The Future of the UK’s Virtual High Street

The 10^th anniversary edition of the IMRG Capgemini e-Retail Sales Index has revealed that more than £250bn was spent online in the last decade, yet sales are also expected to double over the next decade. The figure was calculated to mark the 10^th anniversary of the IMRG-Capgemini e-Retail Sales Index, which recorded sales of £1.8bn in 2001, when it was launched. This year online sales are expected to total £56bn and to reach £123bn by 2020. Recent findings of the second annual PayPal Online Retail Report carried out by Experian support these growth predications and suggest that online shopping is set to double its share of the retail market to 10.4% by 2012. This would provide a significant boost for the economy and if its forecasts come true, online retail will be worth up to £30bn by the end of 2012.

Since it was launched, the e-Retail Sales index has grown by a massive 5,772% and consumers are now more likely to buy goods online than ever. For the Fashion industry in particular developments in rich media and imagery now allow shoppers to see clothes in greater detail. We are now becoming increasingly passionate about shopping online and the combination of ease and convenience are incredibly compelling. The PayPal report also indicates there has been an 11% increase in the number of online shoppers who say buying online does just that.  This relationship is expected to strengthen over the coming decade and by 2020 it is predicted that the internet will account for half of all retail sales and influence most of the other half.

The index also reflects the UK’s wider economy, with growth running at 35% in boom-time 2006, but falling back to 14% during the recession hit 2009. However shoppers are turning to the internet when trying to be thrifty. Two-thirds of online shoppers believe their money goes further online compared to less than half who believed it last year, an increase of 8.5m people.

Bricks and Clicks debate – IMRG / Hitwise Hot Shops List

Ocado’s recent announcement and plan for a £1bn stock exchange; has raised debate from investors regarding whether being an internet only retailer is a blessing or a curse. However the process of making money online is completely different to the physical store model.

At the same time the e-Retail Sales index was published, the IMRG / Hitwise Hot Shops list released its fourth annual top 100, showing Amazon at the top of the list once again, Argos remained in second place and Play.com in third. Apple moved up to fourth place from seventeenth position in May last year, on the back of the much anticipated launch of the iPad. Of the 10 retailers identified for their online efforts in 2006, seven remain which include Amazon UK (1/1), Argos (2/3), Play.com (3/5), Apple Computer (4/10), Tesco.com (5/4), Amazon.com (6/6) and Easy Jet (10/8).  Six of the top ten retailers have physical stores, up from four in May 2009. Thirty three of the fifty Hot Shops have a high street presence, up from twenty three in 2006.  The fastest climbers also included ASOS (15/50) and HP (24/47).

With multichannel retailers now accounting for two thirds of the top one hundred and as some 70% of purchases start online, it turns out that shoppers still need somewhere to go – even if it is just to pick up something they paid for on their home computer the night before. It is clear that those with both physical stores and an online presence are leading the growth in e-retail. The index also revealed that multichannel retailers are consistently outperforming their counterparts in terms of sales growth.  Ocado’s biggest problem may be that they don’t have an existing store network, so it will be interesting to monitor their progress over the coming months.

Future Retail Predictions

The index does go on to indicate that somewhat of a tipping point will be reached around 2020 as the market matures. Therefore the challenge for retailers in the next 10 years will be  to increase their share of the market even further and come up with new ways to extend brand loyalty. The e-Retail Sales Index also predicts that there will be greater cross-border trading in Europe. Mobile commerce is also set to become one of the defining technological advancements of the decade. As always if you need any help or advice with your online retail strategies don’t hesitate to contact us.