Online sales to triple over next 5 years
Online sales in the UK will almost triple over the next five years, according to a study by Verdict Research. The company predicts that online spending will reach GBP 28.1bn by 2011 – equivalent to 8.9% of all retail spending. (Verdict’s figures exclude spending on services such as flights, tickets and insurance.)
Verdict believes that the online market in 2006 grew at its fastest rate since the busting of the dotcom bubble in 2001. A growth rate of 33.4% was recorded for the year resulting in a total of GBP 10.9bn being spent online. The analysts at Verdict see no reasons for an end to the online shopping boom.
Verdict cites the widespread use of low cost broadband services as a leading reason for the boom in online shopping. Of the 3,000 consumers surveyed for its report, two thirds of the online shopper population (which now numbers 18 million), said they have broadband access and shop online more frequently because of it.
By 2011 the typical spend of an online shopper will grow to GBP 1,056 per year (up from GBP 606 in 2006), with the clothing and footwear, DIY and gardening and food and grocery sectors achieving the fastest growth. This growth in spending will be driven by consumers shopping online more often, rather than as a result of further expansion of the online shopping population which Verdict Research expects to grow much more slowly over the forecast period.
Verdict Research also highlights retailer investment as proving pivotal in growing the market. Over the past 12 months a host of physical retailers including the Arcadia brand sites, Dunelm, IKEA, Oasis, Superdrug, Waterstone’s and Wickes have launched new transactional websites. In addition many existing retailers have greatly scaled up their offers including Asda, B&Q, M&S, Tesco and Woolworths.
However, a number of retailers are either still not convinced of the value of operating online, or have made a strategic decision not to move to e-commerce.
Verdict Research highlights three types of retailer who seem set to stay out of the race to build online sales: food retailers where the infrastructure cost associated with an online launch and the strength of competition act as deterrents, value retailers (such as Matalan, Primark and Peacocks) whose business model depends on driving high sales densities from their stores and many smaller specialists whose limited scale makes it challenging to finance major online infrastructure. “For these retailers the case for major investment in transactional websites is far from proven,” says Nick Gladding, author of the report.
Despite the scale of the online opportunity, Verdict Research urges retailers to take care not to jeopardise the trust of their customers. As shoppers spend increasing sums online they need greater assurance that their financial details are safe, particularly in light of the growing number of ‘phishing’ scams, where customers have in error divulged personal financial information to third parties.
The introduction of chip and PIN online should help to allay security concerns but Verdict research advises smaller retailers that lack the expertise to develop their own in-house payment and security systems to consider outsourcing this process to ensure consumer uptake.
More information on the GBP 1,850 UK e-Retail 2007 report is available on the Verdict website.
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