Online shopping creeps up on high street retailers
The internet is becoming more popular with shoppers and more important to retailers as a study reveals a £767million drop in town centre spending.
A study by retail analyst Verdict Research has found that for the first time in twenty years the amount of money spent by families in the high street has fallen. Total spending on the high street dipped to £122billion as online spending increased to £8billion.
The internet has enjoyed a 350% increase in online shopping in the last five years. In 2002, the per-head online spend was £436 and in 2005 per-head spend was £560: an increase of nearly 30%. In contrast, high street spending has been forecast to grow at just 0.1% over the next five years.
An early challenge from the internet to the high street was price. During the dot-com boom, online retailers substantially undercut offline competitors and although prices are now closer many consumers still perceive the internet to be significantly cheaper. Consumers today are now more comfortable buying products over the internet and more confident navigating online stores. Shoppers are increasingly able to find suitable the deals they want online. Search marketing trends show increased online shopping skills as searchers now tend to use phrases of three or four keywords rather than just one or two to find goods and services.
Falling broadband prices play a significant role in boosting online shopping. UK broadband penetration is good. Download speed in the UK is often slower than Europe but online shopping rarely requires super fast connections. Broadband prices may fall again with the announcement this week from Vodafone that it will also provided a fixed-line broadband service through BT Wholesale.
In contrast, high petrol prices act as a disincentive for shoppers to get in their car and visit the shops.
Retailers in the high street face the challenge of out-of-town retailers as well as the internet. Town centre rents rose by 3.6% this year, the biggest increase in six years. Some brands have responded by moving more of their focus online.
In April DSG International, the parent of both Currys and Dixons, announced that Dixons would become an online brand. The announcement follows the closure of 106 loss-making Dixons shops two years ago which cut Dixons' high street presence by a third. Remaining Dixons stores re-branded as Currys.digital. This month DSG announced that the online move was going well. John Clare, chief executive, said: "Dixons' move to become a pure online retailer has started well".
This month Tesco will launch Tesco Direct to offer 8,000 "non-food" items and expects that the majority of the orders will come via the world wide web.
Christmas, the shopping peak of the year, is set to be the battleground between off and online retailers. Online retailers are predicted to do well.
UK becomes Europe's biggest online shopping market
The challenges facing traditional high street shops from their web-based rivals is underscored today in a report that shows the UK overtook Germany to become Europe's biggest online shopping market last year.
A broadband price war, fuelled yesterday by BSkyB's launch of a free basic offer for its TV customers, was behind the surge in cyber sales in the UK in 2005, according to the research group Mintel.
Online shopping sales in the UK hit 9.79bn last year to Germany's 9.71bn, Mintel said.
France is a distant third with online shopping sales of 6.5bn in 2005.
British shoppers' willingness to shop online was illustrated by figures out from John Lewis Partnership that showed its online shop was now the group's second biggest "store" behind its Oxford Street flagship in terms of sales.
Online shops undercut bricks-and-mortar shops and often offer a wider range of goods, putting pressure on high street operators.
Next, the clothing group, which already had a strong mail order business, and Argos, the catalogue shop chain, have proved more adept than most in doing business online.
"The business to consumer e-commerce sector has come of age and is gaining consumer acceptance as a 'normal' retail sales channel," Neil Mason, a senior retail analyst at Mintel, said.
He predicted "physical shops" would fight back by improving shopping experiences and investing in more staff training.
Mintel said European online shopping sales surged 51 per cent in 2005 to 40.2bn compared with 2004, yet online shopping is still just 2 per cent of the total retail market.
It expects the market will grow by 186 per cent between 2005 and 2010, when online shopping sales are tipped to reach 115bn. |
