It’s a lobbyist’s lot to exaggerate the misfortunes of their cause. As does The Retail Coalition, the pressure group backed by retailing heavyweights Solomon Lew, Gerry Harvey and Bernie Brookes. They’re pressing the government to introduce GST on products bought from online retailers overseas, in the interests of protecting local livelihoods, their own clearly included.

That local retailers now face vigorous competition from online businesses all over the world isn’t in question. Nor is there any doubt that online channels are making it easier by the day for customers to identify the best value products and services, wherever in the world they may be found. The scale strengths inherent in bricks and mortar retailing don’t drive success in the way they used to.

But the extent of the hometown advantage that local businesses enjoy in the online shopping sector is heavily underplayed in this debate.

At best, online purchases currently account for 10% of Australian credit card transactions according to the Reserve Bank. Of this online commerce, the lion’s share still goes to local, not offshore businesses.

Our latest Digital Pulse results show that 70% of Australians’ online purchases in February 2011 were in support of local businesses.

Granted, in some of the most discretionary sectors such as cosmetics, software, music and books, the bulk of Australians’ online purchases are now sourced overseas, or via the global device stores such as iTunes. The ease with which these lightweight or no weight products can be shipped here, combined with the often deep price savings available offshore (far greater than a GST will ever bridge), suggest that further book and music store closures will be difficult to stem.

But in a far longer list of sectors, local businesses hold a very dominant share of online purchasing. Groceries, wine, beer and spirits, insurances, travel services, event ticketing, stationery, computer and large electrical appliance sectors are close to captive markets for local online retailers. Either the bulkiness of the physical goods, the regulated nature of the local markets or the need to be physically close to customers (practically or emotionally) greatly favours local merchants.

So, there are abundant opportunities for local retailers to prosper online, by combining new online services with their existing physical network strengths. Not to compete on lowest price for sure, but to offer convenience, brand familiarity, fair value and close at hand service in equal measure.

When one visits the online stores of the major Australian retailers their ambivalence in making the transition to online trading, as a natural extension of their core business is clearly evident.

None more so than the major department stores, who offer a paltry array of online merchandise, when compared to their global peers.

Herein lies the hope for local retailers. Despite a pretty thin local online fashion offer and acknowledging a real pricing disadvantage vs offshore competitors, local businesses still captured a majority of Australians’ online fashion and footwear purchases in February; 55% vs 45%. Australians haven’t turned their backs on local retailers having a go online. And the growing cohort of Australians 35 plus are heavily inclined to shop online locally.

It’s not difficult to understand why Messrs Lew, Brookes and friends are seeking a little pricing assistance from the government to hold their fragile lead. But surely the greater opportunity is to build real online excitement, choice and heartfelt service into their online stores, in a way that’s truly integrated with their existing bricks and mortar networks, to deliver all-round value that pure price competition can’t match.

Where in the world are Australian’s buying online?

Local sources dominate

Younger Australians readily embrace overseas suppliers, older Australians favour local businesses.

Lightweight or no weight goods are increasingly purchased from overseas, but many sectors are captive to local retailers.

How likely are Australians to recommend their online shopping experiences to friends or colleagues?

Read the full Autumn 2010 Report on Slideshare: