why “ecommerce has flopped in NZ”

That article again – right at the bottom, from out of nowhere, come “five reasons ecommerce has flopped in New Zealand”.

“1. Mall mania. Trips to the shopping centre are a top Kiwi recreation.
2. Security fears. Kiwis are paranoid about giving credit card numbers online.
3. Bargain hunting. If it’s not cheaper online, why bother?
4. The Trade Me factor. The auction site dominates the time we spend online.
5. Delivery costs. US research shows free delivery is a big attraction for online shoppers.”

Let’s deal with these in turn.

1: Shopping in NZ malls is nothing compared with the USA. I’m not even going to bother looking up the numbers.

2: Well over a quarter have done so. There are 1.4m Trade Me customers and seeing as you have to pay something to list or bid, you can guess that most have paid. Meanwhile there are those AirNZ customers and the fact that we have been paying our bills through the phone and banks quite happily for years and years now.

3: Wrong way to look at it, but basically there is a scale problem. In New Zealand an online shop would struggle to have enough scale to make holding a wide inventory at cheap cost doable. Having a limited or expensive inventory is killer for online shopping. The alternative is to drop ship from offshore, but that means you are competing with the offshore giants.

4: 40% of Trade Me sales are for new stuff (and a lot use the Buy-Now feature) – there is your eCommerce.

5: Red herring – free delivery is and was offered by some, not by others. Total cost is what matters, and for that you have to look a#3

Now let’s look at another 5 reasons. I’m not saying these are the right ones, or all of them. However I’m pretty sure they are better than the above which, look like they were written by a Telecom apologist.

1: Expensive and limited Broadband. It is really hard to start a business when you cannot even get reliable and cheap broadband to the home (or even university). Anomaly Trade Me used the awesome Wellington Citilink – fibre strung on trolley-bus wires – to start up, and focussed on making their site sleek enough for dial up.

2: Dollars going overseas: the early adopters in New Zealand were well aware of the eCommerce offerings from (mainly) the USA. Why bother with childish home-grown booksellers when you can parallel import (thanks to great unrestrictive laws) from Amazon for cheaper?

3: Population density and placement of shops. The young wealthy people in New Zealand live in the cities – and our cities are far more dense (Auckland excepted) than their US equivalents. We are far behind on the rollout of the big box stores (I am guessing), and Wellington in particular is very centralised. Buying books online makes less sense if I walk past a bookshop every day.

4: Scale of opportunity – while the internet is home to billions, New Zealand is home to just 4 million, and we are much poorer per capita than lots of places. Kiwi entrepreneurs don’t want to constrain themselves to this country, and so launched services (such as search) for the world, or emigrated to work with the best.

5: limited reward culture – The kiwi tall poppy syndrome seems to have been curtailed for now – and having business leaders that are nice guys helps. But we still have a way to go before we get a Netscape or Google – where all of the staff become incredibly wealthy and spawn new start-ups. The Trade Me sale and Rod Drury’s sale earlier this year did finally create a handful of wealthy individuals, and some (2? 3?) have become second stage investors. What we need is a big sale where huge dollars go to all of the staff, and then we can watch the second stage investments go wild as 24 year olds give money to their smart mates.

Published by Lance Wiggs


3 replies on “why “ecommerce has flopped in NZ””

  1. I think you’re right on scale – there isn’t an amazon.co.nz because the market doesn’t work for it – exactly the same thing applies to anyone else trying to do the same thing.

    I don’t think broadband makes any difference, at least on the server side. Why would anyone try and host a commercial (or any) website in their own premises? Using a hosting or rack space provider makes so much more sense. And if you’re going to do that, you may as well host from the US – response times are no slower and costs are a small fraction.


  2. These days Rich I think you are right on the hosting side of things, though I have issues even reliably FTP’ing up to a US based site, and there is still a 200ms lag. ping trademe.co.nz gives 44ms, while ping yahoo.com gives 250ms.

    In the US a lot of businesses got started in University or people’s own premises – eBay, Google, Yahoo number among them. So does Trade Me.


  3. A side comment: I wouldn’t lament the slow growth of big boxes in New Zealand. Having lived now in both the US and New Zealand I can tell you they’re not all they’re cracked up to be.

    Big Box stores here are known for their general contempt shown towards customers and centralization of store management – in many places there are no more main streets, no more local independent shops. This has also brought with it an increasing reliance on cheap imported goods at the cost of local manufacturing. It’s all just big business I suppose.

    Fortunately, New Zealand has consumer protection laws that I hope would require some of these companies to retool their business practices a little before entering the market.


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