The internet properties of the UK’s top 100 high street retailers received 19.3% more visits during July than the 100 largest online-only retailers, says a new Hitwise report. And it’s the fashion sector that’s fuelling the high street’s growth online…
The speed with which the high street is catching up with and overtaking pure play internet specialists is gathering pace. In July, the number of visits to the websites of the one hundred largest online high street retailers was 19.3% higher than the number of visits to the one hundred largest pure play retailers, says a new Hitwise report ‘Can retailers have a happy Christmas during the credit crunch?’
“High street retailers overtook their online only counterparts for the first time during December 2006, but quickly fell behind again for most of 2007,” explained Robin Goad, Hitwise UK’s research director. “However, when the high street overtook again last Christmas, the gap was even greater than before and during 2008 the online-only retailers only managed to edge ahead during February.”
“Given the 2.6% year-on-year decline in actual physical visits to retailers reported by Experian Footfall for July, it looks like high street retailers will be more reliant than ever on their online operations this Christmas,” Goad noted.
Online fashion retailing is now particularly dominated by major high street brands, which accounted for seven of the top ten websites in the category during June, says the report. “The growth of the online fashion industry has been one of the main contributors to the increasing market share of high street retailers online,” says Robin Goad.
“However, there are exceptions to the rule. ASOS was the second most visited website in our ‘Shopping and Classifieds — Apparel and Accessories’ category in July 2008. UK Internet traffic to online-only fashion retailers has more than doubled over the last 12 months.”
In addition to major high street brands such as Next, Top Shop and River Island, the top 10 online fashion retailers in June also included two other remote shopping specialists, M and M Direct and Boden.
Some 62% of shoppers believe shopping online will save them money during the credit crunch according to a poll conducted by discount etailer M&M Direct.
Some 61% of the 1,000 people polled by M&M Direct and Voxpopuk.com, said that they would now be actively looking for bargains while 56% said they would save money by not spending so much on luxury items.
45% of respondents said that bargains were easier to come by online.
When asked if the credit crunch would affect their broader spending habits, 48% of respondents said no, while 54% said that it would not affect their decision to purchase cars, holidays or other large expensive items.
M&M Direct chief executive Steve Robinson said: “The survey shows that the UK consumer is in the process of becoming savvier when it comes to spending money. They want to continue to shop for what they want, but realise they can find bargains online and cut back in key areas to help combat the effects of the credit crunch.”
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UK shoppers spent over £26.5 billion online in the first six months of this year despite the credit crunch, up 38% on the first half of 2007.
According to figures from the IMRG Capgemini e-Retail Sales Index, 17p in every pound was spent online during the first half of the year. Clothing is faring well out of the reported online boom, with £1.76 bn spent on clothes online by UK shoppers in the first half 2008.
James Roper, chief executive and founder of IMRG, said that online shopping growth continues to out-perform the high street and predicted that 30% to 50% of all retail will be online in the next five years.
He said: “As tight budgets and poor weather keep people at home where they can shop online for bargains.
“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.
“However, online they were big winners. Internet clothing sales were up 32%, while lingerie sales rose by 37% and footwear 38%.”
Shoppers spent a record amount on clothes in March, a month-on-month growth of 21.8%, and 31.2% more than March last year.
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%.”
The total online clothing and footwear market grew by 38% to £1.7 billion in 2007 up from £1.2bn in 2006, according to a report by Verdict Research.
A report entitled UK e-Retail 2008 surveyed 4,059 online shoppers and revealed that the online market accounted for 4.2% of all clothing and footwear spend in 2007.
The report said that online shopping was becoming an integral part of UK retail with total online retail spend worth £14.7bn in 2007, up 35% year on year, and a rate of growth almost 10 times higher than that experienced by the total UK retail market.
Last year’s growth was driven by a 5.9% increase in internet users – to 33.1 million - and a 24.7% increase in online shoppers – to 22.6m.
Online shoppers are also purchasing more regularly (an average of 16.9 times per year, an increase of 2.7 trips on 2006) and each spent an average of 7.8% more than 2006.
Verdict Research predicts that with internet access growing and users purchasing more frequently online, this strong growth is set to continue, with online retail sales set to reach £44.9bn by 2012.
Malcolm Pinkerton, senior retail analyst at Verdict Research, said: “The internet is widely perceived as a cheaper and easier way of finding lower prices and bargains in most sector. As the cost of broadband falls, consumers become accustomed to internet shopping and retailers continue to enhance 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.”
Verdict’s consumer research also revealed that a long standing AB demographic bias to the online shopper base persists, but there has been a substantial rise in the number of C2s and DEs as a result of the falling cost of broadband. The number of C2 shoppers has increased by 35.5% to 4.2m and the number of DE online shoppers has increased by 38.9% to reach 2.5m. This is in contrast to the 23.2% rise in the number of AB shoppers and the 19.3% rise in C1 shoppers, where growth is beginning to slow due to the user base maturing.
The report also said that while having an internet presence was vital for retailers, giving the consumer choice by establishing strong links between the in-store and online offer was also now essential. Pinkerton said the key was to ensure that synergies with online retailing were exploited to drive footfall to stores.
The convenience of shopping online is the main reason for its continuing success and this was mentioned by more than half of the 4,059 adults surveyed for Verdict’s report.
Longer term, growth is set to be driven by the ageing population. As today’s younger shoppers get older and their income and spending power increases, the amount they spend online is likely to increase. The internet will be seen as a normal way to buy goods, as this generation replaces one that is more predisposed to make purchases from physical shops. However, this does not necessarily signal a death knell for physical stores.
Pinkerton said: “In many cases online and in-store sales channels will simply blur into one, becoming fully integrated. There is still a need for physical locations, but the number of stores required will vary according to sector.”
He added: “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 multi channel is the key to success.”
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