Summer 2009

IMRG and Verdict Research have different measures for e-commerce sales, but on one fundamental they seem to agree: growth remains strong despite everything

E-retail is still growing at a rate far above the rest of the economy, according to the IMRG Capgemini Index, even though the growth has finally slipped out of double-digit figures. The rate for the year ending in May 2009 was 8.2 per cent, though it was still running at 14 per cent the month before.

Verdict Research, which measures online sales on a different basis from IMRG (omitting 'soft' sales such as airline tickets and insurance), generally seems to concur on percentages. In its UK e-Retail 2009 report, it says internet shopping will increase in value by 13.3 per cent in the current year, reaching a figure that it puts at £20.9 billion.

Verdict reckons the growth will come partly because of what it calls 'the online channel's possession of a number of counter-recessionary characteristics'. Prices are often lower online, its report says, and online shopping 'is disproportionately popular with the more affluent, and therefore more resilient, AB shopping class.'

 

Where Verdict's findings diverge from IMRG's is in the proportion of shopping accounted for by online activities. It says this was 6.4 per cent last year, and will be 7.3 per cent this year. IMRG already puts the proportion above 10 per cent, and a report by the Office of National Statistics recently put it as high as 19 per cent of all shopping.

Verdict expects online shopping to reach the magic figure of 10 per cent of all shopping in the year 2013, at which point it says the value will be £31.2 billion.

Both Verdict and IMRG acknowledge that internet shopping growth is slowing down. Verdict says last year's growth was the smallest since the dotcom bubble burst in 2002. 'There are a growing number of signs that the internet is beginning to mature and enter a new, more subdued phase of growth,' says senior research analyst Malcolm Pinkerton.

However, Verdict predicts continued strong growth in especially price-sensitive markets such as electricals, and the IMRG Capgemini index confirms this, showing that this sector has been particularly strong in the past three or four years, recording a growth of 877 per cent since February 2002.

IMRG also identifies the online clothing retail sector as particularly resilient. Sales have reportedly increased in this sector by 1,990 per cent since February 2001, and was the fastest-growing online sector last year.

By contrast, Verdict says that there is a downward trend in online purchases of smaller, lower-priced items such as homewares, DIY and clothing, which more buyers are seeking out at discount high street stores.

IMRG Capgemini similarly says online gifts sector has been quite volatile since the survey was launched in September 2002; it showed a large spike at the end of 2006, but overall has remained fairly static, growing just 19 per cent since 2002.

Echoing a recent finding of IMRG, Verdict predicts a growing trend among consumers to favour web sites offering free delivery. 'With the likes of Play, Waitrose and Amazon offering gratis services, it is only a matter of time before the majority of retailers are forced to follow suit,' it says. IMRG has warned that this trend may not be sustainable, but the Verdict finding seems to suggest it may be unstoppable.

Verdict predicts a significant alteration in the products and sectors favoured by online consumers, and forecasts a sizeable jump in big-ticket purchases as the housing market and economy eventually pick up.

Since 2000 internet shopping has soared by over 5,000 per cent, with UK consumers spending an astounding £200 billion during this period. Internet shopping is clearly the bright spot in the UK retail sector, where both IMRG and Verdict predict further growth.

The downward trend in IMRG's statistics might seem to bear out claims that online sales are levelling off, but until the recession lifts it will be hard to draw long-term conclusions. Overall, the findings of the two organisations are defiantly optimistic. Online shopping, says Verdict, 'is the golden opportunity in UK retail – resilient to the recession and with continuing growth prospects.' IMRG adds: 'Internet shopping is clearly the bright spot in the UK retail sector É and has great potential for further growth.'