UK Web shopping defies economic downturn

UK Web shopping defies economic downturn

Despite the economic downturn, online retail spending by UK consumers rose 35% to £14.7 billion in 2007 and is growing at the fastest rate for six years, according to a report by retail analyst Verdict Research.

The rate of growth for e-tailing is nearly 10 times higher than experienced by the country's overall retail market and is set to continue, with online spending predicted to reach £44.9 billion by 2012 and account for 13.8% of total Internet spending.

The growth in 2007 was fuelled by a 24.7% increase in the number of Internet shoppers to 22.6 million. These shoppers are also making online purchases more regularly - 19.9 times a year, up by 2.7 trips on the previous year - and spending 7.8% more.

Verdict says this is driven by a 5.9% rise in the number of Web users - which increased to 33.1 million - and spread of high-speed broadband connections. The study found that 55.5% of online shoppers had broadband access at home in 2007, up from 30% in 2006.

The convenience of Internet shopping is also a major reason for its continuing popularity, with over half of 4059 adults questioned citing this as a draw.

"The Internet is widely perceived as a cheaper and easier way of finding lower prices and bargains in most sectors," says Malcolm Pinkerton, senior retail analyst, Verdict Research. "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."

Electricals account for the biggest share of online retail spending - 25.1% - but Verdict predicts food and groceries will take over by 2012 and will account for 29% of sales. Music and video retailing has the highest online penetration, with Internet sales making up 30.8% of the total for the sector and set to account for over two thirds by 2012.

Verdict says most retailers realise the online market is still far from saturated and with the high street struggling, they are investing in improving and expanding their Internet offerings. But the analyst says "despite some degree of cannibalisation" physical shopping is not "doomed" and retailers need to combine the two channels.

"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," says Pinkerton.

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