Companies’ internet sales double in a year

British companies sold more than twice as much over the internet last year than in 2002 as the manufacturing sector discovered the virtues of selling its products online.

The value of online sales overall jumped from Pounds 19bn in 2002 to Pounds 39.5bn in 2003 as business-to-business sales more than doubled. Manufacturing led the trend, with sales almost trebling from Pounds 5.5bn to Pounds 14.6bn, according to official data released yesterday.

The rise was partly driven by manufacturers requiring their customers to order on the web to keep costs down, said the Office for National Statistics. Similarly, influential buyers such as supermarkets also insisted on being able to order online from their suppliers.

Emily Earl, an economist at the Engineering Employers’ Federation, said: “Top companies in the industry always had enormous power to pass on prices to companies further down the supply chain. Now they are setting the rules on how to order.”

She added: “Supply chains are becoming more and more integrated. Companies that are employing just-in-time production techniques will try to use very fine-tuned order methods for which the internet is ideal.”

British business also appeared to have an edge over international rivals due to online ordering as manufacturing sales by UK companies surpassed manufacturing purchases. According to the ONS, the bigger the company, the greater its inclination to do e-commerce. Businesses with more than 1,000 employees spent Pounds 31 of every Pounds 100 over the web, while businesses with fewer than 10 staff spent only Pounds 14 out of Pounds 100 online.

The surge in business spending also eclipsed consumer spending. While online shopping rose 78 per cent to Pounds 11.4bn last year, its share of overall online expenditure fell from 33 per cent in 2002 to 29 per cent in 2003.

James Roper, chief executive of the Interactive Media Retail Group, which represents e-tailers, said there had been a lack of investment in the past four or five years after a lot of companies stopped prioritising the internet in the aftermath of the dotcom crash.

“The growth in recent years has been entirely driven by consumer demand. Companies felt that they didn’t have to invest because the consumers were coming anyway,” he said.

But research by Forrester predicts that online shopping will more than treble to about Pounds 28bn over the next five years as more and more households acquire access to the internet, in particular using broadband.

According to the research company, the UK is Europe’s largest e-commerce economy and has already overtaken the pioneering US in some cases. Tesco, the supermarket, is not only the UK’s largest online retailer but also the most successful online grocer in the world. And at Pounds 310 a year, the net retail spend per internet user is almost at parity with that in the US.

Royal Mail and IMRG predict that consumers will spend Pounds 3.5bn during November and December in the run-up to Christmas, 40 per cent more than last year. The internet though is still a young sales channel. The value of both business and retail sales online accounted for 2 per cent of the total sales by non-financial companies.