Good news, bad news for online retail at the petrol pump

Responding to rises in the cost of living in March of this year, the previous Federal Government under then-Prime Minister Scott Morrison implemented the freeze on fuel taxes designed to rein in skyrocketing fuel prices and offer relief at the bowsers to everyday Australians.

Capped at six months, the current Labor Federal Government has assumed the responsibilities of overseeing the fuel excise introduced by their predecessors, conceding that extending it any further beyond its initial six month period isn’t feasible.

“We’re under no illusions about the impact that this will have on family budgets. We don’t pretend that this won’t make things more difficult for a lot of Australian motorists,” Federal Treasurer Jim Chalmers said in a press conference on Wednesday, “The reason that this petrol excise relief is expiring tonight, on the former government’s timetable, is because it would be too expensive to extend it indefinitely. Even to extend it for six months would cost the Budget about $3 billion.”

“We’ve still got around a trillion dollars in gross debt in the Budget and so we can’t fund everything that Australians would like us to fund. All along before the election, during the election, and after the election, we’ve said to the Australian people in an upfront and honest way that we can’t afford to extend this petrol excise relief.”

According to government estimates, the six month fuel excise freeze ultimately cost the Federal Government approximately $5.6 billion in lost revenue, with the full consequences of this loss expected to be laid bare when Chalmers and the Labor government release their Federal Budget in just under four weeks time.

And while the consequences at the petrol pump directly won’t be most acutely felt for a short time, it has nonetheless been predicted that one litre of fuel will see a rise of up to 24 cents, with Australian consumers already scrambling to prepare for the worst of the pain at the pumps set to come.

For online retail, this is news that might not be all bad.

From its most recent Trajectory Report released on September 16, Power Retail found in its surveying of consumers that as many as 27 percent had planned to increase their online spending over the next month, compared to only 20 percent planning to decrease this kind of spending. Reflecting consumer fears about the current cost of living crisis being projected to worsen, of those who reported plans to decrease their spending more than 60 percent reported saving for essential items as being their primary reason.

On the other side of the coin, when surveying those consumers who planned to increase their online spend over the next month, 44 percent reported planning this increased spend based on greater convenience with purchasing online versus in store. An additional 15 percent reported only planning to shop in physical stores for essential items.

What this suggests is that cost-conscious consumers are already looking for opportunities to save, with many recognising fuel costs – the price of driving to the shops and back – as one such potential area through which to save. As fuel costs rocket upwards thanks to the end of the fuel excise cuts, it is viewed as likely that more consumers will be driven to adopt similar decisions and consequently further business will turn to online.

For online retailers, though, the flip-side is what it may soon cost to deliver products. Delivery trucks, after all, do not run on good will and nice ideas. However, even in this regard potential cost-saving strategies do present for retailers to take advantage of if willing to adjust their strategising. Better utilising and prioritising the encouragement of deliveries to collection points and hubs could well be one way that online retailers themselves could minimise their own pain from the petrol pumps, with less distance and less dropoff points for delivery drivers naturally corresponding to decreased delivery and logistics costs overall.

All things considered, the news of the fuel excise cuts concluding and the outlook of what to expect offers mixed results for online retailers, but with big potential silver linings for the savvy retailer willing to seize opportunities that emerge and strategise accordingly.

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