economy Strategy Consultation, p. 7.

[7]     

Mr Russell Zimmerman, Executive Director, Australian Retailers Association (ARA), Official Committee Hansard, Canberra, 7 February 2018, p. 7.

[8]     

Mr Russell Zimmerman, ARA, Official Committee Hansard, Canberra, 7 February 2018, p. 7.

[9]     

Mr Russell Zimmerman, ARA, Official Committee Hansard, Canberra, 7 February 2018, p. 7.

[10]     

Department of Industry, Innovation and Science, Submission 7, p. 9.

[11]     

Department of Industry, Innovation and Science, Submission 7, p. 10.

[12]     

Department of Industry, Innovation and Science, Submission 7, p. 10.

[13]     

Department of Industry, Innovation and Science, Submission 7, pp 9-10.

[14]     

Department of Industry, Innovation and Science, Submission 7, p. 5.

[15]     

Department of Industry, Innovation and Science, Submission 7, p. 5.

[16]     

Department of Industry, Innovation and Science, Submission 7, p. 11.

[17]     

Department of Industry, Innovation and Science, Submission 7, p. 11.

[18]     

Australian Booksellers Association, Submission 12, p. 1.

[19]     

Mr Tim White, ABA, Official Committee Hansard, Canberra, 14 February 2018, p. 5.

[20]     

Australian Booksellers Association, Submission 12, p. 5.

[21]     

Australian Retailers Association, Submission 5, p. 2.

[22]     

Australian Booksellers Association. Submission 12, Attachment B: American Booksellers Association and Civic Economics, ‘Amazon and Empty Storefronts, 2015 Update, pp 7, 10.

[23]     

Department of Industry, Innovation and Science, Submission 7, p. 12.

[24]     

Department of Industry, Innovation and Science, Submission 7, p. 15.

[25]     

Department of Industry, Innovation and Science, Submission 7, p. 15.

[26]     

Department of Industry, Innovation and Science, Submission 7, p. 15.

[27]     

Responsible Wagering Australia, Submission 10, pp 2,3.

[28]     

Accommodation Association of Australia, Submission 6, p. 4.

[29]     

Mr Richard Munro, Chief Executive Officer, Accommodation Association of Australia (AAA), Official Committee Hansard, Wednesday 14 February 2018, p. 2.

[30]     

Accommodation Association of Australia, Submission 6, p. 6.

[31]     

Accommodation Association of Australia, Submission 6, p. 4.

[32]     

Accommodation Association of Australia, Submission 6, p. 5.

[33]     

Accommodation Association of Australia, Submission 6, p. 5.

[34]     

Accommodation Association of Australia, Submission 6, p. 5.

[35]     

Australian Small Business and Family Enterprise Ombudsman, Submission 8, p. 1.

[36]     

Mr Richard Munro, AAA, Official Committee Hansard, Canberra, 14 February 2018, p. 3.

[37]     

Department of Industry, Innovation and Science, Submission 7, p. 16.

[38]     

Department of Industry, Innovation and Science, Submission 7, p. 12.

[39]     

Department of Industry, Innovation and Science, Submission 7, p. 16.

[40]     

Master Grocers Australia, Submission 9, p. 3.

[41]     

Master Grocers Australia, Submission 9, p. 5.

[42]     

Master Grocers Australia, Submission 9, p. 5.

[43]     

Master Grocers Australia, Submission 9, p. 5.

[44]     

Australian Booksellers Association, Submission 12, p. 2.

[45]     

Australian Booksellers Association, Submission 12, pp 7-8.

[46]     

Council of Small Business of Australia, Submission: The Digital Economy Consultation Paper, p. 4.

[47]     

Council of Small Business of Australia, Submission: The Digital Economy Consultation Paper, pp 6-8.

[48]     

Digital Industry Group Inc., Submission 13, p. 7.

[49]     

Ai Group, Submission 4, p. 6.

[50]     

Department of Industry, Innovation and Science, Submission 7, p. 16.

[51]     

Ai Group, Submission 4, p. 6.

[52]     

Australian Bureau of Statistics, ABS Submission on the Digital Economy: Opening up the Conversation Consultation Paper, p. 9.

