Online retail growing despite fallout

by Staff, Brand Republic 03-Jul-01, 11:10

LONDON - Despite the economic fallout, the number of people shopping on the internet will continue to grow, fuelled by increasing numbers of consumers turning to online grocery shopping, according to a new report.

This year, £1.2bn will be earned by the online grocery sector, accounting for half of all online retail sales, according to Verdict Research. However, this figure represents only 1.4% of all retail grocery sales. It has been estimated that by 2006, 5.7% of all grocery sales will be channelled though online media with a value of £5.7bn.

The number of online shoppers has grown threefold since 1999 and now stands at 5.9m, with another 8.5m estimated to start shopping online during the next five years -- a 144% increase.

The average individual spend has risen 11% to £357 between October 2000 and April 2001, and three quarters of shoppers say they intend to spend more online over the next 12 months.

In the competitive world of online shopping, customer churn represents a major problem. Loyalty is rare and customer acquisition is no longer being seen as an important consideration point. Instead, investment in customer relationship management is testing the skill and initiative of companies.

Verdict's report into electronic shopping argues that to go forward, retailers need to develop online shopping in terms of gender and age. Currently, average spend has risen faster for men (15%) than for women (5%), demonstrating the lack of motivational factors aimed at women. The largest single group are 25- to 34-year-olds at 28% of the online shopping population.

Research shows that cost effectiveness is the key reason for consumers to buy online, followed by convenience and ease of purchase. Low price is now far less of an online shopping motivation.

However, security fears remain the number one barrier to increasing the number of shoppers online.