Retail and Hospitality

UK Internet shopping on the rise

3 June 2008

UK Internet shopper numbers are at an all time high and online spending is growing at its fastest rate for six years, according to Verdict Research in its latest report, UK e-Retail 2008.

In 2007 online spending by consumers on retail purchases’ rose by 35.0 per cent to £14.7 billion, almost 10 times faster than the overall UK retail market. With Internet access growing and users purchasing more frequently and more heavily online, Verdict says this growth is set to continue, predicting that online retail will be worth £44.9 billion by 2012, 13.8 per cent of total online spending. Yet despite some degree of cannibalisation, physical shopping is far from doomed. There is still a need and place for physical locations, the key is to ensure that synergies with online retailing are exploited to drive footfall to stores. While having an Internet presence is vital, giving the consumer choice by establishing strong links between the in-store and online offer is now essential.

In 2007 total retail growth was just 3.6 per cent as consumers' disposable incomes were starting to be squeezed by higher living costs. However, the online market expanded by over a third in 2007, driven by a 5.9 per cent increase in internet users – to 33.1m - and a 24.7 per cent increase in online shoppers – to 22.6m. Furthermore these shoppers are purchasing more regularly (an average of 16.9 times per year, an increase of 2.7 trips on 2006) and each spent an average of 7.8 per cent more than 2006.

The convenience of the channel is the main reason for its continuing success and is mentioned by more than half of the online shoppers from the 4,059 adults surveyed for Verdict’s report. With people working longer hours, making effective use of their limited leisure time is of the utmost importance, whilst ever-improving Internet technology is constantly increasing the speed and ease of online shopping – 55.5 per cent of online shoppers had broadband access at home in 2007, up from just 30.0 per cent in 2006.

“The internet is widely perceived as a cheaper and easier way of finding lower prices and bargains in most sectors,” said Verdict’s senior retail analyst Malcolm Pinkerton, the report’s author. "As the cost of broadband falls, consumers become accustomed to Internet shopping and retailers continue to enhance their online propositions, the channel will find itself extremely well-placed to capitalise on the falling consumer confidence and lower levels of disposable income currently impacting the retail market."

New entrants to the online arena, such as IKEA, whose home shopping service launched nationwide last year, contributed to the swelling in the number of online shoppers in 2007. However, the most significant factor is that the majority of retailers are enhancing and expanding their online offers, realising that demand is a long way from maturity and retains plenty of scope for growth, at a time when the high street is struggling.

Longer term, growth is set to be driven by the ageing population. As today’s younger shoppers get older and their income and spending power increases, the amount they spend online is likely to increase. The Internet will be seen as a normal way to buy goods, as this generation replaces one that is more predisposed to make purchases from physical shops. However, this does not necessarily signal a death knell for physical stores.

“In many cases online and in-store sales channels will simply blur into one, becoming fully integrated,” added Pinkerton. “There is still a need for physical locations, but the number of stores required will vary according to sector – with the rise in music downloads, there will not be such a need for music & video stores for example. Having an Internet presence is now vital and the combination of an in-store and online presence with strong links between the two is essential, giving the consumer choice by becoming multichannel is the key to success.”