[53]     

Mr Adrian Turner, Chief Executive Officer, CSIRO’s Data61 (Data61), Official Committee Hansard, Canberra, 28 February 2018, p. 9.

[54]     

Ai Group, Submission 4, p. 6.

[55]     

Ai Group, Submission 4, p. 6.

[56]     

Master Grocers Australia, Submission 9, p. 5.

[57]     

Department of Industry, Innovation and Science, Submission 7, p. 17.

[58]     

Australian Booksellers Association, Submission 12, p. 3.

[59]     

Australian Booksellers Association, Submission 12, p. 4.

[60]     

Australian Booksellers Association, Submission 12, p. 7.

[61]     

Australian Booksellers Association, Submission 12, p. 8.

[62]     

Australian Retailers Association, Submission 5, p. 8.

[63]     

Australian Retailers Association, Submission 5, p. 8.

[64]     

Australian Retailers Association, Submission 5, p. 8.

[65]     

Australian Booksellers Association, Submission 12, p. 11.

[66]     

Mr Peter Strong, Chief Executive Officer, Council of Small Business of Australia (COSBOA), Official Committee Hansard, Canberra, 14 February 2018, p. 1.

[67]     

Council of Small Businesses of Australia, Submission: The Digital Economy Consultation Paper, p. 4.

[68]     

Ai Group, Submission 4, p. 2.

[69]     

Ai Group, Submission 4, p. 3

[70]     

Ai Group, Submission 4, pp 3-4.

[71]     

Mr Adrian Turner, Data61, Official Committee Hansard, Canberra, 28 February 2018, p. 2.

[72]     

Mr Russell Zimmerman, ARA, Official Committee Hansard, Canberra, 7 February 2018, p. 11

[73]     

Mr Peter Strong, COSBOA, Official Committee Hansard, Canberra, 14 February 2018, p. 5.

[74]     

Australian Competition and Consumer Commission, Submission 2, p. 1.

[75]     

Department of Industry, Innovation and Science, Submission 7, p. 13.

[76]     

Digital Industry Group Inc., Submission 13, p. 2.

[77]     

eBay, Submission 11a: Deloitte Access Economics - Platforms, Small Business and the Agile Economy, p. 7.

[78]     

eBay, Submission 11a: Deloitte Access Economics - Platforms, Small Business and the Agile Economy, p. 4.

[79]     

eBay, Submission 11a: Deloitte Access Economics - Platforms, Small Business and the Agile Economy, p. i.

[80]     

Mr Marcus Bezzi, Executive General Manager, Specialised Enforcement and Advocacy Division, Australia Competition and Consumer Commission, Official Committee Hansard, Canberra, 7 February 2018, p. 1.

[81]     

Department of Industry, Innovation and Science, Submission 7, p. 14.

[82]     

Department of Industry, Innovation and Science, Submission 7, p. 14.

[83]     

eBay, Submission 11a: Deloitte Access Economics - Platforms, Small Business and the Agile Economy, p. 10.

[84]     

eBay, Submission 11a: Deloitte Access Economics - Platforms, Small Business and the Agile Economy, pp 10-12.

[85]     

Mr Peter Strong, COSBOA, Official Committee Hansard, Canberra, 14 February 2018, p. 6.

[86]     

Mr Tim White, ABA, Official Committee Hansard, Canberra, 14 February 2018, p. 9.

[87]     

Dr Stefan Hajkowicz, Senior Principal Scientist, Data61, Official Committee Hansard, Canberra, 28 February 2018, pp 7-8.

[88]     

Australian Booksellers Association, Submission 12, p. 4.

[89]     

Master Grocers Australia, Submission 9, pp 4-5.

[90]     

Australian Booksellers Association, Submission 12, p. 4.

[91]     

Department of Industry, Innovation and Science, Submission 7, p. 14.

[92]     

Department of Industry, Innovation and Science, Submission 7, p. 12.

[93]     

Queensland Government, ‘Small Business Digital Grants Program’, https://www.business.qld.gov.au/starting-business/advice-support/grants/digital-grants, Accessed 19 March 2018.