A New PayPal report reveals that online spending is the only factor that will enable the British retail sector to grow by the end of 2011
-Almost one in four UK adults (24%) believe online shopping will become the norm and the high street will eventually die out.
- By the end of 2011 shoppers are forecast to spend at least one in every 14 pounds online
Online shopping in Britain is set to boom from £8.9 billion to as much as £21.3 billion in annual sales by the end of 2011, according to forecasts in a new report by online payment service PayPal. This forecast 137 per cent growth in online spending means consumers in 2011 will spend the equivalent of approximately £430 for every UK adult more than doubling the current annual online spending.
As experts debate when Britain will come out of recession, the PayPal UK Online Retail Report, conducted by Experian, predicts that 2011 will offer the first signs that UK retailing has emerged from recession. Online shopping is forecast to see its strongest year ever in 2011, and offline sales are predicted to begin to pick up once again. The report suggests that in the 18 months up to the end of 2010, online shopping is the only area of retailing likely to record sales growth. Without this forecast growth UK retailing could be on track to fall in value by an estimated £11.8 billion by the end of 2011, unless consumers choose to move any of their purchases to other channels.
PayPals report looks at the impact of the recession on shoppers and how shopping habits affect the economy. It forecasts that by the end of 2011, adults will dramatically change where and how they shop.
A new era of considered consumption
A mood of considered consumption is now well established amongst UK adults, with shoppers now scrutinising every purchase before committing to spending money. The need to make the most of their money is also driving consumers online where they believe they will find the best deals.
Nearly 4 in 10 online shoppers (8.7 million) now believe that it is easier for them to budget by purchasing items online rather than the high street, while 47 per cent (10.8 million) believe their money goes further online. Meanwhile seven in ten consumers (33.6 million) say they gather as much information as possible before committing to a purchase, and 62 per cent of online shoppers (14.2 million) believe that the best deals are only available online.
So is this the end of the high street?
While millions will continue to visit UK high streets over the next few years, consumers are set to shift more of their shopping online. By the end of 2011 the forecast is that at least one in every 14 pounds spent shopping will be online, which is undoubtedly made easier now that 15 million homes in the UK have a broadband connection. Already 8.6 million UK adults shop online at least once a week and now nearly a quarter of adults (11.7 million) believe that shopping online will soon become the norm and high street shopping will eventually die out.
Carl Scheible, Managing Director of PayPal UK, said: As we all try to make our budgets work harder during the recession it is hardly surprising many of us have headed online to seek a better deal. In fact almost nine million of us now shop online at least once a week. Online shops have already seen phenomenal growth and by the end of 2011, when the recession is expected to be over, we will be spending at least one in every 14 pounds online.
Growing sectors
Over the last six months online shoppers have spent the most money per head in travel, financial services and other major purchases, like white goods and cars. These are all areas in which people want to shop around and compare prices, something the internet has revolutionised.
Carl Scheible concluded: The downturn has meant quick impulse buys may be a thing of the past as we now spend longer thinking about what we purchase. However, cost is not the only deciding factor when buying online; an easy and secure final check out is also important to shoppers.
PayPal offers shoppers a faster and easier way to shop online without having to enter sensitive financial details each time, or even to share them with the online retailer. According to the Payments Council Report, PayPal is the UKs favourite online payment service, with a 21% share of consumer internet payments. Almost one in every ten pounds spent online globally is currently sent via PayPal.
Also of note the IMRG Capgemini e-Retail Sales Index has predicted internet shopping to continue to grow in 2010 after reporting an increase in online sales growth over Christmas.Online retail sales rose by 17% year-on-year in December to £5.46 billion, ahead of the 2009 average growth rate of 14%. 2010 growth is predicted to be 13%.
“2010 looks set to produce another year of strong results for e-retail, with demand expected to remain high as consumers habitually look online for best buys, and a pipeline of significant improvements emerge, including wider product range availability, even better websites and a greater choice of convenient and more reliable delivery options,” said IMRG chief executive James Roper to Internet Retailing.
Sales of accessories, gifts, electrical goods and health and beauty products all rose strongly in December.
A 13% month-on-month rise in sales at “multi-channel” retailers, which also operate stores, contrasted with an 8% fall at Internet-only companies.
But IMRG said this may have been due to a number of multi-channel retailers, like large department stores, offering guaranteed delivery for Christmas.
Several store groups, including John Lewis and Sainsbury’s, have warned retail sales growth could be slower this year or even flat, as consumers struggle to pay off debts and worry about higher taxes and unemployment.
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