Online shoppers break £100bn barrier

Since the nation first discovered the joys of internet shopping 12 years ago, Britons have spent more than £100bn shopping online. Read original article

Consumers swapping the mall for the mouse in ever greater numbers pushed sales past that milestone this month, fuelled by a very strong April performance. A total of £3.47bn worth of goods were purchased online last month: a 55 per cent rise on the previous year.

James Roper, chief executive of the Interactive Media in Retail Group, the industry body which tracks internet sales, pointed out that more and more goods had become available online.

Clothing sales over the internet, for example, are increasing rapidly. The IMRG’s figures include spending on travel, and this continues to be the largest category of consumer spending. It accounts for around £7bn of spending last year, followed by electrical goods at £5bn.

The big rise in clothing sales mirrors trends in the US, where online clothing sales recently overtook computer sales for the first time.

Clothing retailers are investing in technology that makes it easier for customers to view items on screen, and expanding their websites to include popular “interactive” elements, such as reviews from other customers and employee blogs.

People are also buying increasingly expensive items online. Just a few years ago, the average internet transaction was a book or CD costing around £15. Today, a more sophisticated and confident breed of web-savvy shopper thinks nothing of buying big ticket items such as sofas and fridges online.

The spread of high speed broadband has been a magic bullet. Around half of UK adults are now estimated to have a broadband connection in their homes, many of them with speeds of more than 1 megabit a second.

Back in 1995, as the internet made its first tentative inroads into people’s lives, just 2m homes in the UK had any kind of connection – in most cases very slow 14.4 kilobit-a-second modems.

The IMRG expects internet sales in the UK to rise to £42bn this year, a 39 per cent increase over 2006.

It expects sales to reach £78bn, accounting for 20 per cent of retail sales, by 2010.

And with a sizeable minority of retailers yet to embrace the internet at all, the sector plainly has huge room to grow. According to a survey earlier this year by Microsoft, only 56 of the UK’s 100 largest retailers had a website which allowed consumers to shop online.

The UK is in the vanguard of internet shopping. It punches well above its weight internationally, accounting for around 6 per cent of the world’s £250bn a year online shopping market, and around a third of all European online retail.

US consumers are expected to spend around £88.4bn online this year.

Much of the growth in UK internet sales has come at the expense of – rather than in addition to – high street sales, however.

“A lot of it is cannibalisation,” said Mr Roper. “The high street is not growing much.”

While online sales are increasing at rates of around 40 to 50 per cent year on year, overall retail sales for the three months to the end of March grew just 4.5 per cent from a year earlier.

Many of the UK’s largest internet retailers, such as Argos, Tesco and John Lewis, have a hybrid, “clicks and mortar” model, in which they sell both online and in stores. Schemes – such as Argos’ “click and collect” – which allow consumers to order online but collect in store have proved extremely popular.

However, there are a number of thriving stores that exist solely on the internet, especially specialists, such as Figleaves.com the lingerie retailer and Firebox.com which specialises in gadgets.

In some sectors, such as electrical goods, fierce online competition is driving retailers to abandon the high street. Last year Dixons’ announced plans to start trading solely online, saying that keen internet pricing and high rents made a high street presence untenable.

Whether others will follow this route is still unclear.

“It is too early to say which model will be dominant on the internet,” said Mr Roper. “Retailers are barely beginning to scratch the surface yet.”