May 25, 2006, 12:00 AM

The Internet revolutionizes U.K. retailing, says two new studies

Online sales in the U.K. will reach £30 billion this year, up 51% from last year, projects a trade association. Meanwhile, a study of Internet vs. High Street prices shows rapid price depreciation created by easier comparison shopping.


Online sales in the U.K. will reach £30 billion this year, up 51% from £19.9 billion last year, projects trade association The Interactive Media in Retail Group. That represents 10% of U.K. retail sales, the group says.

An equal amount of offline shopping is influenced by online research, the trade group reports.

As part of a report on online retailing, the IMRG also conducted a survey of 3,900 consumers and found that 52% of consumers plan to reduce their High Street (known as Main Street in the U.S.) spending in 2006. In addition, 44% of shoppers expect their online shopping to increase in the next 12 months and 90% had researched goods online then bought them offline.

The IMRG Index collects sales data each month from e-retailers whose sales represent a quarter of the UK market by value.

The survey also reports that 100% of respondents said they research home appliances online prior to purchasing them offline. For consumer electronics it was 94%, furniture, 52%, garden and DIY goods, 49% and travel, 44%.

Further importance of the Internet’s role in retailing comes from consumers’ expectations about product availability. 47% of respondents said that if they cannot find the item on the retailer`s web site they presume that the item is not available in the retailer`s stores either.

At the same time that IMRG survey came out, U.K. market research company GfK reported that the web represents 20% of all MP3 player sales, 18% of digital camera and 14% of smart phone. While it’s nit surprising that consumer electronics products would sell well online, some less high-tech products also experience a high percentage of their sales online, GfK says: breadmakers, 20%, coffee grinders, 12% and dishwashers, 10%.

GfK also quantifies what many have suspected: The Internet effectively commoditises products, which focuses shoppers on price and forces products into faster product lifecycles. For instance GfK tracked the price of a digital camera sold on the Internet versus the High Street. From an equal High Street and Internet launch price in March 2005, the price on the High Street had fallen by 16% by April 2006 while the price on the Internet had fallen by 22%.

“Increased consumer access to high speed broadband Internet services, provides both an opportunity and problem for Internet retailers,” said Kervin Henry, business group director at GfK. “This channel is likely to continue to increase in importance, but the decreased product lifecycle on the Internet means the key to survival means getting the product and price mix absolutely right.”


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