Here’s a figure that should stop any retailer in their tracks: 98% of Australian consumers still shop in physical stores, while 81% research online before making a purchase. That’s not a split between two camps. It’s the same person doing both. The data from Inside Retail makes it clear — Australian shoppers don’t see online and offline as competing options. They use both, often in the same shopping trip.
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Retail spending in Australia hit $38.63 billion in January 2026, up 5% year-on-year according to Mills Shelving. But that growth masks a more complicated picture. Consumer confidence dropped to 68.5 in March 2026 on the Roy Morgan index, and only 15% of Australians say they’re financially better off than a year ago. Shoppers are more deliberate, more price-aware, and more likely to blend channels than ever before. The question isn’t whether experiential shopping will beat online, or vice versa. It’s how to operate in a market where both have to coexist, and where getting the balance wrong costs real money. Here’s what you actually need to know.
What the Research Actually Reveals About Australian Retail
Let’s start with the term you’ll hear constantly in this space: omnichannel. It gets thrown around a lot, so it’s worth being precise about what it means.
The data from the Monash Lens study shows that online shopping participation reached 82% in mid-2025, climbing back from a low of 74% in 2022. That’s still below the 84% pandemic peak, but the trend is upward. At the same time, exclusive online purchasing increased in nearly two-thirds of product categories. What I tend to notice is that the conversation often frames this as a battle between channels. The research doesn’t support that. The customer experience index scores — online 59 out of 100, physical 57 — are nearly identical. Neither channel is dominating. Both have clear strengths and real weaknesses.
The Financial Cost of Misreading the Market
Getting this balance wrong has a direct impact on the bottom line. Roughly 40% of a brand’s perceived value comes from non-price elements such as convenience, service, loyalty programs, and checkout experience, according to Mills Shelving. That means a retailer who invests only in price competitiveness — or only in in-store experience — is leaving 40% of their perceived value on the table.
Consider the numbers from the KPMG Australian Retail Outlook 2026: 96% of retail executives expect revenue growth in 2026, and 81% anticipate margin expansion. That optimism sits alongside consumer confidence at 68.5 and household spending that grew only 0.3% month-on-month in January 2026. The gap between executive expectations and consumer reality is where the risk lives. A retailer who bets heavily on one channel — say, pouring capital into a flagship experiential store while neglecting online checkout and delivery — can end up with high foot traffic but low conversion, because the customer who researches online expects the same pricing and availability in-store. The research shows that shoppers now move across search engines, social platforms, messaging apps, and physical stores before making a decision. Miss them at any point and they move on.
Where Retailers Misjudge the Hybrid Shopper
Treating online and in-store as separate businesses
This is the most common error I see. The Monash Lens data shows that David Jones invested $65 million in an online app specifically to create seamless omnichannel experiences — updated pricing, availability, sizing, and product information across both channels. That’s the right response. The wrong response is running separate inventory systems, separate pricing strategies, and separate return policies. Customers notice immediately. If a product is available online but not in-store, or priced differently, trust erodes. The cost of that friction is hard to measure but the research suggests it’s significant: physical stores score 42 on customer service compared to 20 for online, but that gap has narrowed by 10 points. Online retailers are catching up on service. Physical retailers who ignore their online presence are falling behind.
Ignoring the role of catalogues in a digital world
It sounds old-fashioned, but 71% of Australian consumers read digital catalogues when considering purchases, and one in two use catalogues to decide which store to visit, according to Inside Retail. Over a third still use online catalogues for trip planning, while 29% use paper versions. Retailers who abandoned catalogues in favour of purely digital marketing are missing a channel that directly drives store visits. The mistake isn’t using catalogues — it’s treating them as a legacy format rather than an integrated part of the shopping journey. Digital catalogues are interactive, measurable, and personalised. They’re not print. They’re a data channel.
Underinvesting in the physical store as a fulfilment hub
Click and collect, buy online pick up in store, and boot delivery have become mainstream behaviours, according to Inside Retail. But many retailers still treat their physical locations as sales floors rather than distribution points. Australia Post, for example, has redesigned stores in Melbourne and Sydney specifically for faster service and better-managed online order volumes, with digital self-service options and improved parcel collection zones. The lesson is that a physical store can serve multiple roles — showroom, collection point, return centre, and experience space. Retailers who use their stores for only one of those are wasting square metres.
