Online shopping sparkles for retailers

Industry observers say that internet shopping has finally become a mass-market phenomenon, as new industry figures reveal that online retail spending reached almost £5bn in the run-up to Christmas.

“Online shopping really arrived last year,” said James Roper, chief executive of the Interactive Media in Retail Group, the industry body for the UK’s e-tailers.

“Consumers have given the retail sector a clear message that the internet is a primary way that they want to shop. This is a bit of a wake-up call to traditional retailers.”

Figures released by the IMRG on Friday show a 50 per cent increase in spending in the 10 weeks to Christmas, the fastest rate to date for online sales.

Internet sales are now estimated to account for 9 per cent of all UK retail spending.

This is almost double the 5 per cent market share that catalogue shopping has traditionally commanded and is a strong indicator that e-tailers are winning sales away from the high street.

Strong sales growth at Play.com, the online entertainment retailer, and the UK arm of Amazon – which said trading was up 20 per cent from last year – was in sharp contrast with a fall in sales at high-street music retailer HMV and the Ottakar’s book shop chain.

Retailers with a combined internet and high street offering fared better. John Lewis reported a 76 per cent year-on-year increase in sales in November and December, aided by a 60 per cent increase in visits to the johnlewis.com website. The website took more than £100m in sales over the year, boosted by sales of Apple’s iPod music player. Argos reported a 37 per cent increase in internet sales, contributing 6 per cent to overall revenue.

Tesco, the supermarket chain, said its online business had a record year, delivering more than 1m orders in the four weeks to Christmas, while J Sainsbury said its internet home delivery service grew 28 per cent last year. Boots, the health and beauty retailer, said internet sales were up 44 per cent in the third quarter, while Carphone Warehouse reported a 40 per cent increase in online revenues.

Many industry observers put the growth of online shopping down to the rapid take-up of broadband internet lines.

According to figures from Point Topic, the broadband research company, the number of lines grew by about 60 per cent to 9.8m at the end of 2005, giving the country the highest number of broadband lines in western Europe.

More than 66 per cent of homes have an internet connection, according to figures from Ofcom, the telecommunications regulator, and Point Topic estimates that more than 37 per cent of homes have broadband.

However, they also believe that shoppers have simply become more comfortable with using the internet for purchases and are finding it easier to use increasingly sophisticated online stores.

Stuart Rowe, managing director of Play.com, said: “People are finding the experience of online shopping more comfortable now broadband is so much faster. You can easily check prices, and the websites are getting very good. Internet retailers are taking customer service very seriously and going that extra mile to give shoppers comfort.”

Play.com, for example, included a customer service helpline number on its site for the first time this year.

Christmas internet sales continued to be dominated by consumer electronics, which accounted for around 13 per cent of internet sales.

Microsoft’s Xbox 360 games console, which was launched just before Christmas but was difficult to find on the high street because of delivery shortages, was one of the most searched-for items, according to Kelkoo, the price comparison site.

Sony’s PlayStation Portable was in high demand. One retailer listed on Kelkoo was reported to have sold its stock of 300 PSP consoles in just 10 minutes.

“People were using the internet to search for things that were difficult to find on the high street,” said Glen Drury, managing director of Kelkoo.

However, many internet retailers reported a broadening of focus, with online shoppers branching out to goods such as clothing and drinks as well as electronic gadgets. Online sales of clothing, footwear and accessories rose 24 per cent in 2005 and now account for more than 7 per cent of online transactions by value.

Meanwhile, sales of beer, wine and spirits, rose 26 per cent to £218m.

The peak for pre-Christmas internet sales came in the week commencing December 5, when £653m was spent online.