Online spend rockets in 2008

Internet spending has lessened the pain of the credit crunch following £26.5bn of sales in the first half of 2008

Web site winners: Research has revealed that a total of 17 per cent of all UK retail is now online.

Online resellers could be set to cash in as research reveals that the credit crunch, rising fuel prices and environmental concerns have driven a 38 per cent surge in online spending this year.

The IMRG Capgemini e-Retail Sales Index revealed that £26.5bn was spent online in the UK during the first six months of 2008. A total of 17 per cent of all UK retail is now online and Capgemini and IMRG predict this could rise to as much as 50 per cent over the next five years.

However, the online electrical sector experienced more modest growth. Revenues have grown by a fifth in 2008, but this represents a marked slowdown on the 63 per cent growth enjoyed by the sector in the first half of 2007.

Mike Petevinos, head of consulting for retail at Capgemini, told CRN: “The electrical sector was ahead of the curve in terms of online penetration so inevitably growth will start to slow. Also, in the tighter economic environment people look more stringently at spending decisions for higher cost items.”

However, Stewart Hayward, commercial director of online VAR WStore, said he was unconvinced that online retail was less susceptible to the perils of the credit crunch.

“If there is a slump in business, we will see it the same as anywhere else, online is just another method of ordering,” he said.
However, managing director of online PC supplier Overclockers, Rupert Lowery, indicated business was brisk for his company.

“We have seen good growth this year,” he said. “The economic climate will affect some people more than others and inevitably it plays into the hands of online retailers.”

The report also indicated that while the rising cost of fuel might dissuade shoppers from getting in their car, it is also having an impact on the cost of delivery for online retailers. Some are now looking to pool their delivery resources and merge supply chains to offset the impact of the petrol price hike.

Hayward told CRN that escalating petrol prices were becoming a concern for his business.
“We are under enormous pressure to put our delivery prices up. The cost of warehousing is now lower than the cost of delivering the product,” he said.

“It is a big issue that I can see continuing. There is a challenge for retailers around sustainability.”