BBC News | BUSINESS | UK internet shopping set to boom

BBC News Online: Business

Tuesday, 7 December, 1999, 10:22 GMT

UK internet shopping set to boom

Consumer spending on the internet will grow 10-fold in the next five years, according to a new report from retail consultants Verdict Research.

By 2004, Verdict expects consumers to be spending Ł7.3bn on e-commerce, compared with an estimated Ł581m this year.

high street shoppers

That would represent only 3% of total retail spending, but the impact would be much more significant in certain key areas.

For example, 35% of all computer software is expected to be purchased online, 17% of all books, and 15% of all music and videos.

Although clothing sales will only represent 2.5% of spending in shops, that will be a dramatic increase in e-commerce, growing to Ł1.2bn from virtually no internet clothing spending at present.

Sales threat

tesco websitge

Verdict points out that despite the internet grabbing only a small share of overall sales, it could have a dramatic effect on profits.

This is because very few internet sales will be new sales - most will be taken from existing high street shops.

With margins in UK retailing only running at around 5%, a 2%-3% drop in sales could easily hit the bottom line quite severely.

Many existing retailers have been investing in creating an online presence.

According to Verdict, 61 of the top 100 retailers now have their own websites, compared with 47 at the same time last year.

However, only 29 are transactional, allowing customers to make purchases online.

Investing in order fulfilment is proving difficult for many companies that do not already have a mail order operation.

Most supermarket chains, however, who are expected to generate the most online business, have invested heavily in interactive sites and are developing ordering systems.

Limited Christmas sales

Despite Verdict's optimistic forecast, another survey from CIA Sensor suggests that e-commerce will not take off in the UK this Christmas.

The figures suggest that only 2% of consumers will use the internet to shop for presents.

Instead, 65% will go to high street shops, 45% will visit department stores, and 27% will go to out-of-town retail parks.

"The figures suggest there is still a good deal of scepticism surrounding buying on the internet, with customers concerned about things like credit card security, delivery of purchases, and exchange of unwanted gifts," said David Fletcher of CIA Medianetwork, which carried out the survey.

Those most likely to shop on the internet were male, middle class, married but without children, and living in London.

British shoppers are some way behind their American counterparts. In the United States, more than 10% of consumers intend to shop on the internet this Christmas.

Related to this story:
Christmas shopping on the web (29 Nov 99 | Business)
America's E-Christmas boom (06 Dec 99 | Business)
The growing threat of internet fraud (19 Nov 99 | Business)
UK logs on to e-commerce (24 Aug 99 | The Economy)
Internet shopping explosion (20 Sep 99 | The Company File)

Internet Links: Verdict
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