While retail sales are expected to shrink by 0.6% in the United Kingdom this year, research firm Verdict Research predicts online retail sales will grow 13.3% to £20.9 billion (US$34.4 billion) from £18.4 billion in 2008. Online retail sales will grow at a compound annual rate of 10.5% through 2013, when they will total £31.2 billion (US$51.3 billion) and account for 10% of total retail sales in the U.K., Verdict says. These sales figures exclude travel.
More British consumers are shopping online, and spending more when they do, driving e-commerce growth, according to the report released today, “UK e-Retail 2009.” In 2008, the report says there was a 1% increase in Internet users to 34.4 million, an 18.1% increase in online shoppers to 26.7 million, and the average online shopper spent 5.8% more than in 2007.
The popularity of online shopping among more affluent consumers helps explain why it can continue to grow during the economic downturn, the report says. Middle-class and upper-middle-class consumers account for 56.8% of online spending in the U.K., Verdict says.
“Those with less money to spend are turning to the Internet to search out bargains on branded items like electricals,” says Malcolm Pinkerton, senior retail analyst at Verdict and author of the report, using the British term for consumer electronics. “Additionally, the more affluent groups, who do still have money to spend, continue to appreciate the Internet for its convenience, making the channel doubly resilient to the downturn.”
While some lower-income consumers are moving away from the Internet to take advantage of deals at bricks-and-mortar discount stores, Pinkerton says “this is being more than outweighed by increases in bargain hunters looking for larger, branded items and the loyalty of those most financially comfortable consumers who continue to value convenience over price.” He notes the rate of growth in the number of online shoppers slowed in 2008, and will continue to fall over the next five years.
Once the recession ends, consumers will buy more higher-priced items online, predicts report co-author Matthew Piner. “As shoppers have become more used to shopping online they are more likely to use this channel for big-ticket items when they are able to buy them again,” Piner says. “Moreover, the credit crunch and subsequent recession are likely to have a long-lasting impact on the attitude of consumers toward spending, fostering increasing austerity. With its clear price advantage over the traditional bricks-and-mortar channel, online will become even more attractive to recession-hit shoppers as they venture back to buying big-ticket items.”
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