The internet is becoming more popular with shoppers and more important to retailers as a study reveals a £767million drop in town centre spending.
A study by retail analyst Verdict Research has found that for the first time in twenty years the amount of money spent by families in the high street has fallen. Total spending on the high street dipped to £122billion as online spending increased to £8billion.
The internet has enjoyed a 350% increase in online shopping in the last five years. In 2002, the per-head online spend was £436 and in 2005 per-head spend was £560: an increase of nearly 30%. In contrast, high street spending has been forecast to grow at just 0.1% over the next five years.
An early challenge from the internet to the high street was price. During the dot-com boom, online retailers substantially undercut offline competitors and although prices are now closer many consumers still perceive the internet to be significantly cheaper. Consumers today are now more comfortable buying products over the internet and more confident navigating online stores. Shoppers are increasingly able to find suitable the deals they want online. Search marketing trends show increased online shopping skills as searchers now tend to use phrases of three or four keywords rather than just one or two to find goods and services.
Falling broadband prices play a significant role in boosting online shopping. UK broadband penetration is good. Download speed in the UK is often slower than Europe but online shopping rarely requires super fast connections. Broadband prices may fall again with the announcement this week from Vodafone that it will also provided a fixed-line broadband service through BT Wholesale.
In contrast, high petrol prices act as a disincentive for shoppers to get in their car and visit the shops.
Retailers in the high street face the challenge of out-of-town retailers as well as the internet. Town centre rents rose by 3.6% this year, the biggest increase in six years. Some brands have responded by moving more of their focus online.
In April DSG International, the parent of both Currys and Dixons, announced that Dixons would become an online brand. The announcement follows the closure of 106 loss-making Dixons shops two years ago which cut Dixons' high street presence by a third. Remaining Dixons stores re-branded as Currys.digital. This month DSG announced that the online move was going well. John Clare, chief executive, said: "Dixons' move to become a pure online retailer has started well".
This month Tesco will launch Tesco Direct to offer 8,000 "non-food" items and expects that the majority of the orders will come via the world wide web.
Christmas, the shopping peak of the year, is set to be the battleground between off and online retailers. Online retailers are predicted to do well.