What I’d flag as the most costly mistake
If I had to pick one, it’s the assumption that value-seeking behaviour will fade. Mills Shelving reports that 70% of retail leaders believe this is a structural shift. That means the 75% of Australians who now identify as bargain hunters aren’t going back to old habits when inflation eases. A retailer who builds their model around occasional discounting rather than permanent value — through loyalty programs, transparent pricing, or consistent quality — will keep losing the 86% of consumers who prioritise price. The fix isn’t to slash margins. It’s to redesign the value proposition so that price, service, and convenience work together rather than compete.
→ Scroll right to see all columns
| Shopping Factor | Physical Store Score | Online Store Score |
|---|---|---|
| Customer service | 42 | 20 |
| Return options | 39 | 27 |
| Sales and promotions | 38 | 48 |
| Payment options | 56 | 59 |
| Overall customer experience | 57 | 59 |
Building a Retail Strategy That Works Across Both Channels
Start with data foundations, not store fit-outs
The KPMG Australian Retail Outlook 2026 is clear: robust data management is the foundation for successful AI integration, and successful AI integration is what makes personalised shopping experiences possible. Three-quarters of consumers expect personalisation, and 60% feel frustrated when offers aren’t relevant. That’s not a nice-to-have. It’s a direct revenue driver. For a small to mid-sized retailer, the first step is getting product data consistent across channels — same descriptions, same pricing, same stock levels. Without that, nothing else works. A Shopify-powered ecommerce setup can help centralise inventory and sync it with physical point-of-sale, but the principle applies regardless of platform: clean data, single source of truth.
Design stores for experience and fulfilment, not just display
The research from Inside Retail positions physical stores as experience centres, hubs for online orders, and touchpoints for discovery and brand building. THE ICONIC’s partnership with Hubbed, introducing physical collection points with change rooms for try-ons and on-the-spot returns, is a practical example. A store that only displays products is underused. One that handles click-and-collect, returns, exchanges, and personalised consultations becomes a central node in the customer journey. The layout, shelving, and signage all need to support multiple functions, not just walk-in browsing.
Build omnichannel loops that keep customers in your ecosystem
Retail media is maturing rapidly in Australia, and Inside Retail notes that 2026 is expected to be a pivotal year for adoption. Retail media networks let brands advertise inside a retailer’s ecosystem — on the website, in the app, and even in-store via digital screens. The key is that it’s contextual and measurable. For a smaller retailer, the equivalent is using customer purchase data to send personalised offers that drive repeat visits, whether online or in-store. The loop works like this: a customer buys online, picks up in-store, gets a personalised offer on their phone for the next visit, and returns to the store to try a related product. Each step generates data that feeds the next offer.
What’s coming next: retail media and AI agents
The KPMG report specifically flags that retailers are deploying AI agents for customer service, personalisation, and marketing communications, with advanced search algorithms and data platforms improving convenience. Amazon is projected to capture 20% of Australia’s online retail market by 2030, according to Mills Shelving. That means every Australian retailer needs to understand how they’ll compete on convenience and personalisation, not just price. The brands that will hold ground are the ones that use data to make shopping feel less like a transaction and more like a guided experience — whether that happens on a phone screen or in a physical aisle.
Frequently Asked Questions
Is online shopping going to replace physical stores in Australia? ▾
What’s the biggest mistake Australian retailers are making right now? ▾
How important is price to Australian shoppers today? ▾
What does omnichannel retail actually look like in practice? ▾
Should small retailers invest in retail media? ▾
How much of a brand’s value comes from non-price factors? ▾
The Future Belongs to Integration, Not Either-Or
The data doesn’t support a future where online dominates or experiential shopping wins. What it shows is a market where 9.8 million Australian households shopped online in 2025, while nearly three-quarters of FMCG sales still happen offline. The same shopper does both. The brands that grow will be the ones that make those two experiences feel like one — not by choosing a side, but by building systems, data, and physical spaces that work together. That’s harder than picking a channel and doubling down. But it’s the only direction the research supports.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Navigating the Supply Chain Crisis: Resilient Strategies for Australian Businesses.
Sources and Further Reading
Why More Australians Are Choosing to Build Membership-Based Businesses — Explores how recurring revenue models and community-driven business structures are gaining traction in the current retail and economic environment.
From Idea to Execution: Launching a Successful Business in Australia — Practical guidance on taking a retail or ecommerce concept from planning to operation, covering registration, funding, and market entry considerations.
KPMG (2026). Australian Retail Outlook 2026. 🔗
Monash Lens (2025). Australian shoppers embrace hybrid habits. 🔗
Mills Shelving (2026). Australian Retail Industry Statistics. 🔗
IBISWorld (2026). Consumer Goods Retailing in Australia. 🔗
Inside Retail (2025). From clicks to bricks: how Aussies blend online and offline shopping. 🔗
