Has bubble burst for online trading?

Nov 5 2009 by Andrew Mernin, The Journal

WITH Christmas looming and the Royal Mail crisis showing no signs of abating, Andrew Mernin checks the pulse of the online retail sector to find out what the festive period looks likely to bring for e-traders.

WHILE the last decade has marked the rapid rise of internet shopping, the mass exodus from the high street to the web may be slowing down according to reports.

Research group Mintel this week released figures demonstrating fairly flat growth in the sector compared to its swift surge to power in the past.

Its latest research on shopping trends has found that 22% of consumers prefer to use the internet for Christmas shopping – exactly the same figure as last year’s report.

In the same study, 29% of respondents said they will use the internet for ‘a few’ gifts – just a 1% climb on last year – leading Richard Perks, director of retail at Mintel, to say: “The lack of increase in using the internet to shop for Christmas presents is very surprising and, taken at face value, it would suggest that online shopping has reached a first stage of maturity.

“However, it is more likely the lack of growth this year reflects the postal strikes and that people don’t feel able to rely on receiving the goods they’ve ordered in time for Christmas.”

Meanwhile, UK online spending slowed to its lowest annual growth level in September, according to a similar report, with postal strikes and High Street discounts cited as possible factors.

IMRG Capgemini’s latest e-Retail Sales Index found that online spending rose by 7.6% in September 2009 compared with last year, but by only 1.9% when compared to August 2009. UK consumers spent a total of £3.9bn online in September.

This is lower than the average month-on-month increase for September, says IMRG Capgemini, as shoppers exercise more caution ahead of Christmas and as the recession continues to influence consumer spending.

Postal strikes have acted as a deterrent for online shoppers and will continue to be a key concern for etailers in the lead up to Christmas, say the researchers.

However, Darlington-based Simon Crisp, who runs online shopping directory www.shopsafe.co.uk, believes the postal strike could actually have a positive effect on internet retailers.

He argues that people will be more inclined to buy items online and have them wrapped and shipped to their recipients by retailers – many of whom have switched allegiances from Royal Mail to commercial rivals – rather than posting the gifts themselves.

“We expect to see many retailers switch from Royal Mail if they have not already. Consumers are increasingly keen, at this time of year, to ensure they buy their Christmas presents well in advance. Understandably this is a serious issue for consumers and retailers alike.

“Many of the 4,000-plus retailers listed on Shopsafe.co.uk ship through an independent firm or courier and the gifts or items are distributed direct from the retailer to the consumer, or any address the consumer chooses.

“Traditionally there is a rise at this time of year in online sales and we expect this trend to increase even more so as any proposed strike by Royal Mail bites.

“This can be an incredibly frustrating time for any shopper either buying or sending parcels, letter or anything through the post.”