Online shopping to account for 40% of retail sales by 2020

It took a while coming, but Britain is at last riding high on the wave of the broadband revolution, with hundreds of consumers signing up to faster speeds and lower prices every day. Inspired by the new capabilities of the internet, broadband has become a way of life for over 13 million people and online sales reached £3.7bn in the four weeks up to Christmas, a 50% increase on 2005.

Based on these trends, a new report by independent price comparison and switching service uSwitch.com predicts that internet spend could rise to £40 billion by the end of this yearand to a staggering £162bn in 13 year’s time – accounting for approximately 40% of the total UK retail spend.

As online sales continue to grow, retailers are increasingly discovering the need to invest in their e-commerce infrastructure to drive growth. Results from this Christmas are the most telling with many retailers seeing their in-store profits fall while online sales soared. As a result, the number of online reported casualties is gaining momentum. A famous example being Alan Giles, ex-CEO of HMV and Waterstones, who recently resigned citing “increased online competition from Amazon and iTunes” as a major factor in the company’s poor performance.

According to new uSwitch research, 8 million UK households spend on average two hours a day shopping online. The study also reveals that the average household currently spends £980 a year on online goods and services, representing 10% of their £9,630 total annual shopping bill. The most popular products bought online by over half of adult internet users are holidays, music and films.

While the benefits of shopping online are already clear in terms of time and convenience, uSwitch reveals that the 16million adults who currently go online for goods and services will also reap the benefits financially. The report shows that each household in the UK can save a staggering £500 a year or £42 per month by purchasing goods and services online. With the average broadband connection costing just £15 a month – consumers still stand to save £27 a month. In fact, the annual broadband cost is paid off in just four months.

Shopping online for service goods, such as broadband, credit cards or energy proves the most fruitful, with prices on average 21% cheaper than through traditional retailers. Travel and leisure activities are also on average 15% cheaper if bought over the internet, while the smallest savings are made when buying grocery items online. On average savings of 13% can be made, but the survey revealed that, for commodities such as bread and milk, consumers are no better of buying online than on the high street.

Steve Weller, Head of Communication Services at uSwitch.com says, “The dramatic surge in online shopping last Christmas shows that British consumers are already savvy to the benefits of buying goods and services over the internet. Over the last year broadband prices have fallen by up to 17% while speeds have gone up, making it cheaper and simpler for consumers to log on instead of going out to the shops. Online security has greatly improved so our peace of mind is greater than ever before, and the internet makes it easy to shop around at maybe 40 or 50 different stores in one go to make sure that we are getting the best deals. The falling number of trips that people make to the shops each year, from 237 in 1994 to 206 in 2005 shows just how busy our lifestyles are getting.

“However, consumers may not be aware that as a nation we could save a massive £13 billion a year by shopping online – or £500 for each household. This would pay for your annual broadband cost nearly three times over.”

What are consumers buying online?

Over half of adult internet users buy holidays online
Around 1 in 5 users buy their groceries online
53% buy music and films
Around a third of internet users purchase books, clothes and sporting goods
35% buy tickets for events online
A fifth of people buy their insurance online
1 in 3 internet users buy computer software online.

Weller concludes, “After the New Year celebrations, many people are tightening their purse strings and making resolutions to save. One of the easiest things to do this is to get a broadband connection and shop online as a way to save BOTH money, and time.”