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Online reaches 17% of retail sales, nears tipping point

Thirty to fifty percent of all retail sales could be online within five years, say researchers

Online reaches 17% of retail sales, nears tipping point Thirty to fifty percent of all retail sales could be online within five years, say researchers. UK shoppers spent £26.5billion online in the first six months of 2008, up 38% on the £19.2billion recorded for the same period last year, according to the latest IMRG Capgemini e-Retail Sales Index. That means online sales are now accounting for 17p in every pound spent, equivalent to half of all supermarket sales.

The researchers are now predicting that between 30% and 50% of retail sales will be online in five years. “This is because, as online reaches 20% of all retail sales, retailers experience a tipping point which forces them to seriously re-think the future viability of their business model,” explained Mike Petevinos, head of consulting for retail at Capgemini UK. “We have seen this happen for books, music/DVDs and electricals and as the industry as a whole reaches this tipping point in 2008, more categories are sure to follow.” Sales growth did begin to slow in June, however, with the normal dip in growth experienced in the month “significantly more pronounced than 2007.” That said, Capgemini and IMRG expect rising fuel costs, falling disposable income and smarter consumer shopping habits to drive strong online sales growth throughout the rest of 2008. “Whilst online retail is not immune to the credit crunch, it is showing greater resilience than the high street,” Petevinos explained. “The online channel continues to grow its share of retail spend thanks to the traditional drivers of convenience and choice but these drivers appear to be magnified by the current economic environment.

Convenience has a sharper edge in a world of soaring fuel prices and the ability to research and make more informed choices in a time of heightened price sensitivity is a key advantage of the online channel.” The most pronounced sales increases during the first half of this year have come from both the top end and the bottom end of the market which, say the authors, shows that consumers are becoming smarter shoppers, buying everyday items at discount retailers whilst adding a touch of luxury with select items from high-end retail outlets. This is further backed up, they say, by recent research which found that UK internet visits since June 2007 to mid-market online retailers have fallen by 6%, while visits to lower-end retailers, such as Primark, have increased by 12% and visits to high-end retailers, including Harrods, increased by 14% over the last twelve months.

“Clothing and footwear sales were the biggest losers in physical stores in June, with sales either flat or lower than last year despite heavy and widespread discounting,” explained James Roper, IMRG’s chief executive. “Online, however, they were big winners; internet clothing sales were up 32%, while lingerie sales rose by 37% and footwear 38%.”

This entry was posted on Tuesday, July 22nd, 2008 at 14:52 and is filed under Retail, eCommerce. Find similar posts by selecting any of the following tags: eCommerce, Retail, sales. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.