Phenomenal growth in UK e-commerce

Every year, it seems that retailers put out dire warnings of falling sales on the high street and Christmas 2005 was no exception. We’ve grown used to retailers starting the “new year” sales in late December (and I was amazed to hear a friend admitting to being one of the many reported to be queuing outside Next when their sale started in the early hours of the morning on 27 December 2005). BHS was discounting in mid-December this year – I bought one item at a 60% discount (reduced to half price from £12 and then another 20% off making it just £4.80 on the day I happened to be in town and making my final Christmas purchases).

It strikes me that falling high-street sales are only half the picture, and last Friday’s BBC Working Lunch programme confirmed that for me, outlining some amazing statistics on Internet shopping growth over the Christmas period, with online sales up 50% on the previous year to a total of £5bn in the 10 weeks up to Christmas 2005.

Whether or not people really are deserting the high street (I suspect it is all hype designed to get us into the shops), the Internet has become a core part of our lives (and therefore a significant channel to market for retailers) – unfortunately, not everyone is ready to take advantage of this.

In fact, according to Working Lunch, if you look at the growth in UK online shopping as a whole the e-commerce market has grown 2600% from £87m in April 2000 to £2.26bn in December 2005. Some high street retailers (e.g. Boots) are now taking more business through their website than even their largest brick and mortar stores (up 40% in Q3 2005 alone).

For those who doubt that people really do use the Internet, research by Forrester indicates that 33% of of people enjoy spending time online. Working Lunch reported that when asked “which of the following do you enjoy doing in your leisure time?” the results came back as follows:

  1. Listening to music (60%).
  2. Watching films (54%).
  3. Walking (47%).
  4. Travelling (45%).
  5. Gardening (41%).
  6. Restaurants/bars (35%).
  7. Surfing the Internet (33%).
  8. Watching TV soaps (31%).
  9. Sightseeing (29%).

(Maybe I’m not such a geek after all – I enjoy 8 out of those 9 activities, only finding watching TV soaps to be a bit dull).

To those who think that not that many people have fast enough Internet connections to take advantage of e-commerce sites, think again – the UK is third in a table of European online access levels and second when looking at how many people shop online regularly – both figures well above the European average:

  • Sweden: 77% have online access, 49% regularly shop online.
  • Netherlands: 73% have online access, 33% regularly shop online.
  • United Kingdom: 67% have online access, 48% regularly shop online.
  • Germany: 62% have online access, 37% regularly shop online.
  • France: 52% have online access, 28% regularly shop online.
  • Italy: 47% have online access, 12% regularly shop online.
  • Spain: 35% have online access, 7% regularly shop online.
  • Europe as a whole: 56% have online access, 29% regularly shop online.

Looking further at the UK, 60% of those Internet connections are classified as broadband.

It seems that the initial barrier to Internet sales – worries about online security – is no longer inhibiting consumers (my view is that it was always an issue of perception – people are perfectly happy to read their card details over an unsecured phone line) and the figures seem to confirm that it was more of an issue of unfamiliarity; however, as Working Lunch highlighted, there are still some issues for online retailers to overcome, for example:

  • Delivery times (how about evening deliveries?).
  • Quality of service (returns are often at the expense of the purchaser – even if the wrong item is shipped).
  • Product type (people want to try clothes/shoes for size, smell some items, and feel others).

Even if at first some items don’t seem to fit logically with the Internet, the statistics don’t seem to bear that out (and after all, catalogue sales were popular for many years) – when asked “which products have you bought online?”, consumers responded:

  1. Books (52%).
  2. Leisure/travel (41%).
  3. CDs (40%).
  4. Clothing (37%).
  5. Event tickets (36%).

Often, it is the items which have a personal touch that fit best with retailers who also have a shop front, allowing unsuitable items to be returned in store.

So, even if brick and mortar sales are slipping, Internet sales are looking extremely healthy, but as Lorraine Branch, of IT and business consultancy Conchango, says:

“Success will hinge on offering customers as many different ways to buy as possible while maintaining a consistent retail experience [and] retailers who fail to provide a fully integrated channel approach will find themselves left out in the cold”.

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