Lai Wah Co, Principal Economist at the CBI acknowledges that the growth in online traffic has been huge, noting that the companies having the greatest online success are those who are replicating the traditional shopping experience by providing choice and solid service, over and above convenience.
“This year, certain retailers introduced new ranges online that previously weren’t available. It is coming not only from the consumer but from the retailer side as well. Over time they will put more product ranges online and expand what they have on offer,” she says.
“More and more people are shopping online, relative to shopping on the High Street, in particular pre and post Christmas. Business online has been a particularly strong. Festive sales are up in 2007 some 40 to 50 percent relative to 2006. It has been a growing trend over a number of years now. In that time, a growing number of people have computers at home with increasing use of broadband, which means that shopping online is much easier and faster.”
In addition to being driven by consumer familiarity with online purchasing, Co believes the retailers are adapting their offering to ensure they offer as much as the traditional shopping experience.
“To begin with, when it was new, it tended to be only the more technologically savvy who were at ease buying online. Now, other people are taking to it in greater numbers, women and older people too. There is a changing demographic which is adding to the growth of online sales,” she says.
“Still, it is quite difficult to predict what the equilibrium will be. People’s preferences will play a big part.”
Mark Simpson, MD of website optimisation specialists Maxymiser agrees that the added X factor which is driving online sales is the ability to provide a complete shopping package, over and above convenience. The relative disappointing online performance of companies such as PC World against other such as John Lewis, who have surpassed expectations, demonstrates that it is experience, rather than perception which is proving crucial.
“Everyone had bumper Christmases this year online. Growth was in tens or dozens of percentage points,” he says.
“What it comes down to is customer experience and customer service; who is good and who is not. Amazon, play.com and John Lewis for instance put a lot of money into customer service, the ease of use of their website; delivery is important, so including delivery prices and making delivery clear is very important. When you look at ease of use of a website and checkout process, and how the site is designed to give the customers confidence, those sites are the ones that had the bumper years, over the high street names. The industry is maturing.”
The Bellwether report, the IPA’s quarterly survey of marketing budgets published earlier this week, also shows a rising trend in online marketing, against a backdrop of declining sectorial spend overall. Maurice Lévy, Chairman and CEO of the Publicis Group says that the last quarter of 2007 highlighted the strength of company’s online presence as a driver of the economy.
“The main trends are confirmed: less attraction of traditional media and more digital, interactive. It looks like that despite a gloomy Q4, we can expect a better 2008, probably thanks to the Euro Cup and the Olympic Games. There is undoubtedly some turbulence in our old countries of Europe and, for our industry, we know that we find growth in digital and emerging markets.”
Companies such as Marks and Spencer, who saw their share price tumble upon the announcement of their post-Christmas figures – despite a five percent volume growth in sales – nevertheless saw their online sales rocket by 78 percent. Both the CBI and IMRG (Interactive Media in Retail Group) said that online sales had increased by approximately 50 percent compared to the 2006 sales levels, with both Tesco and Amazon claiming record levels of traffic, due in part to the high street environment becoming less attractive for shoppers.
“The High Street is a less attractive place to visit nowadays, and people’s confidence online has risen over the last year. That confidence continues to grow, and as it does, more money will be spent online,” says Maxymiser’s Mark Simpson.
“There is a general shift towards online, with it offering a level of convenience. That shift is continuing. The high street had had a relatively tough time, and some of it has transferred to the online market, causing a significant increase in sales over the Christmas period.
“It looks as if it is bucking the trend of the economic market. In reality, what is probably happening is that confidence continues to grow online year on year. Perhaps the money from normal high street retail is moving across to online. We certainly don’t foresee confidence dipping online. I don’t see online suffering as much as the high street sectors.”
IMRG also said that online now accounts for 10 percent of total retail sales in the UK, compared to just 0.5 percent in 2000. High Street stalwarts such as Next continue to show declining sales levels overall, with the trend bucked by their online offering.
And on 3 January, Hitwise, the online competitive intelligence service, reported that the number of UK consumers searching for post-Christmas sales online more than trebled during Christmas 2007. The growth of online is likely to lead to the eclipsing of the traditional sales period, which has been rolled back from New Year, to Boxing Day and even to the pre Christmas period in some outlets.
“The post-Christmas online sales are becoming more and more important to retailers every year,” says Robin Goad, Hitwise UK director of research. “For some online retailers, the January sales started on Christmas Day. In fact, Boxing Day was the busiest online shopping day of 2007, and there were almost more searches for ‘Boxing Day sales’ this year than for ‘January sales’ last year.
Retail specialists, Actinic added a polish to the silver lining on the retail cloud, finding that internet revenues have increased 46 percent from 2006, confirming that not only are more people shopping online, but they are spending more. CEO Chris Barling, says: “Considering the effects of the US credit crunch, the Northern Rock crisis and the general overall decline in confidence, 46 percent is remarkable growth and continues the rise and rise of online retailing.”