Online retail sales increased 0.6 per cent in August following a sharp decline in July. Traditional sales, however, still fell slightly during the month. The daily deals market is collapsing. In August it recorded its fourth consecutive decline of over 15 per cent. Has reality finally caught up with the Little Business Model That Couldn’t?

Of course any gimlet-eyed view of the overall online retail story needs to be tempered by the fact that online remains a relatively small part of the retail mix, and still only contributes single digits to the total market.

According to the NAB, “In dollar terms, we estimate Australians spent $17.5 billion on online retail in the 12 months to August 2015. This level is equivalent to 7.1 per cent of spending at traditional bricks and mortar retailers as measured by the ABS (excluding cafes, restaurants and takeaway food, to create a like-for-like comparison) in the 12 months to July 2015.”

Death of the deal makers

The daily deals sector is struggling, and that’s putting it kindly. It was the only sector to record a decline last month and it was a shocker — down 16 per cent. Worse still, that’s on top of a 25 per cent decline in July and a 23 per cent decline in June. We can go on if you like. The group buying sector also shed 26 per cent in May.

According to Telsyte senior analyst Steve Noble, “More often than not, customers treat the internet as a discount channel — or at least as a channel that stands out for how easy it makes it to compare prices.

“Daily deals have a place in this channel, but they are not the game-changers they initially presented themselves as. They will have to content with a fairly small share of the large and growing online retail pie,” he said.

Growth accelerated for electronic games and toys (+27.2 per cent year-on-year), which still leads growth, along with media (+17.7 per cent year-on-year), fashion (11.4 per cent), and personal and recreational goods (+7.3 per cent). Growth was stable for department and variety stores (1.9 per cent year-on-year), while both grocery and liquor and homewares slowed.

This article originally appeared on B&T’s sister site www.which-50.com