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Online shopping tops £10bn
Growing 13 times faster than the high street

By Julian Goldsmith

Published: Friday 25 May 2007

Although high street retailers are in the doldrums, internet retailing is growing steadily and online sales in the UK reached two milestones in 2006.

The latest report from Verdict Research showed total online spending has topped £10bn, while online revenues for retailers tipped four per cent of total retail spending - both for the first time.

Year-on-year growth for the sector is 33 per cent, a far cry from the early years of 1999 when Verdict recorded 171 per cent year-on-year growth in online spending.

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Author of the report, Nick Gladding, explained three drivers were most important in the growth in online revenues for retailers - the proliferation of broadband, the familiarity of consumers with online spending and the rising commitment from retailers as they realised it was possible to make a profit from internet retailing.

He noted over the last 12 months a number of leading brands, including Arcadia, Dunelm, Ikea, Oasis, Superdrug, Waterstone's and Wickes, have launched transactional websites.

Gladding said: "There is more that can be done. Some sectors are lagging behind. The furniture sector is one of those, because the traditional buying behaviour requires the product to be physically in front of the customer."

He explained the grocery sector is also a problem area for online retailing, with little opportunity for growth, even though a few big names have established it as a proven business model.

Gladding said: "Online food sales have been driven by existing players. It will be difficult for new players to enter the market. The start-up costs will be prohibitive. Tesco, Sainsbury's and Ocado have seen good growth but if you are a Morrisons it will be difficult to persuade your high-street customers to shop with you online if they are already shopping with the other three."

Food sales will actually figure in the overall growth of online shopping, alongside clothing & footwear and DIY & gardening in the next five years, although Gladding is sure the existing online food retailers will have this growth to themselves.

The report predicted online spending in the UK will reach £28.1bn by 2011 and have an 8.9 per cent share of the total retail spend.