Online retailing: Windows shopping

Date: 24/01/04

Why online retailing is booming so fast in Britain

SIZE for size, Britain has overtaken America as an online retail market. And - though the Swiss are coming up fast - it is ahead of any other west European country: just in front of Germany, but miles ahead of the other big three, Spain, Italy and France. So says Forrester Research, an American-based technology consultancy. “We were amazed when we saw the figures last summer,” says Jaap Favier, at its European headquarters in Amsterdam. “We used to think of Britain as being six months behind America. But no longer.” This year, by his firm's estimates, 5.8% of total British retail sales will happen online, compared with 5.7% of America's; and the American figures, unlike the European ones, include auctions and travel.

Britain's online sales exploded last year, say figures from IMRG, a specialist in e-commerce information: they were 60% up in November-December from those months of 2002. And there is still far to go, though some sectors, and some retailers, will go further and faster than others.

The ideal is a standard item such as an Apple iPod, Agfa SX digital camera or Kylie's “Body Language” CD. Consumers do not need to inspect before they buy: they will get just what they ordered. It costs a fair bit, so a lower price is seriously worth looking for. It is easy to deliver and these days it will indeed turn up.

Goods like these neatly fit the biggest arguments for buying online: price and the convenience of 24/7 shopping. And sure enough, they gave firms like Argos and Amazon a pretty happy Christmas. Food is another matter. It's nice to have the week's groceries delivered - and indeed both Tesco and Sainsbury's pushed up Christmas online sales of it by about 30% - but it doesn't save money. Shoes and clothes (will they fit?) are hard to sell online. So is furniture (“we want to see it and sit on it”), though MFI does good business.

So the boom will be uneven; add in uneven skills - WH Smith's online sales around Christmas were up less than 5% - and in some sectors it will be very uneven. But it will surely happen, now that retailers are learning to sort out delivery problems (a big one for food retailers) and fears about credit-card security, and as customers get reassurance, experience and ever-wider access to the internet.

Yet all this is true in other countries too. Why has Britain leapt ahead? One reason is hefty in-store prices. CDs are notoriously high-priced here. The British recording industry's trade body has been looking sourly at Amazon, while suing Jersey-based Play.com, and CD Wow, from Hong Kong, which sell cheap imports from outside the European Union. On January 21st, CD Wow agreed to stop.

Other reasons lie abroad. Spain and Italy have relatively few personal computers or other internet access, and a more durable tradition of buying from local, non-chain shops. France has that tradition, and for many years it has also had the Minitel: a once-advanced interactive screen system run by France Telecom, which even now supplies a lot of information, though it is less used for actual sales.

None of that applies to the United States, however. Why is its online retailing not roaring ahead, to maintain its previous lead? The very modernity of its traditional retailing may be one reason, suggests Mr Favier. Americans are already accustomed to fiercely competitive pricing and to 24/7 shopping. And they can park easily at the mall. Try that in Oxford Street.

Why online retailing is booming so fast in the UK, compared to other European countries and the US.

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