One fifth of all spending now online

Figure to reach 50 per cent in five years, says Capgemini

Ian Williams, vnunet.com 21 Jul 2008

Around £26.5bn was spent online in the UK in first half of 2008, equivalent to 17p out of every £1.

The latest IMRG Capgemini e-Retail Sales Index said that, despite the credit crunch, online shopping is up 38 per cent on the £19.2bn spent in the first half of 2007.

The report also foresees strong online growth for the rest of 2008, driven primarily by rising fuel costs, falling disposable incomes, a desire to achieve sustainability in the supply chain and smarter consumer shopping habits.

E-commerce in 2008 has followed similar seasonal trends to previous years. Growth in online sales fell by 16.5 per cent in January, picked up in the spring and declined again towards the summer.

However, the negative five per cent dip in growth for June is significantly more pronounced than in 2007, suggesting that online spending is not entirely impervious to the current economic woes.

"Online retail is not immune to the credit crunch, but it is showing greater resilience than the high street," said Mike Petevinos, head of retail consulting at Capgemini UK.

"The online channel continues to grow its share of retail spend thanks to the traditional drivers of convenience and choice, but these drivers appear to be magnified by the current economic environment.

"Convenience has a sharper edge in a world of soaring fuel prices, and the ability to research and make more informed choices in a time of heightened price sensitivity is a key advantage of the online channel."

Scrutinising the figures more closely reveals that consumers are buying everyday items at discount retailers while adding a touch of luxury with select items from high-end retail outlets.

"Online shopping growth continues to out-perform the high street, as tight budgets and poor weather keep people at home where they can shop online for bargains," said James Roper, chief executive and founder of IMRG.

Clothing and footwear sales were the biggest losers in physical stores in June, despite heavy and widespread discounting.

Online, however, they were big winners. Clothing sales rose 32 per cent, lingerie 37 per cent and footwear 38 per cent.

Capgemini now believes that between 30 and 50 per cent of all retail will be online in the next five years as sustainability issues drive growth.

"As online reaches 20 per cent of all retail sales, retailers experience a tipping point which forces them to seriously rethink the future viability of their business model," explained Petevinos.

"We have seen this happen for books, music, DVDs and electricals, and more categories are sure to follow as the industry as a whole reaches this tipping point in 2008."

See also: