Online is a 1/4 of Australian Retail. The store is the rest.

Australians spent a record AUD 82.6 billion online in 2025, around 24 per cent of retail spending, according to the Australia Post eCommerce Report 2026. The other three-quarters still happens in stores, through people, which is why the in-store customer experience is where retailers should now put their human attention.

Online is also becoming the easier part of retail to automate. Our position is that retailers should let automation carry more of the online work, and put their people back into the in-store customer experience. The evidence in this article comes from the Australia Post eCommerce Report, the annual study of online shopping published by the national postal service, as well as the Australian Bureau of Statistics (ABS), Monash University and published company announcements.

How much of Australian retail is online, and why is it easier to automate?

Online spending reached a record in 2025, growing 14 per cent on the year before, according to the Australia Post eCommerce Report 2026. The same report found that the average online basket fell to AUD 96, the lowest level in five years.

Automation and AI are taking over more of the online journey, from search to recommendation to checkout. Australia Post forecasts that AI could influence up to 30 per cent of digital transactions by 2030. That figure is a forecast rather than a measured result, but it shows the direction in which the online channel is moving.

At the same time, online brands are opening physical stores, which is the opposite of the story that stores are dying. Milligram, an Australian design stationery retailer, began as an online store in 2007, opened its first physical store in 2017, opened its first South Australian store in 2024 and is now opening in Queensland. Analysts at Hana Securities expect new physical stores to drive the next stage of growth for d'Alba, a Korean skincare brand (Edaily, June 2026).

Customers are also arriving better informed, and they are using online differently. A customer can now use a retailer's website as a catalogue rather than as the checkout, looking at a product online and then going to the physical store to confirm it before buying.

Where should retailers put their people and investment?

There are three realistic ways to divide people and investment between the store and the online channel, and each one rests on a different assumption about how the two channels relate to each other.

• The first option is to shift investment and attention online and run stores lean. It assumes that online keeps taking share and that the store is mainly a cost.
• The second option is to run stores and online as separate businesses, each optimised on its own terms. It assumes that the two channels do not affect each other.
• The third option is to automate more of the online channel and put people and investment into the store experience. It assumes that the experience in the store drives both store sales and online sales. This is the option we recommend.

The evidence works against the second option. A study for the International Council of Shopping Centers (ICSC), an industry body representing shopping centre owners, found that opening a new store lifted traffic to the retailer's website in that market by about 37 per cent in the quarter that followed (ICSC, 2018). The study uses data from the United States and was commissioned by an organisation with an interest in physical retail, so it supports the direction of the argument rather than providing a precise figure for Australia.

Why the in-store customer experience is where your people matter most

The store wins where people are involved: in service, advice, returns, discovery and the chance to touch and try a product. The ACRS Retail Monitor, published in November 2025 by Monash University's Australian Consumer and Retail Studies program, surveyed 1,047 Australian shoppers in June 2025. Shoppers scored physical stores at 42 out of 100 for customer service, against 20 for online stores, and scored stores at 39 against 27 for returns.

The clearest test of the store's role came when stores could not trade. During the COVID-19 lockdowns of 2020 and 2021, governments closed non-essential retail, meaning shops other than those selling food, medicine and other essential goods. In September 2021, with lockdowns in New South Wales, Victoria and the Australian Capital Territory, online sales reached a record 15.3 per cent of total retail sales, according to the ABS. Even when non-essential stores were shut in the two largest states, online peaked at about 15 cents in every retail dollar.

People are sensory. They want to feel, touch, see and hear a product before they buy it, and online can offer only one of those senses, the visual, while a store can offer all of them. With the rise of AI being used in images across the web, is there a feeling of trust in those visuals?

When does the in-store customer experience matter most?

The recommendation holds most strongly in categories where shoppers want to touch, try or ask for advice, such as fashion, beauty, homewares and specialist products. It also holds for retailers with stores and staff who can be trained to deliver the experience.

It is weaker for routine, repeat purchases, where speed and price decide the sale. The Monash data supports that distinction: the share of shoppers buying only online rose in two-thirds of product categories in 2025, which means the store's advantage differs from one category to the next.

The experience can also break down inside the store. One frustration in stores is finding the product, and in-store merchandising, store layout and trained staff are what make that part of the experience smooth.

Are physical stores still relevant if online keeps growing?

The case for the store would weaken if online closed the service gap. The Monash data shows that the gaps in service and returns between stores and online are already narrowing.

It would also weaken if AI shopping assistants became good enough to replace advice from a person, because advice is one of the things a store currently does better than a website.

A third risk is price. If consumers keep choosing price over experience, the experience a store offers counts for less, and the fall in the average online basket to AUD 96 points to shoppers looking for bargains (Australia Post, 2026).

What would change our mind is consumer data showing online matching stores on service, or online share rising fast enough to move the three-quarters split.

Common questions

What percentage of Australian retail sales are online?

The Australia Post eCommerce Report 2026 found that Australians spent a record AUD 82.6 billion online in 2025, which is around 24 per cent of retail spending on its measure. On that measure, around three-quarters of Australian retail spending still happens outside online, in physical stores.

Are physical stores still relevant in Australia?

Physical stores still carry around three-quarters of Australian retail spending on Australia Post's 2025 measure. Shoppers in Monash University's 2025 ACRS Retail Monitor scored stores at 42 out of 100 for customer service, against 20 for online stores, and brands that began online, such as Milligram, are opening physical stores.

Why is ecommerce easier to automate than a physical store?

The online journey, from search to recommendation to checkout, runs through steps that automation and AI can increasingly perform. A physical store depends on people serving customers in person, through service, advice and the chance to touch and try a product, which is the part of retail that is hardest to automate.

How can AI be used in a physical retail store?

AI and automation can take over the store tasks that take people away from customers. The aim is to automate, simplify or remove those tasks, so that more of the store team's time goes into the in-store customer experience, which is where a store holds its advantage over online.

Why are online brands opening physical stores?

Physical stores can support online sales as well as store sales. An ICSC study found that opening a store lifted website traffic in that market by about 37% (ICSC, 2018). Milligram moved from online into stores, and analysts expect new stores to drive d'Alba's next stage of growth.

The first move is to look at where store team time goes today, and how much of it actually reaches the customer. The same question applies to the support office: how much of its work actually supports the stores. The next step is to list the store tasks that take people away from customers, because those are the first tasks to automate, simplify or remove. Building that capability, so the in-store customer experience gets the time it needs, is the focus of our training and capability building work.