Online shopping drives retail sector’s growth, says study

LONDON: Online shopping is on a growth path and has become a determining factor in the growth of the entire retail sector, according to a recent study. Net-based sales accounted for almost half of the growth in retail spending in 2005, the study revealed.

Retail analysts Verdict Research, which carried out the study, said spending on the internet grew by 29 per cent, 15 times faster than the 1.5 per cent overall growth of the retail sector, which by itself is the slowest rate of growth in recent times.

Verdict Research found that consumers spent an estimated 8.2 billion pounds on goods bought online in 2005, compared with 9.4 billion pounds in offline sales by department stores. While this constitutes just 3.1 per cent of the total 265 billion pounds worth of retail sales during the year, it accounted for most of the sector’s growth. Of the 3.9 billion pounds shoppers spent additionally during the year, as much as 1.9 billion pounds were accounted for by internet sales.

Senior retail analyst at Verdict Research Nick Gladding, who authored the report, said internet spending is still a relatively small percentage of sales, but it is influencing the way people shop. “E-tail is redefining how people select retailers, enabling them to find the lowest price product and allowing them to shop at a time that suits them. This makes online retailers far more formidable competitors to high street retailers than their current sales figures suggest,” he said.

Verdict cited the instances of Argos, which has a formidable online presence along with its physical stores, scoring over Index as a catalogue showroom operator, and of Dell, which sells a large part of its computers and peripherals over the net, annihilating Tiny, the computer retailer, which went into administration because it could not compete with the lower prices offered by its rival.

The report also said the country’s online shopper population increased by a quarter in 2005 and one in four consumers now shops on the web. The fastest growing age group is “silver surfers”, with the number of 55-plus internet shoppers doubling last year.

Verdict Research’s findings support the figures brought out by Interactive Media in Retail Group, the representative organisation for the country’s online retailers. IMRG said online shopping grew 32 per cent to 19.2 billion in 2005, although its spending figures tend to be higher as these include services such as travel and financial products.