Online accounts for 15% of all retail spend in 2007

Within key sectors such as electrical goods, the research indicates that growth in online sales does come at the expense of high street retailers.

Anthoula Madden, Vice President at Capgemini UK’s Consumer Products and Retail Team says, "Online growth has proven robust and sustainable over the past year, increasing its share of UK retail from 10p in the pound to 15p. Whilst we are yet to see high streets sales decline there can be no doubt online is growing its share at the expense of bricks and mortar retailers and we believe that this trend will continue."

December's e-retail sales were nearly 50% higher than last year’s, although demand for online shopping tailed off significantly towards the end of 2007 with December’s Index only 0.2% higher than November’s, reflecting the credit crunch across the UK economy.

The data, collated by IMRG and analysed by Capgemini’s consumer retail team, reveals that peak online shopping occurred in the first week of December where there was a 9% increase in all online sales. This is later than in previous years, indicating that consumers are making the most of pre Christmas discounting and delaying purchases until the onset of the sales.

The final week of the year only saw a reduction in online sales of 4% (compared with -22% in the previous year) suggesting a tendency to go online to spend Christmas money and vouchers and hitting the online sales post Christmas rather than the high street sales. Clothing increased by 13% in this final week and electrical items by 4%.

Following the lead of US traders in 2006, several leading retailers, including Marks & Spencer, Dixons and Comet, ran online sales promotions on Christmas Day itself, attracting significant levels of business while the high street shops were shut. Four million people shopped online on Christmas Day 2007, spending an estimated £84 million, an average of approximately £21 each.

The largest sales growth can be seen in the specialist e-retail sectors e.g. the electronics sector saw sales growth of 60% in December 2007, indicating that online is increasingly taking the lead. The clothing sector shows a 28% increase on the same point last year and the beers, wines and spirits sector shows over a 20% increase.

Our research shows that the retailers who have both a high street and an online presence seem to have done better than the ‘pure-plays’, so the Multichannel strategy seems to be paying off. We have seen strong results from retailers such as John Lewis and Sainsbury’s, who have spent time and effort revamping their website and addressing their supply chain delivery capability. Interestingly, the M&S online channel grew 78% while reported high street results were disappointing.

With the online sector developing so quickly, it seems that just having an online presence is not enough. Retailers need to meet ever growing customer expectations with recent research by Capgemini suggesting that 1 in 2 would now like a personalised shopping experience. In addition, a customer who bought something online will now expect to collect and exchange it in the high street shop, with a comparable shop and online offering.

Anthoula Madden, Vice President at Capgemini UK’s Consumer Products and Retail Team says "Online retailing is developing so quickly that those who do not yet have an online presence really will get left behind. A ‘joined up’ customer experience across channels seems to be capturing the hearts and minds of consumers as John Lewis have demonstrated, with loyalty to the brand being part of the equation. The Capgemini ‘Future Consumer study’ indicated that only 50% of consumers are interested in just the product, with the majority valuing the overall online experience. We are now seeing established e-retailers developing their retail offering to personalise the customers shopping experience by using the insights gained across channels to better tailor their consumer interactions"

James Roper CEO of IMRG, said: "Consumers are making the most of the 24/7 convenience and competitive pricing that online shopping has to offer. Why would you fight the shopping crowd to buy a TV on the high street when you can arrange for it to be delivered to your home, at a time that suits you and often at a more competitive price? Consumer behaviour has changed dramatically over the last few years and really is the driving force behind many of the changes in the e-retail landscape. If retailers intend to be part of the future retail scene, they need to develop a robust online presence, and that is getting harder as the sophistication of channel increases and customers expectations rise".

Anthoula Madden, Vice President at Capgemini UK’s Consumer Products and Retail Team says, "The latest stats from the IMRG Capgemini e-Retail Sales Index highlight the importance of a multichannel strategy if high street retailers are to compete effectively with their online counterparts. High street retailers have the benefits of brand recognition, robust delivery and distribution channels which can give them competitive advantage – they just need to ensure that they can offer consumers a multichannel experience to capitalise on the ever growing trend for online shopping. "

Jo Evans, IMRG's Managing Director says, "Online shopping has become the dynamo of the retail sector, so it is vital that we all understand how it is evolving and why. We now have a much clearer insight into actual online trading patterns than ever before thanks to the combination of Capgemini's involvement and analysis, together with data from SecureTrading, the UK’s leading independent payment services provider, which is tracking millions of transactions from 1,500 UK e-retailers, and traffic data from the leading digital market research firm, eDigitalResearch, using a sample of over 250 million page views per month from leading UK retailers that have its survey code installed on their web site."